iss masters research paper

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Graduate School of Development Studies

A Research Paper presented by:

Mugabe Moses

(Uganda)

In partial fulfilment of the requirements for obtaining the degree ofMASTERS OF ARTS IN DEVELOPMENT STUDIES

Specialisation:

Public Policy and ManagementPPM

Members of the examining committee

Dr Nicholas Awortwi (supervisor)Dr Des Gasper (reader)

The Hague, The NetherlandsNovember, 2009

CORPORATE SOCIAL RESPONSIBILITY:

The case of Mobile Telephone Service Providers in

Uganda


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Disclaimer:

This document represents part ofthe authors study programmewhile attheInstitute ofSocial Studies. Theviews stated therein are those ofthe author andnot necessarilythose ofthe Institute.

Research papers are not made availa

le for circulation outside o

the Institute.

Inquiries:

Postal address: Institute ofSocial StudiesP.O. Box 297762502 LT The Hague

The Netherlands

Location: Kortenaerkade 122518 AX The Hague

The Netherlands

Telephone: +3170 4260460

Fax: +3170 4260799


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Ded

c

on

To my parents John and Juliet my brothers and sisters;

Every dayuntilmy life withers


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Acknowled e en

Iwould like to thank the almighty God who has always been my guidance

throughout and especially so during my research. Special thanks to the

Principal, Nsamizi Institute of Social Development, Mr Charles Kanyesigye

and the Deputy, Mr Duncan Kalule for having given me this golden chance of

studying Masters at ISS. My sincere thanks also go to DR Nicholas Awortwi

for his guidance throughoutthiswork. Without his effort, my studywould not

have reached this far. My heart-felt gratitude goes to Dr. Des Gasper,whowas

not only my second reader butalso my convener and lecturer. His opinion and

encouragement have helped me in fieldingthis research.

I extend my sincere gratitude and love to my parents, my mother Julietand my

Dad John. Their dedication to see me succeed through education has been

overwhelming. Iwould wish to take this moment to thank my elder sisters

Edna, Enid, Harrietand Ellaand their families for their moral support given to

me duringthis study. Ithank my young brothers Owen and Kennedyfor their

encouragementand prayers. I cannot forget to thank Dan, Simon and Albert

who, despite their busy schedule accepted to proof read and give their in

sighting inputs. Finally my thanks go to my friends Jackie and Mugisha for

their moral support.


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Con en List ofTables 7

List ofFigures 7

List ofAcronyms 8

Abstract 10

Relevance to Development studies 11

Keywords 11

Ch p

e 1 12

1.0 Introduction 12

1.1 Background 12

1.2 Problem stateemnt 15

1.3 Relevance and Justification 17

1.4 Objectives and Research questions 17

1.5 Research Methods and Limitations 181.6 Organisation ofthe Research

Ch p

e 2 20

2.0 Theoretical Background 20

2.1 Introduction 20

2.2 Conceptualising CSR 20

2.3 Relevance ofCSRto Stakeholders 25

2.3.1 Economic Investments 26

2.3.2 Employees 272.3.3 CommunityPartnership 28

2.3.4 Customers 29

2.3.5 Stakeholder expectations 30

2.3.6 Analytical Framework 30

2.4 Conclusion 31

Ch p

e 3 32

3.0 Development ofTelecommunication 32

3.1 Introduction 323.2 Mobile Telephone Services in Uganda 32

3.3 National Regulatory Frameworkfor MTS providers 33

3.4 Company profiles and CSR statements 33

3.4.1 ZAIN - UGANDA 33

3.4.2 MTN - UGANDA 34


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3.4.3 Uganda Telecommunications Limited (UTL) 35

Ch p

e 4 37

4. O Stakeholders and CSR in Practice 37

4.1 Introduction 374.2 Key Stakeholders 37

4.3 CSR in Practice 38

4.3.1 Economic Responsibilities 38

4.3.2 Philanthropic Responsibilities 44

4.3.3 Legal Responsibilities 48

4.3.4 Ethical Responsibilities 50

Ch p

e 5 53

5.0 Conclusion and Recommendation 53

5.1 KeyIssues raised in the Research 53

5.2 Research Findings 535.2.1 Company perception ofCSR 53

5.2.2 Expectation fulfilment 54

5.4 Conclusion 58


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L o ble Table 1 ZAIN Tax remittances to the Government 40

Table 2 MTN Tax remittances to the Government 41

Table 3 UTL Tax remittances to the Government 41

L

o F

u e

Figure 1 Africa's Corporate social ResponsibilityPyramid 24

Figure 2 Analytical Framework 31

Append ce

A Questionnaire 63


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L! " #

o $ Ac % ony& "

ATU African Telecommunication union

CEO ChiefExecutive Officer

CSR Corporate Social Responsibility

CSRR Corporate Social Responsibility Rating

EU European Union

GoU Government ofUganda

ICT Information and Communication Technology

IDB International Development Bank

ILO International Labour Organisation

ITU International Telecommunication Union

MTN Mobile Telecommunication Network

MTS Mobile Telephone Network

PRO Public Relations Officer

UCC Uganda Communications Commission

UCRNN Uganda Child Rights NGO Network

UN United Nations

URA Uganda Revenue Authority

UTL Uganda Telecommunication Network

WBCSD World Business Council on Sustainable Development

MNE Multinational Enterprises

OECD Organisation for Economic Cooperation and Development RCDF Rural Communication Development Fund

MCDT Micro Credit Development Trust

USAID United States Agencyfor International Development

CEO ChiefExecutive Officer


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EU European Union

PERD Public Enterprise Reform and Divestiture

DRIC Divesture and Reform Implementation Committee

MTS Mobile Telephone Service

PRO Public Relations Officer

UTL Uganda Communications Limited

GoU Government ofUganda

ILO International Labour Organisation

UN United Nations

IDB International Development Bank

BCSR Business Council for Social Responsibility

UCC Uganda Communications Commission

UCT Uganda Communications Tribunal

UP TC UgandaPosts and Telecommunications Corporations

GSM Global Systems for Mobile Communications

PDA Personal Digital Assistant

SMS Short messaging system

ICT Information Communication Technology

NSSF National Social Security Fund

BON Build Our Nation

ZAC ZAIN African Challenge

TTC Textfor Change

HFH Habitat For Humanity

URCS Uganda Red Cross society

URA Uganda Revenue Authority

PWHC PriceWaterhouseCoopers


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Ab ' ( ) 0 c (

The economy of Uganda has increasingly been taken over by the private

sector. In turn the private sector is expected to fulfil the corporate socialresponsibilities to the stakeholders. In a bid to understandwhether companies

do fulfil their CSR, the researchwas carrying out in the MTS companies. The

research used the CSR pyramid produced by thatwas designed by Visser

(2005) to explore economic, philanthropic, legal and ethical responsibilities.

The methodology thatwas employed during the studywas through semi -

structured interviews and questionnaires. The analytical framework focussed

on four stakeholder categories which included government, employees,

communityand customers or clients. The MTS companies in questions are thethree dominant ones; Mobile Telecommunication Network(MTN), ZAIN and

Uganda Telecommunications Limited (UTL).

After analysing both the findings and the literature, this paper points out some

areas where MTS companies have done well in fulfilling CSRagenda, notably

in philanthropy and also in abiding to legal regulations but also reveals that

some companies do not fulfil their economic responsibilities owed to

government.


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Rele1 2 nce to De1 elop 3 ent Stud 4 e 5

As private sector marks a substantial reduction in the state administration of

economic sector, stakeholders rights are placed at stake. In a voluntary

manner thatthe corporations dealwith their stakeholders they may directly or

indirectly misuse their mightto turn awayfrom their obligations. As the

research aims at exploringwhether the CSR obligations are beingfulfilled, this

work becomes relevant especiallyto policy practitioners.

Keywo 6 d 5

Corporate Social Responsibility, Mobile Telephone Service providers,

Sustainable Development, Stakeholder expectations, Corporate minimum legal

requirements, Telecommunication.


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CHAPTER1

1.0INTR7

DUCTION

1.18

9 ck@ A ound

Corporate Social responsibility is a development conceptthat has come about

as a result of zealous search for development alternative. The shift of

economic power between different developmentagents, notablyfrom the state

to the private operators as development custodians has changed the focus of

howdevelopment is currently perceived.

In the first half of 20th century, the state was the major conventional

development actor and an apparatus for economic growth and development.

In 1980s, the state was seen as a failure in directing and steering economic

development (Vickers 2007). Discretionary state measures were seen to be

extremely costly and therefore stagnating development. Sally (1998:29,194)

noted; Interventions in the market process, property rights and resource

allocation by the state were no longer efficient (Sally, 1998:29, 194).

