Pay me! Sentiment, growth and telecommunications in East Africa
The 2000s East African growth story could not be adequately told without spending some time on the expansion of telecommunications services. For example, according to the International Telecommunications Union (ITU), mobile telephone subscriptions in Kenya, Tanzania and Uganda grew from less than 1 per 100 inhabitants to 80.68, 75.86 and 50.37 per 100 inhabitants respectively between 2000 and 2015. These are still lower than rates of penetration in countries such as Ghana (129.74) and Cote d’Ivoire (119.31).
Risk Environment
However, between here and above comparator subscription rates are a range of competitive, regulatory and political hurdles; some of which are born of earlier success. For example, in all three countries, operators are being dragged into new lessons on political risk and stakeholder engagement. There is a sense that industry growth outpaced the expectations of government and civil society after liberalisation in the 1990s and 2000s, and it is only now that local stakeholders are grappling in earnest with interests and/or concerns as they define them: particularly, (a) security, (b) income and tax revenue, (c) local content and (d) competition.
In Uganda, MTN CEO Wim Vanhelleput was deported in mid-February, weeks after other officials from the company were expelled or detained for alleged national security failings[1]. The company is also accused of underreporting revenues in avoidance of its tax obligations[2]. Meanwhile, the licensing environment has been changed to oblige national operators to list on the local bourse and allow seamless services across competitors[3]. Similar pressures on local ownership have been brought to bear in Tanzania[4]. And in Kenya, the government already requires a 20% local stake within three years of telco licensing. Across all three countries, ‘data taxation’ is an emerging fiscal instrument.
Looking Forward
Explaining today’s ‘resource nationalism’, in several instances telco companies have been among the most successful performers in recent decades. It would be strange if public officials did not gaze longingly in that direction. All the more so because domestic revenue mobilisation is a pressing need. Eurobond payments are around the corner and debt sustainability is not a given[5]!
Also, on our radar:
Liberalisation and deregulation of telecommunications sector in Ahmed Abiy's Ethiopia, and overtures from MNCs such as MTN, Vodacom, Safaricom
Spat between Kampala and Kigali over alleged surveillance
Rollout of surveillance technologies, public-private partnerships
Data mining for development of credit risk profiles, and contingent risks.
For an in depth report or to roundtable with experts on our team, please get in touch with us here.
[1] https://www.theeastafrican.co.ke/business/Uganda-deports-MTN-CEO-Wim-Vanhelleputte/2560-4982944-7n3cv3z/index.html, https://www.bloomberg.com/news/articles/2019-02-15/mtn-uganda-says-ceo-deported-no-reason-given-by-authorities
[2] http://www.africanews.com/2019/02/22/uganda-authorities-question-mtn-s-sales-figures/
[3] https://www.african-markets.com/en/stock-markets/use/uganda-to-require-telecom-operators-to-list-on-local-bourse
[4] https://www.reuters.com/article/us-tanzania-telecoms/tanzania-internet-users-hit-23-million-82-percent-go-online-via-phones-regulator-idUSKCN1G715F, https://www.theeastafrican.co.ke/business/Tough-rules-see-multinationals-give-up-majority-stakes-in-TZ/2560-4965424-5rhpnpz/index, https://in.reuters.com/article/tanzania-telecoms/bharti-airtel-to-give-tanzania-bigger-stake-in-local-telecoms-firm-idINKCN1P51AQ
[5] https://allafrica.com/stories/201810110163.html, https://www.worldbank.org/en/region/afr/publication/africas-pulse, https://www.odi.org/sites/odi.org.uk/files/resource-documents/12491.pdf