Heavy taxation weighing down mobile services

Saturday July 20 2019

money transfer

A customer (right) waits to collect money at the Juba Express money transfer outlet in Mogadishu on February 12, 2015. With mobile technology at the heart of Africa’s digital journey, it is essential for policymakers to come up with laws that ensure sustainable growth of the mobile services industry. PHOTO | AFP 

MOSES K. GAHIGI
By MOSES K. GAHIGI
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Heavy taxation on mobile services by governments in sub-Saharan Africa is weighing down the providers, with industry captains citing the action among factors likely to undermine its gains.

Mobile financial services operators are directly or indirectly taxed up to 66 per cent of revenues, which coupled with high spectrum fees in some markets, ends up hurting operations.

Now Akinwale Goodluck, GSMA’s head of sub-Saharan Africa, is asking governments to use technology to come up with a broad-based tax that is friendly to the industry.

He said mobile services are subject to different layers of taxes, ending up with “sin tax” like cigarettes, alcohol and other goods in that category.

The 2019 GSMA Mobile Economy Report says the mobile ecosystem across sub-Saharan Africa generated almost $150 billion in economic value in 2018 — equivalent to 8.6 per cent of the region’s GDP — and is forecast to generate almost $185 billion (9.1 per cent of GDP) by 2023.

The report notes that the SSA will remain the world’s fastest-growing mobile region over the coming years, as millions of young African consumers become mobile users, with more than 160 million unique subscribers—those with multiple mobile connections—expected by 2025. This will bring the total to 623 million, representing around half of the region’s population, up from 456 million in 2018.

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“A new generation of youthful ‘digital natives’ across sub-Saharan Africa are set to fuel customer growth and drive adoption of new mobile services that are empowering lives and transforming businesses,” said Mr Akinwale.

He added that with mobile technology at the heart of Africa’s digital journey, it is essential for policymakers to come up with laws that ensure sustainable growth of the mobile services industry, and enable the transition to next-generation mobile networks.

Equally, some 239 million people or 23 per cent of the region’s population, use the mobile Internet on a regular basis, with smartphones accounting for 39 per cent of mobile connections in 2018, and are forecast to rise to two-thirds by 2025.

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