BOTSWANA TELECOMMUNICATIONS INDUSTRY

C O N F I D E N T I A L SECTION 01 OF 04 GABORONE 000532

SIPDIS

DEPARTMENT FOR JACK DIFFILY, AF/S
DEPARTMENT FOR THOMAS CARNEGIE, EB/CIP
DEPARTMENT FOR OPIC, JIM POLAN
DEPARTMENT FOR USITC

E.O. 12958: DECL 29/03/10
TAGS: BEXP BTIO ECON EFIN EINV EIND ETRD OTRA BC KPRP
SUBJECT: BOTSWANA TELECOMMUNICATIONS INDUSTRY
ANALYSIS: LIBERALIZATION AND PRIVATIZATION JEOPARDIZED
BY POLITICAL INTERFERENCE


This cable is classified by Ambassador Joseph Huggins
for reasons 1.5 (a) and (d)


1. (C) Summary. This cable is an analysis of the
Botswana telecommunications industry's efforts at
greater liberalization and the potential consequences
of political interference in the nation's regulatory
framework. The Botswana Telecommunications Authority
(BTA) held a stakeholders' workshop in early February
to publicly debate the further liberalization of the
industry to include such services as Voice-over
Internet Protocol (VoIP),which optimistically could
be implemented by the end of the year. However, this
workshop has been overshadowed by Parliament's
decision to amend the 1996 Telecommunications Act to
place licensing and budgetary authority for the BTA
under control of the Minister of Communications,
Science and Technology, thereby undermining its
independence as a regulator. The amendment appears to
be driven by political and personal aims rather than
sound regulatory policy, and could have serious
negative consequences for the attraction of foreign
direct investment (FDI) into Botswana. Despite this
political interference, France Telecom is reportedly
interested in a strategic partnership with the
government-owned Botswana Telecommunications
Corporation (BTC),if and when it is privatized. End
Summary.

Brief History of Liberalization
--------------


2. (U) In April 1980, the Botswana Parliament approved
the BTC Act, establishing a monopoly parastatal
company. Following repeated calls for service and
cost improvements, the then Ministry of Works,
Transport and Communications directed Mr. Moatshe
Joseph Moatshe, the then Deputy Permanent Secretary,
to lead a project on sector reform in 1992. After
attending several conferences on telecommunications
liberalization, including a regional one sponsored by
USAID in Namibia in 1993, the Ministry paid a
consultant to prepare a draft telecommunications bill.


3. (U) In August 1996, Parliament adopted the results
of that consultancy, the Telecommunications Act, which
established the BTA as an independent regulator. It
also passed the BTC Amendment Act, abolishing BTC
legal monopoly for the
provision of all public
telecommunications services. The BTA was granted the
authority to license all telecommunications operators.
The BTA immediately made the BTC the sole provider of
fixed line voice services. In 1998, the BTA also
issued two mobile service licenses to Orange, which is
majority owned by France Telecom, and Mascom, which is
now a wholly-owned Botswana citizen company. Since
then, the BTA has issued over 20 Internet Service
Provider (ISP) licenses, as well as several very small
aperture terminal (VSAT) licenses for data
transmission.


4. (SBU) In July 2001, President Festus Mogae publicly
stated his desire to privatize BTC, but plans for the
implementation of this commitment have proceeded
slowly. However, Parliament is expected to adopt a
Privatization Master Plan during the 2005/6 fiscal
year, which could lay the groundwork for BTC's
privatization. Although no final deal structure or
date have been announced, it is widely believed that
the government favors a strategic partnership approach
to the privatization of BTC. Mr. Yannick Bordeu, the
Managing Director of Orange, which is 49 percent owned
by France Telecom, told EconOff that France Telecom
would be interested in such partnership should
Botswana proceed with BTC's privatization.

Further Liberalization
--------------


5. (U) Although the market was partially liberalized
through the 1996 Act, a number of areas merit further
liberalization. This would introduce of VoIP and
fixed line voice competition on a service or
infrastructure basis. BTC still dominates the market
and provides all international voice services out of
Botswana. To deal with rising public concerns about
the inefficiencies of BTC, the lack of service, and
the high costs associated with telecommunications, BTA
commissioned a report in 2004 on the further
liberalization of the market. It presented the draft
results to a public stakeholders' workshop in early
February 2005. The draft report included multiple
recommendations, ranging from the need for greater
speed in the process of liberalization to the
necessity to introduce VoIP services. The draft also
addressed issues such as a universal access policy, by
which services are provided to rural areas that are
not economically viable, given the low population
density of Botswana.