International financial institutions based on this state failure to advocate for

Trade liberalisation with free trade paradigm, having rich political, economic

and moral tomes gearing to unfettered system of free imports and exports

(Irwin 1996, Bhagwati 2002). This led to globalisation prominence that

attracted more and more of foreign direct investments especially to the

developing world and therefore the Multinational companies or business

companies. The rights, powers and special privileges awarded to these

companies therefore call for CSR(Dahl, 1973:11)

However, designing strategies for trade and investmentand policies aimed

at alleviating poverty for CSR remains the responsibility of the state (Newell

2006). But due to anti-state bias, the norm of voluntarism and the

unprecedented power enjoyed by these business companies, weaker

governments fail to regulate them as they locate their CSR in areas ofweak or

non-existent societal or environmental fields and exploit the poor

communities. Therefore, government needs supportfrom donor communitie s

and working both with civil societies and researchers to a meaningful CSR

agenda(Newell Pand A. Muro, 2006).


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Simon Caulkin, (2005) noted that, Business is the key to beating global

poverty, butwe are talking much more than handouts, ( The observer, 13

March, 2005). In 2006, itwas reported in The Economist Newspaper that,

Philanthropywill have to shed amateurism that still pervades much of it

and become a modern, efficient and global industry, ( The economist, 25

February- Survey ofwealth and philanthropy). All these authors seek the

intervention ofbusiness companies as a developmentalternative especially in

developing countries which are still trapped in the massive povertywhere the

majority ofthe population continues to survive on less than a dollar per day. In

1950, the Sears CEO considered that profitwas a by-product of success in

satisfying responsibly the legitimate needs and expectations of the

corporations primary stakeholder group Hopkins (2007:114). He mentioned

this group in order of importance as Customers, employees, community and

stockholders.

As the states loss ofeconomic power became obvious and recognised,

different scholars, institutions and organisations were busy constructingwhat

CSR entails: CSR is concernedwith treatingthe stakeholders ofthe firm ethically or

in a responsible manner. Ethically or responsible means treating stakeholders

in a manner deemed acceptable in civilized societies. Social includes economic

and environmental responsibility. Stakeholders exist bothwithin afirm and

outside. Thewider aim ofsocial responsibility is to create a higher standard of

living,while preservingthe profitability ofthe corporation, for peoples both

within and outside the corporation Hopkins (2003:16, 2009:)

According to European Commission (EU), CSR is a concept whereby

companies integrate social and environmental concerns in their business

operations and in their interactionwith their stakeholders on avoluntary basis

(EC Green Paper, 2001). World Business Council for Sustainable

Development defines itas the continuing commitment by business to behave

ethicallyand contribute to economic developmentwhile improvingthe quality

of life of the workforce and their families as well as of the local community

and societyat large(WBSCD, 1999)


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For UK government, CSR is thevoluntaryactions that business can take

over and above compliancewith minimum legal requirements, to address both

its own competitive interests and the interests ofthewider society

Whereas some scholars argue; CSR is for business profits (Friedman 1970,Bowman 1973, Braybrooke 1976:224), all the above definitions address the

social, ethical, environmental and the legal (economic) concerns of all the

stakeholders. Therefore, if the Business is for profit, why should companies

engage in these other social responsibilities? If business companies were

absent,who is responsible for the above concerns andwhy not now?

In Uganda, like any African country the concept of corporate social

responsibility has not taken shape the way it has done in other developed

countries like those in Europe and North America. Moreover, little or noeffort has been made to assess the impact ofphilanthropic activities and other

CSR initiatives on the dimensions ofdevelopment. However some companies

have contributed much in times ofneed and this portray the rate or level of

contribution to development. When Washington was attacked by terrorists,

General Electric, Microsoft, Pfizer and Daimler Chrysler paid 10 Million US

dollars each to help in the rescue mission (David, Nikolai and Thomas, 2008).

United Parcel Service has become an importance actor in humanitarian

assistance. The company helped the Red Cross in providing food to Kosovorefugee camps in Albaniaand Macedonia. In Uganda, the CSRagenda emerged

in 1990swhen the economywas re-structured. In 1993, the Public Enterprise

Reform and Divestiture (PERD)was enacted and Divesture and Reform

Implementation Committee (DRIC) established. The reason for the reforms

was the economic policies that prevailed then; the Structure adjustment

programmes (SAPS) butalso the economic breakdown that had been brought

about bythe political turmoil ofthe previous regimes (Kibikyo 2008). Not only

did the former national enterprises comprise the private sector butthe marketregistered new entrants also, Mobile Telephone service providers inclusive.

After taking over government custodianship, the companies enrolled CSR as

part of their business and this is the reasonwhythe studywas undertaken to


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see if corporate social responsibilities undertaken by companies in Uganda

similarly have an impact on the societyas the ones mentioned above

In the related diverse scholarlywork, manyattempts have been made to

assess CSR performance and Visser (2005) is one ofthosewith a mark in thefield. He developed a CSRPyramid in the African contextthat is comprised of

Economic, Philanthropic, Legal and ethical Responsibilities. The Pyramid is

discussed in chapter 2 of this paper. Using this Pyramid, I focus on the

corporate social responsibilities undertaken by the Mobile telephone service

providers in Ugandawith special attention on the three companies which

include Mobile Telecommunication Network (MTN), ZAIN-UGANDA and

UGANDA TELECOM LIMI TED. These are three most powerful mobile

telephone companies thatare operating in Ugandaand have been in businessfor over a decade.

1.2 Proble B StateB ent

CSR is an area that holds responsible the corporations to invest in

communities in which theyare operating. The question that is likely to come

up here is; Is CSRa phenomenon that Uganda should be advocatingfor as a

developmentalternative? Why is the state not responsible for such investment?

Until mid 1980s, Ugandas economywas purely in hands of the state. Like

many sub-Saharan Africa, therewas a sloweconomic growth and the countrys

budgetalmost entirely relied on external borrowingand the country particular

had faced both economic and political turmoil due to ravagingwars. Itwas

very hard for the state to single handedly, transform the state into a positive

economic performance. In 1988, the first move to privatise state-owned

companieswas made and the subsequent sell ofgovernmentParastatal in 1989.

This was of course intended to reduce government costs and avoid hyper

inflation of that time. Currently the economic power is controlled by foreign

investments and growingatafastest speed. There has been a double increase

in domestic foreign investment from 2001 to 2008where the figures short

from US $ 150 million to US $ 368millions. While Uganda remains with is

chance offoreign capital inflow, it remains embroiled in a string ofchallenges

thatare most likelyto put it on haltas far as development is concerned. Weak


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infrastructure hinders proper allocation ofresources bythe potential investors,

uneducatedworkforce is likelyto be taken advantage ofand be exploited and

political interference that is marred with corruption. Yet , private sector (

Corporations) as an approach to development, are expected to be profitable

and pay taxes, provide employment, obey the laws, contribute to community

development and address other social concerns that may come as a result of

their operations. Surprisingly this private sector seems not to be paying

attention to the CSR agenda. according to World Bank (2006) Report on

povertyand Vulnerabilityassessment in sub-Saharan Africa, income inequality

in Uganda remains high and the Health indicators are highwith little progress

for the last10 years. Rural areas,where the majority live, still remain poverty-

stricken and infrastructure is in the worst state.

In CSR agenda, it is common that corporations try to project a suitable

outlook or image in order to capture the approval ofall the stakeholders. By

using their voluntary character, they try to magnify small changes into huge

ones. Hamann and Cutt(2003:225) explain that corporations implement small

changes and try to have influence over popular and policy discourses so that

questions likely to be asked by the stakeholders are put on hold by making

imaginaryanswers feasible.

Some researchers also argue thatthere is no policyframeworkfor CSR in

Uganda. Katamba (2008), notes that the Ugandan government does not

promote CSR practice, though some laws are indirectly related to it. He further

explains thatthese laws are notalways adhered to. The problem therefore, is

failure to know the contribution being made by business companies towards

development through their CSR initiatives. Whether companies do meet their

legal requirements and go beyond their philanthropic activities to communities

is a point in question. This research aims at discoveringwhether CSR in MTS

companies meets stakeholder expectations.


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1.3ReleC ance and juD tification.

CSR is a field that has, of recent, gained prominence where by development

has beenviewed possible ifresponsibilities can be redistributed from the state

to other non-state actors. In this case the Corporations and other organisationsthat have taken over the role of state in investment have the duty not on to

pursue for profits but also to cater for society needs without expecting

economic advantage.

