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High costs a barrier to entry for Zim telcos

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Reserve Bank of Zimbabwe (RBZ) governor, Gedion Gono says the capital intensive nature of Zimbabwe’s telecoms sector presents a barrier to entry for local companies although there are other opportunities such as provision of goods and support services.

This comes as Zimbabwe is forging ahead with the contentious empowerment policy meant to transfer control in foreign companies to black Zimbabwean groups.

Telecel Zimbabwe, majority owned by Russia’s telecoms company, VimpelCom, is one of the foreign companies in the telecoms sector, and last year VimpelCom said it was willing to dispose of the Zimbabwe unit.

“The telecommunications industry is capital intensive and this presents a barrier to entry for many would be indigenous participants,” said Gono.

He however said there were opportunities for local companies in providing telecoms companies with spares and offer maintenance services. These, according the central bank chief, constitute about 77% of Zimbabwean telco companies’ costs of production.

“There are opportunities for local companies to specialise in repair and maintenance of telecommunications equipment, supply corporate wear, offer transport and courier services,” he said.

The transport and telecoms industries in Zimbabwe contribute about 12% to country’s overall Gross Domestic Product (GDP) of $11 billion.

In July last year, the government issued an ultimatum for foreign companies in the telecoms sector to transfer majority shares to black Zimbabwean groups by mid this year.

The indigenisation policy, which seeks to compel foreign companies to cede 51% control to black locals and to have them pick from local suppliers, has been heavily criticised by economists and investment fund managers.

However, President Robert Mugabe’s has adopted the policy as a key campaign strategy ahead of the country’s elections later this year.

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