What could have been India’s largest outward foreign investment deal — Bharti’s proposed takeover of South African telecom major MTN, valued at $23 billion — finally fell through last week at the altar of populist politics. Populism, as the term is used in the broad political economy discourse, describes policy decisions where cynical political motives take primacy over sensible economics, to the detriment of long-term economic performance. There is probably no better example of this than the US car industry, which has repeatedly been propped up by government over many decades, ostensibly in the national interest, but continues to be bankrupt nonetheless.

For Bharti-MTN, the stage was as perfect as it could have been for a merger between India’s biggest telecom operator and Africa’s largest telecom company. Together, they would have formed the third largest telecom company in the world and been superbly placed to expand beyond their local markets. The price, it seems, was mutually acceptable. The formula dictating cash and share swap components was worked out too. Hardly surprising, since both companies had spent many months negotiating all this, with a large set of bankers, lawyers and consultants advising them.

The only potential twist in the tale lay with MTN’s largest shareholder — the South African government. With a 21 per cent stake in MTN, through its wholly owned investment corporation, it was the single largest shareholder in MTN and thus could virtually veto any deal. And as it turns out, the acquisition of MTN — a symbol of “black empowerment” and “national pride” in South African business — by a foreign company was simply not acceptable to the left-leaning Jacob Zuma government.

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