Whereas much information that has been written on corporate social

responsibility, most of it has been written in the context of the developed

nations and has little reference to developingworld. Yet some companies

especiallythe Telecommunication companies that have penetrated the African

market have equally succeeded as those in the developed world. Though theyare able to report on what they are doing, they are unable to reportwhat

changes theyactually impact on the stakeholders. While I do appreciate their

efforts to be socially responsible, I find it an area of interest to studywhat

actually they do and whether what they do contributes to development and

also meets the stakeholders expectations

1.4 Objective E and re E earch que E tions

The main objective of this thesis is to analyse the corporate socialresponsibilities undertaken by the Mobile telephone service companies in

Uganda.

The main research question thatthe study seeks to answer is:

To what extent do mobile telephone service companies in Ugandafulfil corporate social

responsibilities?

In trying to find answers to the above questions, the following sub -

questionswere ofgreat guidance.

(a)Who are the major stakeholders ofCSR?

(b)Whatactivities do MTS companies provide?

(c) Howdo companies and stakeholdersviewCSR?

(d)Do theyfulfil stakeholders expectations?


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(e) Do theyfulfil the legal requirements?

1.5 Research methods andlimitations

This study is fundamentally qualitative in nature though fewtables and charts

were used. To gather the information better and achieve the objective, the

researcher employed two techniques; semi-structured interview and

questionnaires. The questionnaires were addressed to the PROs of the three

companies who are responsible for information dissemination for their

respective companies. The use ofquestionnaires to the PROs was because of

the time factor thatwas anticipated to be a hindrance once interviewswere to

be used. For the rest of the respondents, interviews were conducted. A tri-

dimensional dataanalysis is then used. This includes the reviewing ofliterature,

primary data analysis and secondary data analysis, all concerning corporate

social responsibilityaboutthe three MTS companies.

Regardingthe literature review, voluminous information is used ranging from

text books, research papers, journal articles, magazines and internet especially

concerning theories and concepts. Most of the sources of information have

been annexed atthe back ofthis thesis.

Concerning primary data, itwas collected over the month ofAugust2009,

specificallytargeting dataabout CSR in Mobile Telephone Service companies. The companies under the studywere MTN, ZAIN-Uganda and UTL. The

reason for targeting these companies was because of their prominence and

reputation as successful companies in the Telecommunication industry in the

country. MTN is the leading company in terms ofmarket share, followed by

ZAIN-Ugandaand UTL becomes the third.

Many sources were consulted in soliciting information regarding the

secondary data. The major sourcewas the Government ofUganda(GoU)and

the Uganda communication commission reports. More so, internationalorganisations which included International Labour Organisation (ILO), The

United Nations (UN), International Development Bank (IDB), UN Global

Impact, Business Council for Social Responsibility (BCSR), African


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Telecommunication Union (ATU) and the World Business council on Social

Development(WBCSD)were consulted.

The other source of information was local Non Governmental

organisations that included beneficiaries ofthe CSRactivities, The newspapersbusiness columns, and some magazines that report on corporate affairs in

Uganda like the CEO magazine and the Super Taxpayer Magazine.

In total, the sample sizewas 64 respondents. Three ofthese were PROs,

nine were employees of the benefitting communities, and fifteen were

employees ofthe three MTS companies, two corporate managers ofZAIN and

UTL, three journalists, fifteen researchers and two government officials

Duringthe research process, limitations facedwere; being in a competitive

environment, some respondents were hesitant to give necessary data for the

analysis, others opted to deliberately refuse the interview, the study involved

moving from one place to another and this proved costly both in time and

money.

1.6 Organisation of the researchpaper

The research paper is arranged into five chapters. Chapter 2 contains theories

and literature about corporate social responsibility rangingfrom the

international perspective to the local perspective. Chapter three discusses the

companies and their CSR environment in relation to stakeholders. Chapter

four discusses the CSRand stakeholders in practice, stressingwhat is done and

stakeholder expectations. Chapter 5 conta ins the summary ofthe findings, few

recommendation and the conclusion.


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Chapter 2

2.0 THEORETICAL BACKGROUND

2.1 Introduction

In the report published by British Telecom The sustainability review 2009,

the author starts bythe statement Our customers and our shareholders are atthe

heart ofeverythingwe do.In the same report, Sir Michael Rake, the chairman

ofBT (2007-2009) said

Im delighted thatIm able to personally selectthewinners ofthe Chairmans

Awards from hundreds ofapplications from BT people involved in community

activities. Im also proud ofour long-term supportfor, and our peoples

commitmentto, fundraisingtelethons and disaster appeals. Over the next year

our newvolunteering strategywill help even more ofour people get involved in

our communitywork, extending the benefits for BT and our charity partners.

Delivering his Corporate Social Responsibility Report2008, Didier Bellens, the

CEO Belgacom, the leading Belgian Telecommunication company noted;

I believe that embedding CSR into our business strategywill enable us to

address some challenges ofour society more successfullyandwill allowus to

progress together on a more sustainable basis.Bellens CEO, Belgacom.

While for the France Telecom, their corporate social responsibility is

summarised in threewords, include, PreserveandCare

All the massages above indicate that Telecommunication companies arevastly

engaged in CSRactivities and are highlytreasured in bringingabout sustainable

development.

2.2 Conceptualising Corporate SocialResponsibility

Hopkins (2003) noted that the concept ofCSRwas not prominent until the

Great Depression of1930s. But since then to 1960s, it became an important

issue not only for business but also in the theories and practices of law,

economics and politics.

In 1930, Merrick Dodd ofHarvard lawposed a question, Forwhom, are

corporate managers trustees? (Hopkins 2003). With this question he was


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engaged in a debate with Berle ofColumbia law school. Dodd was with the

view that corporations served a social service as well as a profit-making

function. However, the debate did not resume until 1970swhen it sprangagain

into prominence. Scholars believe that itwas exacerbated bythe fall ofBerlin

wallwhich symbolised the downfall ofcommunism. Since then, debates about

whatthe managers should do have been accumulatedvastly. Some economists

could not agree that corporate businesses should engage in social

responsibilities and pointed out that the sole purpose of business is to make

profits (Friedman 1970, Bowman 1973, Braybrooke 1976: 224). Friedman

followed a principle that CSR expenditure reduces the profits which in actual

sense are the companys capital for investment. Since investment furthers

business performance, a relative CSR expenditure will drop the level of

business performance thatwould otherwise benefit more and more people in

the future. He maintained that businesses have no moneyto spend.

Steiner (1974:84) could not buythe idea ofFriedman and his colleagues

when he advocates for a breakwith classical concept of profit as the sole

purpose ofbusiness. He argued thatthough business remains fundamentallyan

economic institution, it has responsibilities to help society achieve its basic

goals especially as it becomes larger and larger. As it grows bigger, society

tends to take a greater interest in its operations and the business thinks

carefully about its responsibilities as it is affected by this public interest

(Steiner, 1974:81). Naor (1982)wentfurther to tryand conceptualise CSRas an

obligation ofbusiness. He noted that business is a social activity conducted by

people for people and that satisfying the socially desirable needs and bringing

about increases in publicwelfare should be the major aim ofbusiness. Though

Naor is concerned aboutwhat is socially desirable due to multiple stakeholders,

he suggests that social desirability can be based on the majority consensus ofall

the public concerned (stakeholders).

The economic argument of CSR remained an issue ofcontestation over

the period of1970s. Whereas Steiner talked ofhowpublic interest is directly

proportional to the size of business, Edmunds (1977) interestingly suggested

how the business can decentralize and avoid social responsibility. He noted


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that social responsibility takes one-third of the total corporate executive

commitmentand since CSR involves foregone alternatives in form oftime and

profits, which in turn increases overhead costs, business companies can

decentralise to appear small economic units and reduce public pressure.

Argued and contested upon, a newwave in CSR agenda emerged especially

after the amalgamation of national economic units or governments into a

global one in 1990s. Global ReportingInitiative convened in 1997as an inter-

national multi-stakeholder effortthat creates a common frameworkforvolun-

tary reporting of the economic, environmental and social impact oforganisa-

tion level-activity(EOCD 2001). In 2000, EOCD guidelines for Multinational

Enterprises (MNEs)were revised to bring them up to date in the rapidly

changing global economy. Global Compactwas officially launched in 2000 inNewYork one year after UN Secretary General Kofi Anan challenged

business leaders to have shared values and principles and give globalisation a

human face (EOCD, 2000:16). European commission, in July2002, released a

communication callingfor public action to promote CSR(Commission ofthe

European communities, 2002b:8). The same commission developed a frame-

work ofhowbetter the CSR can be understood.

