US embassy cable - 05LILONGWE709

C O N F I D E N T I A L LILONGWE 000709 
 
SIPDIS 
 
STATE FOR AF/S DAN MOZENA AND KENDRA GAITHER 
STATE FOR EB/IFD/ODF ELAINE JONES AND TED LYNG 
STATE FOR EB/IFD/OMA AUDU BESMER 
TREASURY FOR INTERNATIONAL AFFAIRS/AFRICA BEN CUSHMAN 
PARIS FOR D'ELIA 
 
E.O. 12958: DECL: 08/17/2015 
TAGS: ECON, EINV, ECPS, KPRV, PGOV, PREL, MI, Economic 
SUBJECT: MALAWI TELECOM PRIVATIZATION ON HOLD 
 
 
Classified By: ECONOFF W. TALIAFERRO FOR REASONS 1.4B/D 
 
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SUMMARY 
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1. (C) The GOM has suspended the privatization of Malawi's 
parastatal telecommunications monopoly at the last moment. 
The privatization is a condition of two large World Bank 
programs in Malawi.  The President apparently made the 
decision out of fear that the privatized company might 
sabotage state-run media outlets for political purposes. 
Embassy has expressed USG concern and recommends continued 
pressure through the World Bank and Malawian Embassy in 
Washington.  End summary. 
 
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SUDDEN SUSPENSION, WITH CONFUSED PUBLIC SIGNALS 
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2. (U) The Government has suspended the impending sale of 
Malawi Telecommunications Ltd. (MTL) at the last minute.  GOM 
was scheduled to approve the sale on August 10, but instead 
it informally told the buyers and the Privatization 
Commission that the deal had been "suspended pending further 
clarification."   On Monday, the Information Minister was 
quoted in the press as saying the deal had been cancelled 
outright, and that the GOM did not intend to privatize the 
company. 
 
3. (U) The suspension has caused a stir in the diplomatic 
community, because the privatization is a condition for two 
World Bank programs with a total value of $78 million.  The 
negotiations for MTL's sale have been under way since 2000, 
and the MTL board has consistently opposed the sale.  As 
might be expected, the sale is not popular with Malawian 
politicians, who generally oppose privatization. 
 
4. (C) In recent conversations with the CEO of the main 
buyer, Press Corporation Ltd., members of the Privatization 
Commission, and the Minister of Finance, we have learned that 
the deal was suspended personally by President Bingu wa 
Mutharika for political reasons.  Specifically, Mutharika 
fears that Press Corporation is sympathetic to former 
President Bakili Muluzi's United Democratic Front (UDF) party 
and will use the outstanding debts of the Malawi Broadcasting 
Corporation and Television Malawi as an excuse to unplug the 
state-controlled media and hobble the government's 
communications.  Most informed observers find the political 
fear irrational, though the risk of putting a strategic 
utility into private hands is more widely shared. 
 
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FINANCE MINISTER WORKING TO CLOSE THE DEAL 
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5. (C) Finance Minister Goodall Gondwe is negotiating with 
Press Corporation to accommodate the President's concerns, 
and he has proposed diluting the Press participation from 52 
to less than 50 percent.  He believes this can be done 
quickly, though others close to the deal doubt this.  Another 
possibility is to pay the media outlets' debts with proceeds 
of the sale and offer the GOM a "golden share" veto over 
disconnections of state news media.  As for the Information 
Minister's remarks, the Finance Minister has said the GOM is 
looking for a face-saving way to retract them.  Meanwhile, he 
has indicated that World Bank and donor pressure on the issue 
would help to ensure speedy resolution. 
 
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COMMENT AND RECOMMENDATION: CONTINUE PRESSURE 
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6. (C) Embassy has expressed our deep concerns over the delay 
in meetings with Gondwe and with the resident World Bank 
country manager.  We recommend continued pressure on the 
World Bank, and perhaps on the Malawian Embassy, to ensure 
that the GOM does everything it can to move the deal along. 
This will certainly be of value to those within the GOM, 
including Gondwe, who are arguing for quick closure.  To the 
extent that the USG can reinforce Gondwe's representation to 
Mutharika that the world is expecting a transparent and 
rational process, it should strengthen his hand on this and 
similar issues in the future. 
 
EASTHAM