African Telecom Sector - Issues and Challenges

An update on the document published by Global Voice Group in 2011 (Telecom Governance in Africa – Issue and Challenges)

Much water has flown under the bridge since the publication of Global Voice Group’s (GVG) paper prepared for the International Telecommunication Union (ITU) in 2011 (CWG-WCIT12 Contribution 36). In this paper, GVG summarized the economic, technological, fiscal and regulatory challenges facing the African States with respect to telecom markets in Africa. The group also emphasized the importance of bridging the technological gap between the regulators and the technology-driven industry they have been entrusted to regulate.

However, the bleak divide among African countries concerning the financial and technical resources required to meet the challenges that are posed by the emerging telecom landscape has persisted. Capacity building remains the order of the day and regulators still need the tools that will empower them to cope with the ever-changing and increasingly complex telecom environment. While we should rejoice at the quantum leap being made by the countries of Sub-Saharan Africa (SSA) in relation to the use of mobile devices, especially of the smartphone, we should not be oblivious of the fact that no ‘one size fits all’ framework, political or regulatory, can apply to the countries under reference.

According to the GSMA’s Mobile Report on the Mobile Economy 2014 for SSA, the telecom industry contributed US$13 billion to the public coffers of SSA countries in 2013, excluding the fees payable for licenses, spectrum auctions or for the digital dividend. Should such approaches be shrugged off, especially when one is conscious that several western countries doggedly pursue taxation initiatives? According to the GSMA, it would appear that 63 countries levied mobile-specific taxation in 2011, with the average taxes and fees on mobile telephone services being more than twice higher than the average sales tax for other goods and services in the USA. Europe, Latin America and Eastern European countries all have higher levels of taxation of telecom services than Africa.

The taxation of the industry for the purpose of promoting development and the welfare of the people should therefore not only be perceived as being reasonable but essential, especially in countries where it also helps support technical empowerment to cope with the increasingly sophisticated fraud techniques. The challenge is however not only the varied forms that fraud takes. It is, to a large extent, the drive needed to find and to adopt the tools and mechanisms that will allow countries in SSA to take the bull by the horns and to handle the situation effectively. This is where the cutting-edge technologies introduced by a pioneer in this field, Global Voice Group (GVG), can help governments boost their ability to supervise and control the telecom sector, with a view to mitigating the phenomenon of fraud while at the same time allowing them to generate considerable funds by diversifying and widening their tax base. Around ten countries of SSA have already received inflows of US$1 billion through GVG’s innovative financing initiatives, and more countries are poised to benefit from the technological solutions being proposed by GVG for the management of the International Incoming Traffic.

The achievements noted by GVG in this field so far would not have been possible without a paradigm shift in the region, at the level of the regulators, who are playing a more pro-active role in the introduction of innovative financing for the overall economic development of the countries where they operate. This public policy consideration is in line with what the Chairman of UNITAID and Deputy Secretary-General of the United Nations, Mr. Philippe Douste-Blazy, has recently stated, namely, that innovative financing for development remains crucial on the international scene. The contribution of the telecom sector to macro-economic development in this respect is more than warranted, given the benefits this sector has derived from globalization.

Progress on ITRs
In the light of the momentous developments in the telecom sector, the ITRs were reviewed at the World Conference on International Telecommunications (WCIT) convened by the ITU in Dubai in 2012. A step was made in the right direction when a provision with regard to taxation was integrated in Article 8, which deals with charging and accounting. The provision reads as follows:

“8.3 Where, in accordance with the national law of a country, a fiscal tax is levied on collection charges for international telecommunication services, this tax shall normally be collected only in respect of international services billed to customers in that country, unless other arrangements are made to meet special circumstances”.

To better reflect the current realities in this sector, we maintain that a further revision of this article is called for to give national authorities, in an explicit manner, the necessary latitude to impose taxes on all telecommunications traffic, whether incoming or outgoing.