Weekly digest for 18 June 2021

KEY READING FOR THE WEEK

This week’s main story is from Tanzania, where the government has announced that it will remove VAT on smartphones, tablets, and modems. The rationale for setting aside VAT is to increase broadband penetration from its current level of 38% to over 80% by 2025. This decision is a welcome development in a continent where most governments’ see the ICT sector as a cash cow and have imposed extremely high taxes. Often taxes are specific to the ICT sector and considerably higher than for other sectors. In Sudan, for example, the VAT rate for the ICT sector is 40% compared to the standard rate of 17%. The decision by the Tanzanian government recognizes that low smartphone penetration is a major obstacle to increasing data usage. Unfortunately, this is not an entirely good news story because the Tanzanian government has also proposed a SIM card tax. The current proposal (there have been several, most notably in the 2021 budget speech where the government proposed a SIM card tax of between 10 and 200 shillings per day) is for a 1,000 shilling SIM card tax to be paid monthly. This will nullify any benefit from the removal of VAT. The government needs to make a decision: does it want to grow broadband penetration and the associated benefits of higher economic growth? Or does it want to increase tax revenues in the short term at the cost of lower broadband penetration and lower economic growth?

OTHER WEEKLY NEWS FROM AROUND AFRICA

• Uganda: All MNO’s in Uganda have been given one year, from June 2021, to finalize their listing on the Uganda Stock Exchange. Until now, operators have been reluctant to list. The expectation is that at least 20% of equity will be offered on the local bourse.
• Tanzania: the government is developing a national digital economy blueprint in order to enable greater investment in the ICT sector and to grow broadband penetration. The blueprint is desperately needed because current government policy is a confusing mix of contradictory signals (see main story).
• Mozambique: Vodacom has threatened to stop interconnecting all calls from Tmcel over failure to pay interconnection fees. The regulator, INCM, has stepped in to mediate the dispute.
• South Africa: the long running saga of South Africa’s auction of High Demand Spectrum (HDS) seems about to add another chapter. The regulator, ICASA, has said that it is nearing a “settlement breakthrough” and would expect the auction to go ahead at the end of August 2021. There are no details at present on what the breakthrough might entail.
• MTN: The mobile operator has committed to using open RAN systems in all its networks. Adopting open RAN means that MTN is no longer tied into a single supplier and can modularize its network from a wide range of suppliers, lowering the the overall cost of provision.