Shame Makoshori

27 January 2011

The mobile phone industry reaped in excess of 117 500 percent mark up on SIM card sales during the hyper-inflationary period between 2007 and 2008, industry experts told The Financial Gazette this week.

Produced in South Africa at US$0,17 per unit, mobile phone SIM cards landed in Zimbabwe at between US$150 and US$200 per unit as the industry cashed in on acute shortages.

At about 12 million, the mobile phone subscriber base for Zimbabwe's three mobile cellular companies has increased four-fold since 2009 when government liberalised the country's economy, triggering price cuts to about US$2 per SIM card.

Telecommunications Operators Association of Zimbabwe president, Reward Kangai, confirmed last week that mobile phone networks have been purchasing SIM cards at less than US$1.

"It depends on the volumes being bought but it (the price) is less than US$1," said Kangai, the managing director of the State-owned Net*One.

The mobile phone industry is one of only two sectors that phenomenally grew during the decade-long turmoil that ended in 2009 with the adoption of a multi-currency regime and the formation of the inclusive government between ZANU-PF and the two MDC formations.

Another sector that reported tremendous growth was the platinum mining industry where output increased to 5 496 kilogrammes in 2008 from seven kilogrammes in 1996.

Mobile phone networks worldwide generate revenues through airtime sells, not SIM card trade. But in Zimbabwe it was from both

Assuming that production costs have remained at US$0,17 per SIM card, the industry could still be reaping over 1 000 percent in mark-up.

The exorbitant pricing system, in a country where per capita gross domestic product is estimated at just US$160, and unemployment is over 90 percent, according to United Nations statistics, have retarded the growth of the industry when compared to other African markets.

The International Teleco-mmunication Union (ITU) estimated in 2009 that mobile phone ownership in Zimbabwe stood at about 13,3 people per every 100.

In Tunisia, the figure was 84.

During the same period, the ITU estimated that for every 10 000 Zimbabweans, only 0,1 had access to internet bandwidth.

The figure was estimated at 11 in Tunisia.

Market-wide exorbitant pricing during hyper-inflation was seen as a contingent measure to cushion companies from unpredictable shocks that frequently raided the defenceless Zim-babwe dollar.

Then, the National Incomes and Pricing Commission was in an uncompromising mood, forcing companies not to increase prices even as the inflation scourge intensified, picking to more than 500 billion percent in 2008, according to the International Monetary Fund.

When pressure mounted on the market to review prices downwards, SIM cards, like bread, sugar, fuel, mealie-meal and other basic goods and services, drifted into the black market, the only place where market forces were at play.

Computer Society of Zimbabwe (CSZ) president, Artwell Mukusha, who sits on the National Economic Consultative Forum's Information and Communications Technology committee, said last month they raised the SIM card price issue with the Postal and Telecommunications Regulatory Authority several times to no avail.

"We found out that the cost of producing a SIM card was actually US$0,17 when SIM cards were sold at US$150, sometimes even US$1 000 ," he said.

He said claims by the industry that penetration rates reached 60 percent last year could be inaccurate.

"They say the penetration rate is now at 60 percent, I don't look at it that way," Mukusha said.

"We have two to three lines per person due to lack of connectivity.

"I think we are much less than that," said the CSZ boss.

Zimbabwe has some of the region's most expensive mobile phone voice and data services.

But several projects that could see improved service and price reductions are underway.

Econet Wireless, the Zimbabwe Stock Exchange-listed mobile phone giant with 73 percent market share, and Africom, are working on a cable connection project to link the country with the East African submarine cable via Mozambique.

Fixed line network, TelOne, would be connecting to Beira via Mutare while Powertel has undertaken similar projects in the south western parts of the country.

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