In Africa, many countries have not moved on the same pace especially

with those in the developedworld. This has been attributed to bad governance

and political turmoil which have affected many countries in the region. How-

ever CSR has started taking shape, more so in South-Africawhere many com-

panies have subscribed to CSRInternational organisations like Global Report-

ing Initiative (GRI) guidelines. Moreover, the country hosts Mervin King, a

commission on ethical codes ofconduct in good corporate governance that is

based in Johannesburg (Hopkins 2003:202). Other companies are increasingly

getting involved in the social programmes like HIV/AIDS prevention and

cure. Examples of these companies include Coca -cola in partnership with

UNAIDS (Hopkins 2003:203).

Evidence from the literature clearly shows that CSR is a developmentalter-

native that should be adopted. Hopkins (2008:14)was the first to link CSR

with development, maintainingthat CSR can really pavewayfor development.

He further argues that, Clearly, governmentswill be the overall arbiter ofde-


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velopment through the public purse, but the failure, alongwith international

partner UN, in many developing countries has provided an empty space that

must be filled byanother entity-the private sector and its champions, the lar-

ger corporations (Hopkins 2008:14) However, what is much needed is the

clarity aboutwho the stakeholders are, their expectations and the CSR en-

gagement priorities. Some companies do puta substantial amount ofmoney in

communities but end up having no impactatall. Hopkins (2008) gives an ex-

ample ofCoca-Cola Companythat builta hospital in Somalia many years ago.

Without health system, the hospital did not have doctors, management system

and even other required personnel. In a short period, the Hospital had been

ransacked ofits equipment it contained andwas quickly used as a refugee shel-

ter and nowserves as a slum. This is because the companythat built it had no

prior thoughtabout sustainability. Therefore, the society (stakeholders) has a

stake in directingthe CSRactivities.

Amidst the many definitional constructs of CSR, Visser, a renowned

scholar in the field ofCSR redesigned aPyramid that had originally been for-

mulated by Archie B. Carroll. Carroll had developed afour-part conceptualiza-

tion, contemplating that business does not only have Economic and legal re-

sponsibilities as fundamental obligations to society butalso Ethical and discr e-

tionary (philanthropic) ones (Carroll 1979). In his interesting CSR pyramidal

framework, Carroll had assumed the business obligations to societywere fun-

damentallyvital to society in a hierarchical order of importance which was

Economic, legal, ethical and finallyPhilanthropic. Literally, Economic respon-

sibility means doingwhat is required bythe global capitalism, Legal responsi-

bility means doingwhat is required by global stakeholders, ethical responsibility

means doingwhat is expected by stakeholders and Philanthropic responsibility;

doingwhat is desired bythe stakeholders.(Carroll 2004).

In redesigningthe pyramid for Africa context, Visser (2005) put Economic

responsibility as the first priority, followed by Philanthropic, then legal and

lastly ethical. His reasonswere that, in Africa business companies operate in an

environmentwhere socio-economic needs are so greatthat philanthropic

activities are an expected norm. Legal infrastructure is poorly developed so

there is no pressure on the companies and lastly CSR is still atan earlyage of


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maturity in Africa. With high rate ofpoverty, Philanthropytakes a higher posi-

tion in Africa because business companies themselves cannot succeed in failing

communities though, ofcourse economics remains thevital part ofany busi-

ness entity. Whereas ethical codes are highlytreasured in developed world es-

pecially Europe, theyare not so much developed in Africa, the reason theytake

the least priority.

Using Visser (2005), the research study intended to show areas that firms

should make priorities while they commit their CSR engagements for devel-

opment.

Fig.1Africas Corporate SocialResponsibility Pyramid

Source; Wayne Visser, 2005

A closer look into what each responsibility category embraces is of a

crucial concern to later examine its relevancyto the stakeholders.

Ethical

Legal

Responsibilities

Philanthropic

Responsibilities

EconomicResponsibilities


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Economic Responsibility is historically believed to be the most

fundamental obligation of any business entity (Crane et al, 2008:62) . The

primary motive ofan entrepreneurship is to make profit. Therefore firms need

to perform in a manner that is consistently maximising earnings per share.

(Friedman 1970, Braybrooke 1976:224). A firm is required to maintain a strong

competitive position and a high level ofoperating efficiency.

Philanthropic Responsibilities entail charitable expectations of the

society(Crane etal, 2008:65). Managers and their employees have the dutyto

participate involuntaryand charitable activitieswithin their local communities.

Firms should assist private and public educational institutions as well as

helpingthose projects thatare involved in improving lives ofthe communities.

Such projects include health, agriculture, infrastructure, water and sanitation,waste management and even environmental protection. The rationale is that,

other than beingan expected norm in a society, business firms cannot operate

in failing communities and therefore the reason to engage in this kind of

responsibility.

Legal responsibilities on the other hand are concerned with what

governments expect the firm to do, that is, complyingwith the laws and

obligations. A law in this sense is a codification ofwhat is right or wrong

(Visser, 2005).Ethical responsibilities however embody the standards, norms or

expectations that are reflected stakeholders rights (employees, shareholders

and the larger community), in regard to howfairly or justlytheyare treated or

howbusiness companies respect or protect stakeholders moral rights (Crane et

al, 2008:64).

2.3 Relevanceof CSRto stakeholders.

There is no doubt that corporations or business firms have stakeholders

(Crane etal 2008:143, Hopkins 2003:17). Stakeholders are related to the firm in

different capacities. While some actas inputs (Investors, suppliers, employees

and customers) to the firm, others work as mutual partners (Governments,

communities, trade associations and even political groups)with it(Crane etal


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2008:143). Therefore they require, expect and desire the firm to be socially

responsive to their needs. Similarly Telecommunication companies are socially

responsible to their stakeholders in a range ofactivities that include economic,

philanthropic, legal and ethical. For the interest of my research, four

stakeholder categories have are considered.CSR in;

y Economic (Employee + Government category),

y Community partnerships,

y Governmentas a recipient ofLegal CSR

y And consumer- related CSR engagements.

The first category combines two stakeholders as theyare the most recipients of

economic CSRfrom the corporations

2.3.1 Economic investments.

The supremacy ofeconomic CSRactivities makes it considerably unique com-

pared to other social responsibilities a business firm has (i.e., philanthropic,

legal and ethical). While these others mayfocus their attention only on stake-

holders who may not necessarily be the shareholders, economic investments

are argued to bring returns on equity that are enjoyed by shareholders only

(Friedman 1970, Sundaran and Inkpen 2004). This was the classical idea of

corporate motive of making profit. However, of recent many scholars haveargued that a single motive cannot sustain the existence of a corporation.

There are other groups (stakeholders)who affect or getaffected by the busi-

ness (Freeman 1984, Hopkins 2003:13).Clarkson (1995:112), for instance, ar-

gues that "the economic and social purpose ofthe corporation is to create and

distribute wealth and value to all its primary stakeholder groups, without fa-

vouring one group atthe expense ofothers.Though it is not legally manda-

tory that a high-profit maximising firm should plough back a reasonable in-

vestment in philanthropic activities, it is in the current global system whereeconomic power and strength has shifted from state to private sector. The era

ofcapitalism has drastically reduced the influence of state and this is further

deepening due to the expansion ofthe multinational companies. Whilst, there

is not standard for thatand the factthat many companies claim being socially

responsible, a level ofprofit should correspond with the level ofCSR. In the


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economic turbulent crisis that is going on, big companies have been rescued

from collapse in the famous bail out system. Ifthe government can do that,

why nota companythat has taken over the role ofgovernment in investing do

the same to communities in alleviating poverty?

2.3.2. Employees

Employees are one of the important business stakeholders and are direct

beneficiaries of CSR practices and policies. Due to increased pressure from

globalisation and the growing competition, companies have been are constantly

compelled to consider streamlining their operations in a manner thatwill

increase productivityand contain costs that best suits the output per share. In

the process, employees sometimes find themselves on the demeaning end;with

lowsalaries, exploitation in terms ofworking hours and evenwith no any otherbenefits from the company. This research focussed on employees in relation

to three things: Salary, Bonuses and working hours. Though its difficult to

measure the concept offairness, it does not mean thattheword loses meaning

when it comes to economic employee treatment bythe company. Indeed, all

employees may not receive the same amount of salary but the disparity that

exists between the highestand the lowest determines howfairlythe company

treats its employees in remunerations. When the gap is bigger, then the

company is not all that fair. When rewarding bonuses, where do companies

base their judgement, who receives the bonus and atwhat rate? Is it on

performance, individual initiatives, intelligence or hard work? In their

arguments for business to reform, Waddock et al (2002), noted that the

company can receive a competitive advantage if the primary stakeholders of

employees gettheir payand benefits, safetyand health, rights atwork ofglobal

labour standards and fair/ ethical treatments. Employees as individuals need

organisational justice thatwill make them feel part of the firm. CSR and

justice share afundamental ethical assumption ofnormative treatment (Folge,

Cropananzo, & Goldman, 2005).whereas the Organisational justice entails

norms regarding the treatment of individuals within the firm, CSR entails

norms regardingthe treatment ofindividualswithin, groups ofindividuals and

environments external to the organisation. Therefore CSRas a justice done to

the employeeswill not be seen bythe individualswithin butalsowill be judged


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bythe environment(Individuals outside the organisation). It is therefore clear

that,whereas the individuals inside (employees) may not knowhow fairlythey

are being treated; an outsider mayverywell know the injustice being inflicted

on them. The reason aswhy corporate social responsibility becomes relevant in

that the firm goes beyond its immediate narrow monetary interest and

considers who the company is,what is ofvalue besides moneyand towhom

it has responsibility.

