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he time to speak truth to power is now,” says MTN CEO Ralph Mupita. “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.” His
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 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 slowlyslowly 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 skittish executives have found their spine. Last month Gareth Ackerman, chair of the Consumer Goods Council of South Africa, said that if the infrastructure crisis 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 President Cyril 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.
But what really elevates 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.
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. 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 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 nutjob Taliban).
And, Mupita says, Nigeria’s network is more reliable, as batteries aren’t being stolen from base stations almost every day. “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,” he says. “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%.”
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. 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 has been just as badly hurt. “We’ve invested over R2.5bn over the past three years to enhance network resilience during loadshedding. In operational costs, such as fuel and generators, loadshedding costs us an extra R300m a year and that’s without taking lost revenue into account,” he says.
As a band-aid, Joosub says the Competition Commission ought to grant a special dispensation to allow 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 are nowhere. Last June, the Hawks made a fuss 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 what it has done since?
As Mupita says, “crime around battery theft is on such an industrial scale that it’s becoming impossible”.
It looks that way. 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. It looks worse now.
Rand Merchant Bank’s head of research, Isaah Mhlanga, wrote last week that the private sector had been quick to step into the 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 aren’t convinced, which is why they ditched MTN with the same gusto as police minister Bheki Cele chasing a photo opportunity. State failure, after all, comes with quite a price tag.
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 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.
* The writer holds shares in MTN