“The time to speak truth to power is now,” says Ralph Mupita, CEO of cellular firm MTN. “Doing nothing at this point will lead to a failed state. We need to do something radical because the moment is here, and we have to seize it.”
Mupita’s warning, elaborated on to the FM after MTN’s annual results this week, wasn’t an off-the-cuff sentiment, expressed while shooting the breeze about data speeds.
It was a considered and targeted message, expressed on a day on which his company’s stock got truncheoned, losing R28.4bn — equal to 10.7% of its entire value — as it revealed that the consequence of state failure had wiped R695m (or 3.4%) off its otherwise considerable profits last year.
Mupita says the red lights are flashing like never before. “Things can slip slowly-slowly and then suddenly. We’ve gone beyond the slowly-slowly stage, and we’re staring over the cliff — South Africa has always pulled itself back from the brink, but we have to do that now, or it’ll be too difficult when it gets to the suddenly stage,” he says.
There are a number of elements that makes Mupita’s warning different. He’s not the first to speak openly of the prospect of a failed state, but he is the most senior CEO to do so.
It also suggests our once whippet-skittish executives have found their spine. Last month Gareth Ackerman, chair of the Consumer Goods Council of South Africa, told President Cyril Ramaphosa that if the infrastructure crisis — water, roads, rails and police — isn’t fixed, “we will not be able to guarantee stable supplies of food, medicines and other essential goods”.
Whether this roused the Marie Antoinettes in Ramaphosa’s somnambulistic administration is anyone’s guess. It should: Mupita, a civil engineer who headed Old Mutual’s emerging-markets arm until joining MTN in 2017, isn’t an alarmist.
We don’t have, anywhere else, the level of vandalism and theft around sites like we have experienced in South Africa
— Ralph Mupita
But what really elevates the importance of his red flag is his unique vantage point. There are, after all, few pan-African success stories like that of MTN, which has 289-million customers in 19 countries in Africa and the Middle East.
Yet Mupita says of all these countries, South Africa is the absolute worst for crime, vandalism and theft.
“If you look around our networks, for sure we’re the worst,” he tells the FM. “We don’t have, anywhere else, the level of vandalism and theft around sites like we have experienced in South Africa.”
It’s a breathtaking indictment. MTN’s fear-factor portfolio includes South Sudan (where Amnesty international says “corruption permeates all sectors of the economy”), Eswatini (ruled by a despotic monarch), Liberia (where, at last count, 53% of people had paid a bribe to a state official) and Afghanistan (ruled by the prehistoric religious zealots of the Taliban).
Mupita says even Nigeria’s network is more reliable, as its base stations aren’t being fleeced of batteries with the same regularity as Fikile Mbalula needs help tying his shoelaces.
“In Nigeria, our 17,000 towers were designed on the assumption that only 5% of the grid would be available, so we built a network with diesel generators to provide the other 95%. The result is 99% network availability with high quality,” he says. “But South Africa is on the other end of the scale: 30 years ago, we developed a network which now has 12,900 sites, designed on the basis of 100% grid availability. But the energy availability factor has now fallen below 60%,” he says. And often, when MTN installs a battery on a site, it’s stolen within days.
Today, MTN has 12,700 towers in South Africa. Three years ago, none of them had batteries — now they all do.
Iraj Abedian, founder of Pan African Investment & Research Services, says Mupita’s warning points to a business sector on its knees. “Retailers have to pay roughly R1bn each to keep their businesses alive. It’s the same for MTN and Vodacom. The cost of doing business in the country has made it impossible to do business, and business leaders have dragged their feet way too long,” he says.
Shameel Joosub, the CEO of Vodacom, tells the FM his company been just as badly hurt by the blackouts. “We’ve invested over R2.5bn over the past three years to enhance network resilience during load-shedding. In operational costs, such as fuel and generators, load-shedding costs us an extra R300m a year — and that’s without taking lost revenue into account,” he says.
It has been “nothing short of a disaster” for the industry, he says, as 20,000 cellphone sites rely on power.
As a Band-Aid, Joosub says the Competition Commission ought to grant a special dispensation to allow mobile firms to work together to share generators, batteries and renewable energy sources.
MTN’s problems are shared by Eskom and Transnet, among others, where cables and tracks are routinely stripped.
Yet the police — delinquent, absent or on the take — are nowhere. Last June, the Hawks made a song and dance after it arrested the owner of Monkey Scrap Metals in Middelburg, where it found Eskom pylons weighing 740kg and 350m of Eskom cables. But this was damning by omission: if the Hawks believed those few cables deserved headlines, what does this say about how little it has done since?
Says Mupita: “The crime around battery theft is on such an industrial scale that it’s becoming impossible.”
Disturbingly, most of the R695m MTN forked out last year for batteries, generators and security was spent in the past six months, amid 146 days of load-shedding. The trajectory looks worse now.
Rand Merchant Bank’s head of research, Isaah Mhlanga, wrote last week that the private sector was stepping into a vacuum created by government failure. “The question is, will it happen quickly enough, and at enough scale to generate economic benefits for the majority before society breaks?”
Investors clearly aren’t convinced, which is why they ditched MTN with the same alacrity as police minister Bheki Cele chasing a photo opportunity.
Says Mupita: “We believe we’re going to be in a sustained level of load-shedding exceeding stage 4 into the medium term, and we lowered the profit margin outlook for South Africa [which] probably surprised the market. We’re going to have to invest more to secure the network, and that cost will come from the profit margin.”
MTN, with a cash buffer of R44bn, is better off than most. Yet its accounts are a visceral reminder of how the nebulous notion of “state failure” translates into rands, cents and jobs.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.