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A golden goose tax
There is little debate on whether African countries collect sufficient tax revenue. The IMF in particular has been imploring Sub Saharan African countries to focus on expanding their respective tax bases. Some countries have taken this on board, but most haven’t moved beyond lip service.
When it comes to new taxes what we often see is for an African government (especially a new administration) to set its sights on the commodity players like mining companies and oil multinationals.
But there’s also a growing trend of governments looking to their fastest growing sector of the last two decades: the mobile phone industry. To be clear, in most countries phone companies and operators already pay taxes, but the more recent trend is to put in place or raise specific mobile consumer taxes—particularly for devices and transactions.
Just over a year ago Uganda’s regulators introduced a so called social media tax and a levy on mobile money transactions. Uganda is not alone, research from 2017 shows up to 26% of the taxes paid in the mobile industry in 12 Sub Saharan African countries were industry-specific.
Kenya, often highlighted as the leading light of mobile money sector, has also been increasing taxes on mobile money transactions and on airtime, something described as double taxation since you can’t have a mobile money transaction without having paid for airtime in the first place.
Much of this is tackled in a new paper by Njuguna Ndung’u, who was the central bank governor in Kenya from 2007 to 2015, the early years of M-Pesa’s mobile money rollout. Ndung’u, who is currently executive director African Economic Research Consortium (AERC), warns these new transactional taxes risk stalling progress on digitization and financial inclusion in these countries. The paper uses economics’ Laffer curve to argue raising taxes may have the opposite effect of increasing government revenues because beyond an unknown optimal point African consumers will simply stop using these services and return to cash.
If there’s any doubt about how raising or introducing these taxes might play out look to Uganda again. Within three months of regulators rolling out new levies there was a decline in the number of internet users, total revenues collected, as well as mobile money transactions.
— Yinka Adegoke, Quartz Africa editor
Stories from this week
Nigeria wants to start charging a tax on local online purchases. Nigeria’s government is considering a 5% tax on all local online purchases as part of a bid to raise tax funds. But as Yomi Kazeem notes, the floated idea flies in the face of the country’s long-held ambitions of a cashless society and is bound to impact the growth of local online businesses.
Congo Brazzaville’s ‘first son’ laundered $50 million through six European countries. A new investigation reveals Denis Christel “Kiki” Sassou-Nguesso, the son of the president of the Republic of Congo, participated in a complex money laundering scheme which spanned six European countries, the British Virgin Islands, and the US state of Delaware. The scheme moved more than $50 million, reports Justin Rohrlich.
Kwame Nkrumah became one of Africa’s great independence leaders through a “tragic error”. Ten years before he led his country to independence, the London-based Kwame Nkrumah arrived in Ghana after a lackluster political party invited him to become the party’s secretary. After Nkrumah broke ranks with the party’s leadership, and became their most dreaded rival, the invitation was described as a “tragic error”.
We’re building African data science institutions focused on Africa. More African academic institutions are setting up training programs in data science. But as this discipline develops, African universities have an opportunity to blaze new trails by expanding online courses and establishing partnerships with businesses and governments.
The growing importance of literary festivals in African cities. In the last decade and a half, African writers and readers have been gathering in cities including Durban, Hargeysa and Lagos to discuss the impact of literature. James Murua writes the continent’s thriving literary festival scene is breeding a sense of community for people, including African millennials, seeking truth and hope.
Ethiopians in the diaspora are ready to gamble on the country’s financial reforms. Ethiopia is making moves to open up its financial sector and will allow Ethiopians with foreign nationalities invest, buy shares, and set up lending businesses in the country for the first time. Haleluya Hadero finds the reforms are being embraced by Ethiopian-origin investors from Dakar to New York.
Chart of the Week
Jumia is no longer a unicorn. This week the share price of Jumia—Africa’s largest e-commerce operator, crashed below its IPO launch of $14.50 four months after a much celebrated launch on the New York Stock Exchange. The stock has been hurt by fraud claims and press releases on speculative class action lawsuits. Ultimately, it means Jumia’s market capitalization ended the week well below its pre-IPO billion-dollar “unicorn” status.
African startups are on on pace for another record breaking year of fund-raising. So far—taking just startups that have raised over $1 million into consideration—44 startups have raised $450 million, according to GSMA research…It helps when investors can see some exits for early investors. Mobile network tower operator, Helios Towers is reviving plans for a $3 billion IPO later this year. While Africa’s biggest phone maker, China-based Transsion’s plans for an IPO this year are back on course as it bids to raise around $430 million…African Infrastructure Investment Managers (AIIM), a private equity fund manager backed by South Africa’s Old Mutual, has raised $320 million to fund power, transport and energy projects in Africa.
Other Things We Liked
African Governments are rushing to hire Trump-linked lobbyists. The Cameroonian government is the latest to hire a PR firm with close ties to president Trump to improve its image on Capitol Hill. For Foreign Policy, Robbie Gramer and Jefcoate O’Donnell write on the growing list of African governments tapping US lobbying firms for more influence in Washington.
A different take on Ethiopia’s role in AfCFTA. In Jacobin, Stephanie Jay argues against Ethiopia’s cooperation in the AfCFTA trade agreement, and points to democratic socialism as an alternative to the Horn of Africa country’s previous state-driven development style and perceived neoliberal future.
How Afrobeats is influencing American pop music. The recent release of Beyoncé’s Afrobeats-infused “Lion King” soundtrack is expected to make an impactful introduction of the genre to a mass American audience. For Complex Kemet High speaks with one of the album’s producers, Pro2Jay, on the soundtrack’s creative process, and the inroads Afrobeats has made in the American music scene.
Developing policies in internet governance. Africans with a background in IT, computer science can apply to AFRINIC’s Fellowship Program for a grant to attend the AFRINIC-31 meeting in Luanda, Angola on public policy and internet governance. (Aug. 20)
Mentoring future African leaders. Mid-career professionals with a graduate degree can apply to the Mo Ibrahim Foundation’s leadership fellowship for a chance to be awarded an $100,000 stipend, and the opportunity to work with the AfDB, UNECA, or the ITC. (Oct. 14)
Keep Your Eye On
Corruption trial of Omar al-Bashir begins (Aug. 17). Prosecutors say Sudan’s ousted president Omar al-Bashir faces charges related to foreign currency possession and corruption.
India-Africa Entrepreneurship & Investment Summit (Aug. 16-18). Indian and African entrepreneurs and angel investors will meet in Mauritius to discuss investing in Africa, and creating a sustainable investment ecosystem.
*This brief was produced while listening to Paulina by Gerrvd (Zimbabwe).[Spotify]
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