6. (SBU) The Chief Executive of BTA, Mr. Moshe
Lekaukau, told EconOff that the next step will be to
present the final report, including public input
incorporated from the workshop, to the BTA Board of
Directors in April 2005. The draft policy will then
be submitted to the Minister of Communications,
Science and Technology for adoption by the Cabinet and
ultimate passage by Parliament.


7. (SBU) When asked to put a timeline on further
liberalization, Mr. Lekaukau said he hoped Cabinet
would move quickly to adopt a new policy, but thought
the best-case scenario would have it done by the end
of the year. Mr. Lekaukau noted that the speed of
adoption would depend in part on the timeline for the
privatization of BTC. He emphasized that he would
like to see the privatization and liberalization occur
simultaneously, a sentiment echoed by Mr. Bordeu from
Orange.


8. (SBU) But there is a clear divergence of interests
between BTC and private industry. BTC prefers that
the privatization precede the liberalization in order
for it to rebalance its structure and pricing schemes
to limit any potential adverse impacts on the
valuation of the company through premature
liberalization. Private industry attendees at BTA's
stakeholder workshop, however, voiced their demand for
more immediate action on liberalization.

Undermining Regulatory Autonomy
--------------


9. (U) The BTA has consistently been recognized as a
model of regulatory efficiency and independence by the
telecommunications industry. In 2001, the
International Telecommunications Union (ITU),
published a report entitled, "Effective Regulation
Case Study: Botswana 2001." The report explicitly
states: "BTA is one of the few regulatory bodies that
enjoys complete freedom in licensing operators and in
establishing and financing its operational budget, its
level of independence and effectiveness may develop as
a world model."


10. (SBU) But this independence was directly
undermined by Parliament's decision in December 2004
to amend the 1996 Act, and place financial and
licensing decision-making power under the direct
authority of the Minister of Communications, Science
and Technology. This amendment eliminates BTA
autonomy. In her speech to
Parliament in proposing
the amendment, Minister of Communications, Science and
Technology Pelonomi Venson said, "The BTA has
performed quite well since its inception, leading to a
major improvement in telecommunications services."
But she followed this statement by saying, "Some of
the powers currently vested in the BTA are of such a
nature that far-reaching decisions could be taken
without sufficient policy consultation with
Government. Of specific concern are the powers to
license additional fixed line and cellular operators.
Any decision on these two aspects would greatly impact
on the structure and viability of the ICT sector, and
could place major public and private investments at
risk."


11. (SBU) However, the amendment could cause precisely
what its publicly presented rationale intended to
prevent. It would undermine the BTA's autonomy and
jeopardize Botswana's efforts to attract foreign
direct investment. In particular, it might impede the
privatization of BTC, provoking concern among
investors about potential political interference in
the regulator and the lack of separation from the
operator, since BTC is wholly-owned by the government.
The first recommendation of the 2004 Global Symposium
for Regulators calls for "an effective regulator
separated from the operator and insulated from
political interference."

Public Reactions to the Amendment
--------------


12. (U) Initial public reactions to the amendment have
been overwhelmingly negative. The weekly periodical
"The Sunday Standard" wrote an editorial saying the
amendment "raises new doubts about the government's
sincerity on attracting foreign investments."


13. (C) The country's leading private sector
association, the Botswana Confederation of Commerce,
Industry and Manpower (BOCCIM),intends to submit a
formal complaint to the government about the
amendment. The President of BOCCIM, Iqbal Ebrahim,
told EconOff that the amendment jeopardizes the
successful privatization of BTC as well as the
integrity of the regulator. Ebrahim added that BOCCIM
would push the government to immediately adopt its
draft Competition Policy, which is waiting on the
Cabinet for action. This would provide a basis to
challenge the amendment. He also expressed concern
about the impact the amendment could have on potential
foreign investors broader assessments of Botswana as
a destination for FDI.


