Zimbabwe ICT sector shows signs of recovery

After breaking all inflation records and experiencing a chronic shortage of capital and international political isolation, Zimbabwe's ICT sector is showing signs of recovery, according to analysts.

From 1999, Zimbabwe was in a state of economic decline after the government embarked on a campaign to seize land owned by white farmers and redistribute it to indigenous people, a process that ended in September 2008 with a political agreement with the opposition. During that time, Zimbabwe's president declared that companies could only trade in the Zimbabwean dollar, which led to difficulties for some international companies to do business in the country.

But a new report by Technology Strategies International in partnership with BroadGroup TMT Ventures is predicting a resurgence of the country's ICT sector, powered by pent-up demand for local ICT services and a return to the U.S. dollar and U.K. pound for companies.

"The acid test for the Zimbabwean ICT sector is to see what companies already active in the sector are doing," says Christie Christelis, president of Technology Strategies International. "Over the past year we have seen massive investment into the mobile market in Zimbabwe, with the number of subscribers more than doubling in a single year."

The report states that with a mobile teledensity of 31.5 phones per 100 people, Zimbabwe is still well behind the rest of Africa, indicating that there is still strong potential for growth over the next five years.

"Pent-up demand for communications services in the consumer and SME market, the demand for data service and broadband, is likely to go up as the market opens," said Dobek Pater, senior telecoms analyst at Africa Analysis.

According to the report, titled "Investment Opportunities in the ICT Sector in Zimbabwe: 2010," fixed-line penetration has grown at a modest 3 percent annually during the last half of the crisis decade, reaching only 365,400 subscribers at the end of 2009.

Technology Strategies International predicts that the number of fixed-line subscribers in Zimbabwe will increase to 468,000 by 2014, representing an annual average growth rate of 5 percent. Mobile subscriptions, however, are expected to rocket to 11.3 million over the next five years, an annual average growth rate of 24 percent. Mobile teledensity will approach 95 percent over that period and the number of Internet users is set to increase to almost 3 million.

The availability of capital and continued investment by local and regional companies is expected to prop up the ICT sector, but the country is still considered a risky place to do business, with a government requirement that companies must be majority-owned by locals.

"We have already seen Liquid Telecom [owned by Econet Group] investing in the deployment of a comprehensive fiber-optic transmission network in Zimbabwe with a plan to interconnect to neighboring country operators and providing them with access to the Seacom cable through South Africa," added Africa Analysis' Pater.

Although the use of international currencies is expected to raise hopes in the international market, many investors are still wary of the risks involved.

Christelis acknowledged that the risks are high in the Zimbabwean market, but pointed out that the window of opportunity for foreign investors to make large returns is likely to remain open only for the next two years.

"There is a unique opportunity for private equity investments in Zimbabwe," Christelis said. "The country's banks are unable to provide any capital for business ventures, and Zimbabwe is on the blacklist of a number of donor organizations. Savvy private equity investors -- those with an appetite for risk -- are likely to make very good returns if they enter the market now."

Three of the largest opportunity areas, according to Christelis, are the mobile market, both at the retail and infrastructure levels; providing last-mile access through advanced technologies such as Wi-Fi; and laying down broadband infrastructure to connect to the undersea cables circling Africa.

Zimbabwe's political leadership is yet to sort out work permit issues; the country has a stringent permit issuance policy for international employees.