It’s official, Cassava Smartech has been weaned from Econet Wireless Zimbabwe (EWZ). This, after shareholders of Econet Wireless Zimbabwe unanimously voted for the resolution at an Extraordinary General Meeting held in Harare on 29th November 2018. Cassava Smartech will be listed on 11th December this year in what will be the largest initial listing on the Zimbabwe Stock Exchange (ZSE).

Founding Director of Econet Wireless Zimbabwe Strive Masiyiwa had already shed light on the Cassava Smartech demerger over a month ago. In a Facebook post on 30th October 2018 he stated that this “small” business had generated over $250 million in Zimbabwe in 2017. He further stated that Cassava Smartech doubles its size every year and it is the single largest employment creator in Zimbabwe employing about 1000 people directly and 100 000 indirectly. As if that is not enough, he added that the digital bank Steward Bank has more than 800 000 customers, 80% of the 1.5 million smallholder farmers in Zimbabwe use Ecofarmer and, Ecosure is the largest insurance company in Zimbabwe in terms of policies. All these are business units of Cassava Smartech. According to Strive Masiyiwa, the demerger is meant to unlock value. A major highlight of the demerger is the fact that current shareholders will get the same proportion of shares in Cassava Smartech as they have in Econet Wireless Zimbabwe without having to pay for them. It’s a definite win for the shareholders. “Imagine you had shares worth $1000 but by splitting the company we can make those shares worth $1500 or more because we have exposed the hidden value that people could not see before the split”, says Strive Masiyiwa.

At face value, it looks as though taking Ecocash and Steward Bank away from Econet Wireless Zimbabwe (never mind the other upcoming businesses like Vaya Ride) is taking away a huge chunk of the cake. Is there any business left for Econet Wireless Zimbabwe to do? However, an informed analysis will show that this is a strategic master stroke. Naspers, the parent company of Multichoice recently announced that it is spinning out Multichoice in a move identical to that of Econet. Let us explore the future of Econet Wireless Zimbabwe after this split.

Where to for Econet Wireless Zimbabwe?

1.      Effects of demerger on the Econet Wireless Zimbabwe Board

The biggest change is that Strive Masiyiwa will not be involved in board activities of both Econet Wireless Zimbabwe and Cassava Smartech. Instead, he will assume a peculiar directorship role as Special Director Responsible for Vision and Continuous Innovation. While he will not necessarily have to attend all board meetings, he is not absolved from his fiduciary duties to the business. In addition, there will also be a movement of 3 board members from Econet Wireless Zimbabwe to Cassava Smartech.

2.      Business incubation

Like what is happening with Cassava Smartech, the focus of Econet Wireless Zimbabwe will be to continue to incubate synergistic businesses that may be spun out as separate but interrelated and interdependent business. Every business is a small piece of one big puzzle. So a few years down the line, Econet might be “splitting” again, and listing a new “baby” on the ZSE.

3.      Telecommunications

Econet Wireless Zimbabwe has always had voice, data and sms as its core service offerings in Zimbabwe’s telecommunications landscape.  As such, they will continue to be the growth hub of these services focusing on virtual reality, gaming platforms, artificial intelligence and smart city concepts which will result in a further explosion of data volumes. The more data you will use for these services, the more Econet will become profitable. We have already seen the early signs of the smart city thrust in the recently announced partnership with Harare City Council.

4.      Media

Through its media services provided through Econet Media Zimbabwe, EWZ will change the way media and content is consumed by bringing mobile mass scale capabilities of providing affordable content to customers everywhere, anytime, anywhere hence the adoption of Kwesé as its brand image. The primary product of the media business is Kwese Iflix.  Smartphone penetration is currently estimated to be at 40%. This presents an opportunity to not only drive data usage but also to allow the company to bundle it with voice and sms products to create  a seamless product and convenient billing arrangements. This is something competitors will find hard to replicate in the country. A good example is the recently introduced Yomix App which will allow subscribers to create their own bundle comprising their choice of sms , data and voice.

5.      Technology

On the technology front, Econet Wireless Zimbabwe is developing business applications that will assist business managers to manage real time business functions. This will be done through the provision of on demand information and the ability to give instructions to machines and other applications. Th is provides room for applications to be developed, robotics, artifcial intelligence (AI) and other similar applications. While still in its infancy, this business to business enterprise is a great opportunity in areas like renewable energy solutions, telematics, drones for commercial use and any such developments.

There is no doubt that Econet Wireless Zimbabwe will take advantage of existing strong brand presence, large customer base and adequate financial resources to exploit these and other opportunities. Ideally, when we look at the individual market valuation of both Econet Wireless Zimbabwe and Cassava Smartech come 11 December 2018, it should be higher than when Cassava Smartech was locked up in Econet Wireless Zimbabwe. Interesting times ahead.

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