Investigation for the Observer shows how deals done by the UK telecoms giant benefited politically connected elites in eastern Africa
The spread of mobile phones across Africa
has been one of the continent’s success stories over the past two
decades, transforming lives through better communication and simpler
banking. It has also resulted in huge profits for powerful international
companies – and for some of Africa’s wealthiest and best-connected
But an investigation for the Observer into the African interests of UK mobile phone giant Vodafone,
by the Finance Uncovered network, has raised serious questions about
transparency and the processes by which western firms entered Africa’s
Often western operators that wanted market access in a particular
country would have to choose between accepting a government stake in the
venture, or giving significant shareholdings to “local investors”. But
how those governments selected their partners appears contentious, and
questions have been raised over how some deals were structured.
The Finance Uncovered investigation has discovered that, in certain
cases, politically connected elites secured shares in Vodafone
subsidiaries by borrowing money from Vodafone itself. Such arrangements
may strike outsiders as odd, but they are legal, and for the lucky few
able to do such deals the rewards have been huge. The International
Finance Corporation, part of the World Bank, estimates that mobile phone
revenue in sub-Saharan Africa grew from $100m in 1995 to $40bn in 2015.
Last September, Vodafone raised $1.1bn by selling a mere 5% stake in
its main African subsidiary, Vodacom Group. And the month before,
raised $213m by selling a 25% stake. The flotation, the biggest on the
Dar es Salaam stock market, was a coup for one of Tanzania’s wealthiest
businessmen, Rostam Aziz.
The scion of a successful Tanzanian trading family, with interests in
mining, agriculture, ports and media, Aziz became an MP in 1994 and
went on to become the national treasurer for the ruling party after he
bankrolled and managed Jakaya Kikwete’s successful presidential campaign
Two years later, in 2007, Aziz’s “extraordinary influence” was noted
in a US embassy cable that later appeared in WikiLeaks. The cable quoted
a fellow politician saying of Aziz: “I don’t know what magic that guy
has, but he is the power behind the throne.”
In 2011 he resigned as an MP amid corruption allegations that he has
strenuously denied. At the time Aziz suggested the unsubstantiated
claims were the work of political rivals. “I have decided to relinquish
all leadership positions in the party ... my decision is based on a
clear conscience to end these gutter politics and spend my time
concentrating on my business,” Aziz said in his resignation speech.
By this time he was a very wealthy man. In 1999 an Aziz company
acquired a 10% stake in Vodacom Tanzania. Over the next eight years Aziz
increased his shareholding to 35% via two companies, Mirambo and
Under rules that were common to shareholders in Vodacom Tanzania,
local investors such as Aziz’s companies were obliged to lend the
telecoms operator money to help it build its network. But Vodacom also
lent Aziz’s company millions of dollars to help him with those
By 2012, Vodafone says, Aziz’s company owed Vodacom $52.5m. Two years
later Aziz’s company sold half of his shares for $240m. His
shareholding catapulted him on to the Forbes list of global
billionaires. Vodacom Tanzania now wants to buy out Aziz’s company’s
remaining share, which would net him another huge payday.
Vodafone says the 1999 deal with Aziz took place before it gained
majority control of Vodacom Group and that it was “not party to the
transaction”. By 2006 it owned half of the group and then went on to
And Vodacom Tanzania is not the only Vodafone interest in Africa that
has resulted in significant profits for influential and well-connected
minority shareholders. In 1999 the Kenyan government of Daniel arap Moi
allowed Vodafone Kenya to buy a 40% share in the state-controlled telecoms operator, Safaricom, for $42m.
later transpired that Vodafone had been given “advice and assistance”
on securing the investment by an anonymous Guernsey-registered company
In 2001 Vodafone granted Mobitelea share options in Vodafone Kenya at
1999 prices, enabling it to buy a stake in Safaricom. Finance Uncovered
estimates that these options eventually yielded Mobitelea a profit of
about $51m in 2009, a reflection of Safaricom’s spectacular success.
The involvement of Mobitelea did not surface until 2007, when the
Kenyan government floated some of its Safaricom holding, and was
required to list all current shareholders. But exactly who was behind
the company has never been publicly disclosed. There is speculation that
members of Moi’s inner circle may have benefited from the deal.
After Kenyan MPs raised concerns of corruption involving Mobitelea,
the UK Serious Fraud Office approached Vodafone for further information.
The company says that it worked closely with the SFO to provide
documents and information relating to who was behind Mobitelea, and that
the SFO decided to take no action. However, despite divulging the
information to the SFO, Vodafone says it was legally obliged not to
publicly disclose the identity of the beneficial owner of Mobitelea for
reasons of commercial confidentiality.
This explanation has angered many Kenyans. John Githongo, Kenya’s
renowned anti-corruption champion and chairman of the Africa Centre for
Open Governance, said he was concerned that the true beneficiaries
behind Mobitelea had never been identified publicly.
“Reportage of these transactions continues with a bitter taste left
in the mouth,” Githongo said. “How would British media and NGOs respond
to the same practices if they took place within the UK?”
Rather more is known about some of the shareholders in Vodafone’s operations in Mozambique. In 2007 Vodacom Mozambique
lent Emotel, a telecom company owned by the economic arm of Frelimo,
the country’s ruling party, nearly $1m to enable the government to meet
its obligations to become a 3% shareholder in the telecom operator.
Vodafone said Vodacom was told by the government that if it wanted to
operate in the country it would have to partner with Emotel. Vodafone
said the transaction preceded its acquisition of a majority control of
Vodacom Group and that it was not a party to the deal.
Another shareholder was Intelec, a company that administers the
business interests of Armando Guebuza, president of Mozambique until
2015, and one of the country’s richest individuals.
A third was the Whatana Investment Group, an investment company
chaired by Graça Machel, Nelson Mandela’s widow. Her first husband was
Samora Machel, the president of Mozambique until his death in 1986. More...