2.3.3 Community

Globalization has brought greater complexities, limited resources and

interdependence. Communities and business are increasingly entering into

partnerships, recognisingthat shareholders and societal values are intrinsically

linked (Loza, 2004). In Most cases businesses engage in communitypartnerships with aviewofhelping communities financially. However notall

these partnerships are worth of praising because they may aim at building

reputation for the business, which largely benefit the business by providing it

with competitive advantage over others (Crane etal, 2008:273). In realitythe

increasing pressure that has emerged from communities or Civil society

organisations on business is not aimed at searching for philanthropic

contributions in financial terms but the need for the firms to provide

information on the impact ofall their social activities (Crane etal, 2008:275).

Ofcourse this is a riskyventure on part ofthe business as confidentiality is a

tool to their success in many times. This lack of social reporting and trust

between businesses and communities often causes conflict. Hopkins (2008:22)

put it A company practising CSRwill have provided dataand the sort oftrack

record that increase the level oftrust ofall the stakeholders in its activities. The

costs ofbreakingthis trustare high.

Other than that, companies should provide CSRactivities to communities

which have minimal access to state or private sector provisions especially inrural areas. Examples ofthese provisions include banking, public transportand

even supportto marginalised group (Tracey etal 2005). Definitelythese puta

difference to other lives ofpeople living in these communities especiallywhen

there is no hope of provision in the near future. However, though these


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community partnerships may exist, the question is, are theyaddressingwhat

they should be addressing in their corporate social agendas? Are they

addressingthe community/society expectations?

Our business dependsvery considerably on the health ofthe community. Ifthathealth is adverselyaffected by deprivation, crime,vandalism, racial tension, inner-

city decay, homeless or pollution, so, too, is our business health. Our opportunities

are reduced, our problems increase, our costs rise. So rather than moaningabout

these problems, it makes good business sense for BT toworkwith others and get

involvedwith addressingthem (Hopkins 2003:63).

Indeed, any responsible business would bear these daily problems that affect

the societieswithinwhich it is operating in. Dominic Cadbury, the chairman of

Cadbury-Schweppes, said;

companies across UKare increasingly recognisingthe importance ofbusiness

engagementwith the community. Companies have awealth ofexpertise and

skills. Theyalso have powerful products and brands. Together through

partnershipswith thewider community, they can create and deliver real benefits

(Hopkins 2003:63).

2.3.4 CustomersThe term Customer in most cases is applied to refer to the end-user of a

service ofa product. Haynes (1997:16) notes that Customers is a generic term

referring to anybodywho receives a service or product from some other

person or a group ofpeople. In this researchwe mean external customers as

the stakeholders within the Mobile telephone companies who use services or

products offered bythese companies.

Hopkinswrites, the statementthat customer is a king or queen has never

been truer than today (Hopkins 2003). In the massive development ofCSRideology, Business firms are increasingly shifting their attention at improving

the relationship between business management and their customers. This is

aimed at building stronger and long-term relationship with them. Further,

more approaches to customer identification, interaction that creates retention


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and profitability, have been thought ofby many companies (Thompson 2004,

Knox 2001and Gronroos (1996). Therefore more CSRactivities have targeted

the customers as a major stakeholder especially to the growing businesses.

However, in developingworld, these CSRactivities may not necessary reflect

the Customer needs, priorities or expectations thus have less impact or none at

all especially on development. Itake the impactto be there only ifthese needs

that CSRactivities are addressing can satisfactorily be addressed accordingto

what the customer expects. In terms of mobile telephone service in Uganda,

we talk offairness in terms ofproduct price available to customers, thewaythe

handling ofcustomer complaints are beingattended to

2.3.5 Stakeholder Expectations

Expectations are perspectives that a customer, a community member agovernment official or any other personwho has a stake in business has.Firms

are obliged to meet the expectation of the stakeholders (Donaldson and

Preston 1997, Berman et al, 1999). However stakeholder expectations are

relative to the way stakeholders affect, or are affected by the business firm.

This means different stakeholders have different expectation from the same

business firm. This is measured by administering an instrument such as

questionnaire or checklist on various stakeholders in a survey. In this regard

the stakeholders indicate the extent to which the company has effectivelydelivered services to their expectations andwhere it has fallen short.

The feedbackarising out of this survey helps the companyto improve on its

weaknesses and strengthen its performance. More so byanalysingthe company

profile and their public statements, conclusions can be made aboutwhatthese

companies are expected to deliver

2.3.6 AnalyticalFramework

The followingframework narrates and analyses the CSR services inwhich the

three companies of MTN, ZAIN-UGANDA and UTL are engaged. It

explores the stakeholders and their relationshipwith the firms under categories

mentioned in Vissers CSRPyramid


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Figure2: The AnalyticalFramework

Economic Philanthropic Legal Ethical

2.4 Conclusion

To sum up, Vissers Pyramid in recent literature has been used as a major yard

stick in measuring CSR . The same has been incorporated in the above

analytical frameworkto explorewhether MTS companies meetthe

expectations ofthe stakeholders. Employees, Communities, governmentand

clients have been key stakeholders in the analytical framework.

Company

Investments

Longterm

Short term

Profits

Employees

Salaries

Bonuses

Workinghours

Tax

Percentageshare

Togovernment

CommunityPartnerships:

Road-building

Hospitals

Schools

Orphanages

Public Safety

Government/corporate CSRPolicies:

Adherence toUCC, UCT

Guidelineswhich include;

Quality

standards ofservice

Universal accessto the network

Fair prices

Occupationalsafety

Trainings

Equal treatmentofstaff

Fair dismissal


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CHAPTER 3

3.0 DEVELOPMENT OF TELECOMMUNICATION

3.1 Introduction

This chapter avails the status ofMTS companies in Ugandafrom the time pri-

vatisation of telecommunication industrywas introduced in country and the

existing regulatoryand policyframework. It includes the profiles of the com-

panies under studyand also talks about CSR statements thatform part oftheir

business strategies.

3.2 Mobile Telephone services in Uganda

In Uganda, Telephone services were offered by a state-owned monopolyprovider, the UgandaPosts and Telecommunications Corporation, until 1993

when the first private companywas issued a license to operate as a second

network provider. Celtel (nowZAIN)was the firstto geta license but started

its operations in 1995. The company concentrated much in urban areas like

Kampala, Mbarara, Masaka, Aruaand other populated towns. In 1998, MTN, a

South African Company got a license as a second private Mobile telephone

service provider. MTN became relatively cheaper and extended its network so

rapidlyand even in rural areas than did the Celtel. The third private companywas created in 1998when UPTCwas unbundled and Uganda Telecom Limited

(UTL) formed. In June 2000, UTL was privatized and bought by Ucom

Limited, a consortium of three companies from Germany, Egypt and

Switzerland each. However of recent three other companies have joined the

mobile telephone industry in Ugandathough theyare no tas strongas the first

three. They include Warid Telecom, Hits Telecom and Orange Telecom.

Ugandas mobile telephony is afast growing sectorwith Ten million mobile

subscriberswhich is one-third ofthe total population (UCC 2008). The mobiletelephonyto population coverage is almost100% but geographically, it is 65%.

This indicates that some parts especially rural areas still need to be covered.


