BD Insider, Letter 123

Letter 123 of BD Insider covers the additional 5% telecoms tax in Nigeria, CBK's cease and desist order regarding Flutterwave and Chipper Cash.

BD Insider, Letter 123
Telecom subscribers in Nigeria will now pay 12.5% tax

For Letter 123, we will look at:

  • additional 5% tax on call, text, and data for telecom subscribers in Nigeria
  • why Kenyan Banks will stop transacting with Flutterwave and Chipper Cash
  • Kenya and the internet ahead of the August 9th election
  • the latest African Tech Startup Deals (in PNG and an interactive format)
  • job opportunities, events, and more.

Telco subscribers in Nigeria set to pay 5% tax on Data, et al.

The news: The Federal Government of Nigeria has disclosed that telecommunications subscribers would pay a 5% excise duty on calls, SMS and data services as part of the 2022 Fiscal Policy Measures and Tariff Amendments [pdf].

Why it matters: According to local reports, the 5% tax will be added to the already existing 7.5% Value Added Tax (VAT) on telecommunications services. "It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue," Nigeria's Finance Minister, Zainab Ahmed said.

The resistance: However, telecom operators have kicked against the implementation of the 5%. According to the Executive Secretary, Association of Telecommunications Companies of Nigeria (ATCON), Ajibola Olude, "the proposed excise duty on all telecommunications companies is badly intended by the Ministry of Finance. And the current state of Nigerian communication is so bad that only about 756 Internet Service Providers (ISPs) were registered but only 10 are active because of issues with forex."

Normally, excise duty is applicable on beer and stout, wines, spirits, cigarettes, and homogenised tobacco manufactured in or imported into Nigeria at 20%. With the Finance Act 2022, Nigeria has introduced excise duty on non-alcoholic beverages including telecommunication services.

Subscribers' burden: "It is a strange move, it appears a bit unusual. Excise duty is supposed to be apportioned to goods and products, but we are surprised this is on services. We will continue to support the government but ALTON won’t be able to subsidise this on behalf of subscribers in addition to the 7.5% VAT, making it 12.5% subscribers to the Federal Government," the Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Gbenga Adebayo said.

Zoom out: At a time when other Governments are looking to boost digital penetration, this tax could slow down Nigeria's rate of digital adoption.

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Kenyan banks to halt transactions with Flutterwave and Chipper Cash

The news: The Central Bank of Kenya (CBK) has ordered financial institutions in the country to "cease and desist from dealing with Flutterwave and Chipper Cash".

In a letter dated July 29, 2022, CBK's Deputy Director of Bank Supervision, Matu Mugo ordered the Chief Executive Officers of these institutions to comply with the directives within seven days.

Why it's happening: "It has come to the attention of the Central Bank of Kenya (CBK) that Flutterwave Payments Technology Limited (Flutterwave) and Chipper Technologies Kenya Limited (Chipper) have been engaging in Money Remittance and Payment Services without licensing and authorisation by CBK," Mugo said.

This letter was sent a day after CBK's Governor, Patrick Njoroge said that the fintech unicorns are unlicensed in the country.

The voice of CBK's Governor

However, Yewande Akomolafe-Kalu, Flutterwave's Head of Branding and Storytelling argued that "like many other financial technology service providers in Kenya, [Flutterwave] entry into the market was through partnerships with banks and mobile network operators licensed by the Central Bank of Kenya."

CBK is snubbing these unicorns: Yewande added that Flutterwave submitted its application for a Payment Service Provider licence in 2019. "We have been in constant engagement with the Central Bank of Kenya to ensure that we provide all the requirements and we look forward to receiving our licence," she said.

Although Chipper Cash has not made any public comment on the issue, Leon Kiptum, the Country Director for Chipper Cash in Kenya told HapaKenya in January that "Chipper Cash was not well guided until someone with experience joined the business. Initially, we were operating in partnerships with companies that have licenses. The laws have since changed, and we had a window to apply for the required licenses for operations and comply with the new regulations."

According to Kiptum, the fintech company needs two licenses (to operate in Kenya)—a Payments Service Provider (PSP) license which allows you to have a wallet, and an International Money Transfer Operator (IMTO) license. He revealed that Chipper Cash has applied for the IMTO license and is awaiting approval.

Kenya has no plan to shut down the internet — ICT Secretary

The news: Ahead of Kenya's August 9th elections, Joe Mucheru, ICT Cabinet Secretary has said that the Kenyan government has no plan to shut down the internet despite the ongoing misinformation on social media.

Last week, Kenya's ethnic cohesion watchdog, the National Cohesion and Integration Commission (NCIC) directed Facebook to stop the spread of hate speech on its platform within seven days or face suspension in the East African country. "Not clear what legal framework NCIC plans to use to suspend Facebook," Mucheru tweeted.

The NCIC was formed after the 2007 post-election violence that left 1300 Kenyans dead, is to make recommendations on remedial action against entities or persons perpetrating and perpetuating hate speech. A few months ago, it banned the use of some coded words said to be fueling ethnic tension.

So far: Social media companies including Facebook and TikTok have been modifying their platforms to avoid the spread of misinformation. Meta—Facebook's parent company—has established operations centres for major elections around the world since 2018, including in Kenya.

Within the [ongoing] campaign period, Facebook removed 37,000 pieces of content for violating its Hate Speech policies on Facebook and Instagram in Kenya, as well as 42,000 other pieces of content that violated our Violence & Incitement policies.

TikTok also launched an in-app guide to enable access to factual and authoritative information ahead of the elections. The social media platform was accused of fueling misinformation and political tension in Kenya. Kenya has experienced significant electoral violence in previous elections.

Zoom out: In April 2022, Kenya distanced itself from a US listing as among 60 signatories to an agreement that commits members from arbitrarily shutting down the internet. In the past four years, citizens in close to half of African countries have experienced an internet blackout.

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