14. (SBU) Mr. Bordeu, the Managing Director of Orange,
told EconOff that the decision to amend the Act was
unfortunate and that an independent regulatory
framework is essential. But he expressed optimism
that liberalization would proceed unhindered by the
amendment and said he hoped the amendment would be
overturned. He could not comment on how the amendment
might affect France Telecom's interest in BTC.

Political Interference Complicates BTA Mission
-------------- -


15. (C) Despite the public presentation of the
amendment as a prerequisite for enhanced efficiency, a
picture of political interference, intrigue, and
ruling party factionalism has emerged as being the
prime reasons why Parliament amended the 1996 Act.


16. (SBU) Several members of the opposition in
Parliament, as well as some members of what is known
as the Kedikilwe faction within the Botswana
Democratic Party (BDP),publicly mused about the
rationale behind the Ministry's decision to amend the
1996 Act during discussion in Parliament. Mmadinare
constituency's MP Ponatshego Kedikilwe, a veteran BDP
politician, but not necessarily a supporter of the
Mogae government, asked for a compelling explanation
as to why the amendment was being advanced, saying,
"We want to know what has gone wrong so that we can be
in a position to explain to Batswana."


17. (C) Opposition MP (for the Botswana National
Front BNF) Mephato Reatile, representing Ngwaketse
West, told EconOff that the decision to amend the Act
was aimed at punishing Mr. Lekaukau for his allegiance
to the Kedikilwe faction within the ruling party. But
another, and possibly more worrisome rationale was
advanced by Mr. Lekaukau himself.


18. (C) In a scathing indictment of current
parliamentarians, Mr Lekaukau admitted in a
conversation with the EconOff that the decision to
punish him was the direct result of his unwillingness
to undermine the nation's interest for the sake of one
individual's personal benefit. He appeared to be
referring to the former Minister of Communications,
Science and Technology, Mr. Boyce Sebetela, who is the
alleged architect of the amendment. Mr. Lekaukau
asserted that the Cabinet was ignorant on
telecommunications issues and uninformed in the bulk
of its decisions on such matters, and said several
members had since told him they were not properly
briefed on the subject, nor of its consequences prior
to the adoption of the legislation.

19. (C) Mr. Lekaukau went on to say that the
stakeholders' workshop held by BTA was very successful
in raising awareness about the amendment's
consequences, and expressed hope that the rising
public anger against the amendment would lead to its
repeal.


20. (C) The indictment by Mr. Lekaukau is backed by
separate public allegations of misconduct by former
Minister Sebetela, which were reported by the
opposition Botswana Congress Party (BCP) to the
Directorate of Corruption and Economic Crime (DCEC) in
October 2004. The BCP alleged that Sebetela used his
position to award tender contracts to a company, PC
Net, in which he is a shareholder and for whom his
wife works. Opposition MP candidate for Gaborone
Central of the Botswana National Front (BNF) wrote an
editorial seconding this complaint claiming, Sebetela
"would like the public to believe that there is
nothing wrong with him, in his private capacity, doing
business with companies that operate within the ambit
of policies and regulations set by his/her Ministry,
or negotiating business deals with a department under
his portfolio. Contrary to what he says he would
actually like to veto the decisions of the BTA." It
now appears that Sebetela has succeeded, albeit after
his removal as Minister.

Conclusions
--------------


21. (C) It appears unlikely that the 1996 Act's
amendment will be overturned despite the public
outcry. Moreover, the further liberalization of the
telecommunications industry appears to be proceeding
despite the amendment, as the business community is
clamoring for the introduction of new products and
services with faster processing times and lower costs.
However, in spite of the revelation that France
Telecom is potentially interested as a strategic
partner in the privatization of BTC, the amendment, if
it signals a shift away from transparent regulatory
policy, could inhibit investment into Botswana. If
the lack of transparency leads to protracted legal
challenges, which has been neighboring South Africa's
experience, foreign investors may change their opinion
of Botswana as the model of political stability and
integrity and begin to view Botswana as a political
risk. Since good governance is Botswana's principal
selling point for foreign investors, such a shift
would have very negative consequences for the
country's growth prospects.

HUGGINS