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3.3 National regulatoryFrameworkfor MTSproviders

An effective regulatory system is one that is ruled bya clear legislative mandate

to assure that service is provided through a competitive market to as many

people as possible at prices thatfairly reflectthe cost ofservices (Noll 1999).In 1997, Uganda Communication Commission (UCC)was created. This was

after the government had issued the licence to the first second network

provider, ZAIN (formerly Celtel)andwas aboutto issue licence to more two

companies, MTN and UTL. UCC was created purposely to monitor

communication activities, establish tariffsystems to protect consumers, ensure

equitable distribution of resources throughout the country and more so to

promote competition

The Commission levies on the gross revenues of the operators a compulsoryamount of 1% which is set aside to cater for the rural development

communications. This is in linewith the equitable distribution ofresources that

is stated in its major objectives. There is also Uganda Communications tribunal

(UCT) that is an oversight body created to offer disputes resolution. MTS

operators can appeal to this tribunal if theyare aggrieved byanything arising

from the communications act or from the influence ofgovernment power tha t

may sometimes incline to favouritism of some operators. So far government

has not interferedwith any matter concerningthe MTS operatorswithouttheinvitation ofUCT (Shirley etal 2002)

3.4 Companyprofiles and their CSRMission Statements.

3.4.1 ZAIN UGANDA

ZAIN Uganda(formerly Celtel) is an MTS provider in the country principally

engaged in providing Voice and datatelecommunication services. It is one of

the subsidiaries under the umbrella of ZAIN Group which operates in the

Middle Eastand in seventeen African countries.

Licensed in 1993, itwas the first private MTS provider to operate in Uganda.

With its headquarters in Kampala, it launched its services in 1995 startingwith

the districts ofKampalaand Mpigi. By2001, the company had already covered

17 districts. However, currently the network coverage is countrywide. Under

the licence terms, Celtel paid $ 50,000(UCC 2007), as a one -time Market entry


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fee plus other non-monetary requirements which included connecting its

network countrywide and also providing services to customers on a full time

basis. ZAIN is ranked second market shareholder with 40% after MTN

Ugandawhich gota licence in 1998.

The Corporate Mission reads, to cement ZAIN as a leading global mobile

operator that provides professional,world-class mobile and data services to all

our customers, wherever theyare, worldwide. And we aim to achieve this by

exceeding our customers expectations, rewarding our employees, and

providing returns beyond reasonable expectations for our shareholders. All

ZAIN subsidiaries operate on a group mission statement.

The company received stiffcompetition after new entrants in the market

which led to financial backdrop but ofrecent performance has improved. TheNetIncomewas $ 224 million for the year 2008 compared to $126 m in 2007

(78% increase).

Since it started its operations, ZAINhas engaged invarious CSRactivities.

These activities are part ofZAIN group corporate strategies. The CSR mission

statement is;

y To guide and streamline the companys business processes in a socially

and environmentally responsiblewayy To produce a positive impact on societyand the stakeholders, nowand

in the future

y To invest in these communities to help fulfil their potential

3.4.2 Mobile Telecommunication Network(MTN)

Mobile Telecommunication Network Uganda (MTN), a South African

company, was issued a licence in April 1998 as the second mobile network

provider in the country. Its one ofthe subsidiaries under MTN South Africa.It became operational in October the same year and offered fixed-line,

payphone, mobile voice and data services. Its services are based on Global

Systems Mobile (GSM) cellular technology. As it is popularly branded due to

its corporate colour, the yello (reflecting both hello and Yellow), covers

over 72% ofthewhole country. In addition to the three initial services, MTN


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nowoffers internet services and the recent innovations are the mobile money

transfer and the Google SMS. It takes the first position in the market share

having 49% per centwith 3 million customer base.

Like ZAIN, MTN has been engaged in CSR from the time it becameoperational in the country. In 2007, after ten years in business, it had already

spent1.87b Uganda shillings (approx. $1.1m). In the same year, the company

launched MTN Foundation, an initiative created solelyto handle CSRactivities

throughout the country. The initial capital thatwas donated by MTN to the

foundationwas 600m Uganda shillings ($352,941).

The Mission statementfor MTN Foundation is Improvingthe quality of

life through caring partnerships. The Foundation has been engaged in many

CSR partnerships having philanthropic focus on Education (Including Scienceand Technology), Music, Arts and Culture, Health and HIV/AIDS,

Environment, Community developmentand also the lowcost housingthrough

strategic partnershipwith Habitatfor Humanit

3.4.1 Uganda Telecommunications Limited ( UTL)

Uganda Telecommunications Limited (UTL)was the third MTS provider to

be issued a licence. Itwas established in 1998after unbundling UPTC thatwas

owned bythe state and a monopoly provider ofTelecommunication services.

Two companies were formed; UgandaPosts Limited (UPL) and UTL. UPLremained government-owned but UTLwas later privatised in June 2000and a

bid for 51% shares was won by a consortium comprised of three multi -

national companies jointly called Ucom Limited. These companies were

Germanys Detecon, Egypts Orascrom and Telecel International from

Switzerland. Later the Ugandan government handed over 18% ofits shares to

the Libyan company, the Greencom and remained with only 31% at the

disposal ofpublic offering. Still it holds the third position in terms ofmarket

sharewith 8%.

The initial major mobile telephone services that the company provided

were both dataandvoice communications, through calls and short messaging

systems (SMS). In 2005, the company launched another facility, the high-speed

mobile internet that can be used with Personal Digital Assistants (PDAs)


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including mobile phones. The company is one of the success stories of

Ugandas privatisation reforms (Byaruhanga 2004). From the economic

dilapidated company(UPTC) of1970s to a locally invested private company, it

was able to enter the competitive market that had already seen ZAIN and

MTN both foreign-owned, launch their operations. Todaythe company boasts

ofcountrywide network coverage.

Uganda Telecommunications Limited is guided bya strategic CSR mission

statement;

Telecommunications play an essential role in safeguarding, enriching and

strengthening the social, environmental and economic foundation of Uganda.

Telecommunication has transformed our country through access to innovative

technologies that make a real and positive difference in peoples lives. Keyto this

journey is the relationships we have developed with the societywe serve. This is

why at Uganda Telecom corporate social responsibility has become an integral

part ofwhatwe do; in our challenges, achievements and thevision for the future.

We recognise the impactwe as a corporation have had on the environmentand in

the communities we serve, and fullyaccept the responsibility this bestows upon

us. We have embraced our responsibilities and have undertaken social investment

initiatives in education, sports, ICT for development and with empowering

disadvantaged children

Source: Uganda Telecom Limited Corporatewebsite

Conclusion

Interestingly, the three companies have all allocated 1% oftheir profits as an

investmentto CSR. Butthey have taken different priorities in the committing

it. While MTN has chosen sports as the key CSRactivity, ZAIN is committed

to invest more in education than any other activity. UTL, on the other hand

does not specify its priorities but talks of Education, Sports, ICT for

developmentand empoweringthe disadvantages children. In the next chapter,

these activities have been looked into in detail. All this said, the major

challenge lies in measuringthe impactthatthese companies engage in.


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Chapter4

4.0 STAKEHOLDERS AND PRACTICE OF CSR BY MTS

COMPANIES

4.1 Introduction

In this chapter, the study focuses on the descriptive analysis ofwho the

stakeholders ofCSR activities are and also looks at different categories of

CSR that the companies are engaged in, which reflects Economic,

Philanthropic, and Legal as well as Ethical commitments. The chapter

concentrates on the period between 2003 and 2009. Classification is done per

the MTS provider and howthey committheir respective CSRactivities.

4.2 Key Stakeholders

Today businesses are focussing on societyand external environments as a

result ofa numerous stakeholder groups coming up (Steadman etal, 1995).Yet

many definitions ofwho the stakeholder is are still contested. Butfewscholars

have given so far impressing statements ofwhata stakeholder means. Freeman

(1984:46) noted thata stakeholder as any group or individualwho can affect or

is affected by the achievement of the organization's objectives. To Phillip

(2003);a stakeholder is any individual or group ofindividuals that is the legit i-mate object ofmanagerial or organizational attention.

Hopkins (2003:49), knowing the reality surrounding the stakeholder

concept, was convinced that there are at least seven stakeholder categories

(termed the Seven Azimuths). He mentioned each, as owners or investors,

management, employees, customers, the natural environment, the wider

community including governmentand the contactors or Suppliers. Literally, all

these can affect or be affected bythe operations ofthe business around them.

Though to some, stakeholder is known bythe power he has over business(Phillip 2003), in the developingworld, this may not necessarily legitimisewho

a stakeholder is. In countries like Ugandawhere a great number of the

population is poor, companies need not to be influenced to remember

engaging in CSR. Managers are in position to know the conditions of the


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communities theyareworking in. Specifically in major beneficiaries ofCSR in

Ugandaare the communities, the employees and even governmentthrough the

fulfilment oflegal requirements and partnership

4.3

CSRin PracticeThe data explored here presents the CSRthat have been implemented bythe

MTS companies in their respective categories. That is, Economic,

Philanthropic, legal and Ethical responsibilities.

