US embassy cable - 05GABORONE532

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, Economy 
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