Local currency issues hamper Zimbabwe’s telecoms operators
Zimbabwean telecoms companies are constrained from meeting surging demand for voice and data services owing to challenges accessing foreign currency. This is further exacerbated by power issues.
Although usage of foreign currency has been increasing in Zimbabwe, where up to 77% of purchases of basic foodstuffs are made in US dollars, telecoms operators are struggling to access foreign currency to pay international vendors of equipment, licenses and other suppliers. This means that network expansion plans are being stalled, and combined with electricity supply challenges, is resulting in dropped calls and lower levels of network availability.
“Foreign currency availability for servicing our network foreign suppliers continues to be a major challenge and has hampered our ability to implement much needed network maintenance and expansion,” Charles Banda, company secretary for Econet said.
The Zimbabwean telecoms firm is planning to modernise its current core network by adopting virtualisation technologies, which will improve the ability to efficiently allocate network resources. This modernisation will also include biometric detection as well as digital identification, which says the company, ‘will enable better protection for our customers against growing cyber-security’ risks.
Lower than inflation
As the pace of dollarisation gathers in Zimbabwe, there has been no respite for telecoms operators in the country. The time that tariff increase approvals take from the industry regulator can be lengthy and, when they are granted are often below the country’s rate of inflation.
“Unlike other businesses in the country, which are seeing more sales in US dollars, most of our revenue is still in local currency. This is problematic, because across the industry the tariff adjustments, when they are approved, will be way below the rate of inflation, so in essence the approvals for tariff increases will be insignificant,” one Zimbabwean telecoms executive told ITWeb Africa in confidence.
Econet said in its recently-released trading update that Zimbabwean telecom operators are ‘struggling to meet the capacity and coverage demands of consumers as investment in long overdue capacity enhancements and routine maintenance remains severely constrained by the lack of access’ to foreign currency.
As a way of dealing with this, operators are now having to negotiate payment with network equipment vendors to factor in the local business environment challenges.
In 2022, the Posts and Telecommunications Regulatory Authority of Zimbabwe highlighted in its Q3 telecom industry report that there is mounting ‘pressure on the profitability and overall financial sustainability’ of the sector.
‘Although operating revenue increased in the third quarter of 2022, expenditure also rose across all subsectors. Prioritisation of the sector in terms of government expenditure, power availability, protection against vandalism, resource mobilisation, foreign currency availability amongst other issues, is pertinent,’ said regulator’s report.
Despite these hurdles, Econet raised voice and data volumes by 32% and 46% respectively in the nine month period to the end of November 2022. This translated to a 9% surge in revenue for the period.
“The growth was largely driven by voice and data volumes, which were however weighed down by tariffs that were below inflation,” Econet said.