4.3.1 EconomicResponsibility

The primary purpose of any business existence is the economic

responsibilities. Its a duty of companies to be efficient, invest in profitable

ventures and also fulfil the responsibility ofpaying tax to government. During

the study, the researcher looked atthree areas under economic responsibilities.

These are Investments (profits, long and short term), Taxes and employee

welfare. However it is to be noted that, because of the sensitivity of

Telecommunication industry, it is difficult to get the financial investment

figures aimed at increasing shareholder returns. The researcher looked at Rural

Communication Development Fund and the Micro Credit Development Trust

as a CSR community investment that entered multiple stakeholders into a

partnership. The percentage profit shares paid to governmentwere explored.

This helped the researcher to discover howtransparentthe companies are.

RuralCommunicationDevelopment Fund(RCDF)

As a policy requirement to provide equal access of communication

countrywide, Rural Communication Development Fund was established in

1997. Each company commits 1% of its revenues to the fund, in partnership

with World Bank and the communities. This was initiated by the Uganda

Communications Commission. From 2003 to 2008, MTC companies had

contributed US$ 6million and the World Bank had accumulated US $ 10

Million towards the project. The fund was founded to provide districts with

internet, ICT training centres, Web portals and the public payphones. Whereas

the projects have been running since, the project seems to still far from

success.

Power is a big challenge. The project is at stand still Richard, Arua District


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Chairman. Micro Credit Development Trust(MCDT), Uganda

While the RCDF benefit from all the three companies as a result of 1%

compulsory levy, MCDT is a partnership between MTN and the Grameen

Foundation USA thatwas launched in 2004 in Uganda. The partnership gave

birth to a project named Village phones. The partnership is an online micro

credit projectwhere Grameen Foundation USA, MTN and Five other local

financial Institutions entered into a deal to give loans to communities so that

they buythevillage phones. These phones are specifically made to operate in

areaswhere the network is difficultto access and also where electricity is hard

to get. The phones are rechargeable and they have long antennae that help

them receive the network. Communities applyfor loans through these micro

credit institutions and buythe phones at subsidised price. The calling ra tes are

also subsidised and cheaper too. Theyare boughtand used for business; those

who do not own their mobile phones make calls at public payphones (Village

phones) since they are cheap. This has extended communication in villages

since they are somehow easy to buy and maintain in terms of airtime. The

company also launched solar powered mobile recharge centres for these

rechargeable phones in areas where the trust is operating. According to

USAIDReport2008;

yThe project surpassed five-year goal of5,000 newcell phone businesses, es-tablishing6,700 newbusinesses in Uganda in justthree years, growingata

rate of150 newbusinesses per month.

y On average, Village Phone Operators sell five times more airtime than that

used byatypical urban customer usinga personal mobile phone.

y Village Phone Operators have been able to educate their children, access Pri-

vate healthcare, and growtheir businesses. Some have expanded into other

businesseswhich help to create more jobs in their communities.

y Farmers use thevillage phone to receive market information to better negoti-

ate prices for the goods they produce

ZAIN and UTL have not had other commercial partnerships with the

communities that one would really call economic corporate social

responsibilities. The overall financial investmentthese companies make as core

businessventures arevery hard to obtain due to the competitive nature oftheir


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business. Askedwhattotal amount ofmoney MTN spent on CSR initiatives in

the year 2007/8, the senior manager could not reveal;

I have towithhold some ofthe information you require because it reveals

exactly howmuch profits MTN makes. Such kind ofinformation is notfor

public consumption Tom, Commercial legal and Litigation officer.

Taxespaidtogovernment.

It is obvious that government provides incentive structures, inducements and

other benefits to operatingfirmswithin the economy. These may be in form of

tax holidays and grace periods and even the very fact that they are granted

licences to operate is an incentive on its own. Therefore the firms or

companies ought to pay taxes to the government. In real sense, governments

exist to provide amenities to society. In instances where firms function on

behalfofthe state, the functions ofgovernment shiftto the firms. But because

firmswill always avoid any expenditure to maximise profits, it is a government

duty to impose tax to firms so that the social costs can be met. Under this

corporate responsibility the researcher explored how much the three MTS

companies in Uganda paid as tax to governmentfrom 2003 to 2009

Table1 showing ZAIN tax remittances to government (US Dollars)

PERIOD VAT PAYE CORP. TAX WHT EXCISE TOTAL

2003

118,583 494,781 - 545,825 1,159,190

2004

- 480,216 155,826 1,043,112 1,679,153

2005

80,832 633,930 78,535 1,750,946 25,608,287

2006

1,633,489 937,850 402,873 3,037,877 6,012,089

2007

2,849,442 2,931,144 139,110 7,837,574 13,757,270

2008

5,945,826 1,991,510 2,007,900 10,330,209 20,275,445

2009

4,701,710 1,287,969 1,291,825 5,670,332 12,951,836

TOTAL

15,329,882 87,574,400 4,076,069 30,215,875 81,443,270

Source: Uganda Revenue Authority


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Table2 showing MTN tax remittances to government (US Dollars)

Period VAT P AYE CORP.TAX WHT EXCISE TOTAL

2003 11,869,026 1,684,657 7,808,667 3,665,342 7,872,263 32,899,957

2004

15,205,202 1,994,890 12,437,060 4,713,342 9,710,356 44,060,852

2005

16,450,240 2,336,858 20,024,200 6,900,108 12,250,790 57,962,198

2006

19,635,584 2,438,843 21,646,477 7,322,985 14,816,477 65,860,362

2007

26,504,061 4,664,715 24,997,276 9,546,954 22,550,495 880,846

2008

18,226,52 4,553,995 13,531,871 2,276,212 23,098,405 61,345,868

2009

10,270,693 3,818,013 4,894,187 21,226,141 18,516,096 39,621,602

Total 101,757,458 21,491,971 105,339,738 55,651,084 96,577,132 302,631,685


Table 3 showing UTL tax remittances to government (US Dollars)

Period VAT PAYE CORP. TAX WHT EXCISE TOTAL

2003 2,685,839 1,072,786 95,227 591,750 854,726 5,300,328

2004 4,916,161 1,710,882 383,957 1,989,357 9,000,357

2005 7,119,554 1,993,004 3,833,329 2,967,659 12,463,546

2006 6,406,777 1,779,956 1,431,187 4,463,014 14,080,934

2007 7,034,792 1,932,162 734,945 5,600,639 15,302,538

2008 7,246,098 1,824,053 1,501,299 6,376,969 16,948,416

2009 5,538,946 1,043,202 402,281 3,403,341 1,038,770

TOTAL 40,948167 11,356,045 95,227 8,878,748 25,655,705 74,134,889



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From 2003 to 2009, ZAIN Ugandawas not paying corporate tax to the

government. Corporate tax, according to Uganda Revenue Authority, is

ordinarily a companys income tax. It is 30% of the profits made by the

company and is paid only if the company makes profits. Responding to the

researchers question why there was no corporate tax shown for ZAIN and

UTL, the Uganda revenue Authority official said;

Those companies have not been exempted from paying corporate tax.

That means they have not been making profits Julius, Customs Tax

Department, URA

Employeewelfare(salaries,bonusandworkinghours)

Telecommunication industry in Uganda is believed to be one of the most

profitable in the country. It employees a great number ofpersonnel, more so

the newly graduated employees. However, it remains hard for the MTS

companies to reveal howmany employees they have on their payroll. Literature

approximates over 500 direct employees of each company (Katamba, 2008).

Justina, ZAIN CSR manager talked to the researcher and said that itwas not

the companys policy to discuss how many employees they have. She

considered it to be a sensitive issue that can be used by a competing firm.

Economically, CSR looks at employees in terms ofsalaries and other incentives

beyond the remuneration which include Work-life balanced and the way

overtime hours are paid. Aware that the workers had differing amounts of

remunerations depending on the level of organisational hierarchy, the

researcherwas interested in understandingwhetherwhatthe employees get is

whattheyactually expect. Three senior managers were interviewed, one from

each company. In addition, five employees were randomly interviewed from

each company to have their views ofwhat they expect from the company.

Again, Justina, the CSR manager, ZAIN, was asked aboutwhat she thought

aboutthe companys remuneration;

As Itold you,we consider employee information confidential because ofthe

nature ofour business. However on my partam happywith my salarythough no

one is ever satisfiedwithwhat she/ she gets.


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She said that she believed the company payswell its employees and thosewho

are not satisfied are so because of human nature of always wanting more.

Mark, the corporate affairs manager UTL said;

As a competingfirm,we strive to getthe best personnel. We have to offerattractive salaries in order to getthe personnel from other sectors. Am sure our

staffis happywithwhatwe give them.

After failing to catch up with Public relations officer, MTN, one senior

manager allowed the researcher to interviewhim. He also said that MTN is a

leading MTS companyand truly cares about its employees. he said most ofthe

employees are happywithwhatthey get, him inclusive.

Ofcourse is aleadingtelecommunication company. We are paidwell. I really

dont complain over it The Respondent

From the MTN Group literature, the company strives to achieve the top

quality employees and creates conditions that promote and retain the

employees. They offer attractive salaries to the staffand apartfrom the salaries,

the executives and the senior managers are given travel allowances, a company

car and the contribution to the retirementfund. For this case, the contribution

to the retirement fund is paid to National Social Security Fund (NSSF).To

MTN employees, bonuses are rewarded in line with preset performance

indicators and approved by the Remuneration and the Human Resources

Committee. The employeeswhowere interviewed confirmed it.

All the three companies almost have the same structure about the salary,

bonuses and the working hours which is from 09:00am to 05:00pm in the

evening. While it is the same across all MTS companies, Justina, CSR Manager

ZAIN, revealed that the company had not been paying performance

allowances for the lastthree years since 2007. She attributed this to the recent

financial setbacks thatthe company suffered.

UTL does not differ from the two companies. Employees interviewed

conformed that the salaries they get meet their expectations and they are

satisfiedwith it. However theyall agreed thatfor thosewhowork during night

shift dont getthe bonuses they deserve.


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It is really hectic,weworkfor long hours. The company should think ofadjusting

on our payments. Denis; UTL employee, Customer Department

4.3.2 PhilanthropicResponsibilities

These are charitable and voluntaryactivities thata corporation or a company

engage in to improve the lives ofcommunitieswithinwhich it operates. These

are actuallywhatthe government oughtto be doing. They comprise ofa range

ofactivities such as health, education, environment, culture and all thosewhere

the company does not expect backan economic advantage.

Much as the three companies have engaged in activities of giving out

money and other donations, most of these events are promotional aiming at

creating their own reputations. The comprehensive data below is the

considered CSR activities and the process of their delivery by each company

under study.

To beginwith, ZAIN has engaged in many events since its operations

begun in 1995. However, its stake in CSR came to prominencewhen two CSR

programmes were launched in 2006; Build Our Nation (BON) programme

and ZAIN Africa challenge. ZAIN believes that education is the lacking

ingredientto foster development in Uganda. Justine, the CSR manager ZAIN

posed a question to the researcher;Whatwould Uganda be ifwe all knewwhatto do, that iswhywe in

Education?

Both programmes were launched to foster the development ofeducation in

Uganda especially in response to the second Millennium Development Goal

which advocates for universal primary education. Through Build Our Nation

programme, ZAIN has partneredwith the Ministry ofEducation and sports to

help Primary schools through donation oftext books. Since 2006, 28,000text

books have so far been donated to 140 primary schools. An electronic random

selection systematic draw involving schools across the country is held each

quarter ofthe year and thewinners gettext booksworth US $ each. So far, text

books in circulation are 360Million Uganda shillings (Approx.US $211,764)


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ZAIN African challenge (ZAC) on the other hand target universities

where through inter-university tournament. ZAIN put US $ 1,000,000 to be

won both in grants and prizes by the competing universities. The winning

university takes US$ 5,000 and the participants take US$ 500 each. The

tournament brings together 100 Universities across Africa and so far 4

universities have benefitted in Uganda. Nkumba Universitywon US $30,000 in

institutional grants. Makerere University, Mukono University and Mbarara

University ofScience and Technology have so farwon US $ 5,000 each.

In 2008, ZAIN Uganda partnered with Text for Change (TTC) an

HIV/AIDS awareness programme to advocate for free testingand counselling

services by sending massages to ZAIN subscribers in Mbarara District each

week. The programme was also supported by AIDS Information Centre,Dutch foreign Ministry .A huge number ofclients was tested and this was a

successful mobile phone based platform for increasing awareness in health

services. Other CSR notable philanthropic activities alreadyaccomplished by

ZAIN were the donations to Jinja Women In Need, an organisation for

internally displacedwomen in camps that included clothes, Utensils and other

items for needy communities.

MTN has also had its Philanthropic contributions in manyareas. The four

projects that have benefited are Habitatfor Humanity(HFH) Uganda, MamaBag KitProject, U-Connectand the Malaria Consortium. Also, MTN is quite

different from other companies as most of its contributions to society are

through sports. In 2004, the company launched an initiative, the MTN

Foundation thatwas to be responsible for all the CSR activities itwas to

engage in. The allocated fund to run the Foundation is 1% ofthe profitafter

tax. This does not mean that before 2004, the company had no prior

engagements in CSR.

Habitatfor Humanity(HFH) Uganda is probablythe most historical bene-ficiary ofMTN UgandaPartnership agenda. HFH is an International organisa-

tion that has its subsidiary in Uganda. Its a non-profit making organisation

that helps in eradication of poverty by building low-cost houses to the rural

poor especiallywidows, orphans and those affected with HIV/AIDS. The


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partnershipwas entered in 1999; one year after the company had launched its

operations. By 2004, when the MTN Foundation was launched, 122 houses

had already been built. Since then, other 105 houses have been built. The cost

ofthe 227 houses so far contributed by company is US $199, 314.

Mama Bag KitProject is another beneficiary, a projectthatwas initiated by

Uganda Red Cross Society(URCS)to help the expectant mothers in thewar-

ravaged northern Uganda. MTN Uganda entered into partnershipwith URCS

in 2004 and pledged to supportthe projectthrough MTN Marathon, an annual

event that is organised by the company.MTN Marathon also started in 2004

and draws many participants from across Sub-Saharan Africa. The proceeds

gotfrom the Marathon are all donated as charityto the Mama bag KitProject

operating in the northern Districts ofUganda. For the previous five years an

amountworth US $ 74,470 has already been donated to the projectfrom the

annual Marathon proceeds.

In 2006, MTN partneredwith Ministry ofEducation and Sports to connect

internetfacilities to Primary schools through a project called U-Connect. The

initial schools thatwere connected were 9 and so far over 40 schools have

benefitted. In addition, manyworkshops have been organised to impartteach-

erswith computer schools and more than 1000teachers have participated and

the programme is still running.

In March 2008, MTN donated US $117,647to Malaria Consortium. Malaria

Consortium works with the Ministry of Health to prevent Malaria, TB and

other neglected tropical diseases in Uganda. The organisation is involved in

raisingawareness through information education programme and communica-

tion and behavioural change programmes. Not only does the consortiumwork

within with the National Malaria control Policy guidelines but also gears to-

wards achievingthe Millennium Development Goals. The Company donation

to Gulu Primary School ofUS$ 138, 235 is another contribution that deserve

mention. Thiswas given in May2009to renovate the dilapidated structures of

the school. It houses more that 1000 pupils and is located in Gulu district

northern Uganda.

MTN, beinga sports fanatic, more and more funds have been put in sports

like Proline Soccer academy, the sponsoring ofsports teams, Music awards and


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many other sports activities. However, some of the respondents encountered

during researchwondered whya big company like MTN would keep dashing

money in sports, something considered leisure in Uganda.

Accordingto Robert, Monitor Newspaper employee,

MTN should emulatewhat newcompanies are doing now. Heritage Oil Com-

pany has already constructed a road and school in Hoima districtand yet it is

no bigger ..Why cant MTN do the same?

Talking ofcommunity support, UTL as a number three player in the coun-

trys mobile telephony cannot be undermined. Asked aboutwhatthey dowith

the community, Mark, the corporate affairs manager replied;

that iswhywe exit. We exist becausewewantthe communityto develop.

On the companywebsites there are so many interventions that the company

undertakes within the community though not all can be considered philan-

thropic. The partnership between UTL and Kulika Charitable Fund remains a

distinctfeature in the companys CSR campaign. In 2005, the company signed

a memorandum ofunderstandingwith Kulika to sponsor 56 students on un-

dergraduate level. Students were to choose local universities of their choices.

Thatvery year, a pact ofUS $441,176was paid to Kulikato cater for full fees,

accommodation and even pocket money. In 2006, the company donated

computers to Koch Goma Secondary school in Gulu district. In the same year,

the company organised inter-university gamesworth US$147,058and the top

winner got US$ 5, 880 prizes plus the trophy. Other contestants also got other

prizes both in cash and items.

A Dormitoryfor Tooro Babies Homeworth US $15, 000was constructed

in 2006and the dormitorywas handed over to Bishop Egidio, Kasese Diocese,

in 2007. The company provides 50% ofthe monthly internet subscription fee

for Sanyu Babies Home, a

iss masters research paper

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