It’s taxing times for SA

Minister of Finance Nhlanhla Nene presents his Budget speech in the National Assembly. With a dwindling revenue base and a lagging economy, the minister didn't have much choice but to hike the tax rate, says the writer. Picture Cindy Waxa

Minister of Finance Nhlanhla Nene presents his Budget speech in the National Assembly. With a dwindling revenue base and a lagging economy, the minister didn't have much choice but to hike the tax rate, says the writer. Picture Cindy Waxa

Published Mar 1, 2015

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Finance Minister Nhlanhla Nene forced to up taxes for now but must look at bigger picture in the long term, writes Victor Kgomoeswana.

Johannesburg - It matters not how glibly we can explain the higher tax rate for wealthier South Africans, one can only hope that the trend is not going to be sustained on an upward trend.

Finance Minister Nhlanhla Nene, it seems, had no other choice with a dwindling revenue base and slower economic growth than to raise taxes. However, we all agree that the bigger conversation to have is how to get the economy of our country working again.

It is not a discussion that government leaders can have alone; it is the very definition of public-private partnership. The private sector, I insist, has a bigger role to play than it gives itself credit for.

Not only does it have more responsibility to make a difference, but it also has more power. For all the taxes that companies pay, the jobs they create and many social responsibility initiatives, surely government leaders will have no option but to listen to them about how to get the economy growing.

What is disturbing to me, though, is how our debate about growth keeps coming back to inflexible labour laws as if making it easier for employers to “ire and fire” at will would be the magic pill.

As much as I understand why entrepreneurs would like to be freer to let staff go when in economic bust times, I wish we could elevate the level of debate a bit.

We should be asking ourselves and private sector leaders some pertinent questions. Since the enactment of the Skills Development Act and Employment Equity Act – in 1998 – have we found creative and effective ways to achieve what these two transformational pieces of legislation intended to achieve?

Can all of us say, with a clear conscience, we have done our best to facilitate core and critical skills training in our companies, to enable young people from poorer, mainly black communities navigate the historic impediments of the political economy, one that deliberately excluded black people?

When I used to run workshops as a Black Economic Empowerment (BEE) adviser for multinationals, I had a cheeky quip about how most of us wait until the end of the financial year to run noncore skills training programmes in the form of team-building workshops to make annual skills development returns possible.

But with no intention to intensify skills development the way it was intended to work.

How about enterprise development? This indirect form of BEE is a powerful tool if we understand that there are black people out there striving daily to build enterprises.

Without access to markets their businesses are condemned to the shallows of the South African economy, w here they will never make an effect on the job creation we all agree is necessary.

As procurement managers, and on this one public sector leaders have a case to answer, are we confident that we have made serious efforts to steer our buying decisions to favour black enterprises; where such do not exist to meet our specifications, spend 3 percent of our post-tax profit to build them?

The reason I am revisiting the BEE debate is that the economy cannot produce the required 5 percent growth to meet the job creation targets and give Nene the revenue he needs to avoid tax hikes for the rich, if it remains untransformed.

The commercial rationale of BEE is that as South African business leaders, our fate is better served if more South Africans earn a decent income to be consumers of our produce or services.

They cannot if our education is not producing work-ready matrics and graduates, but our responsibility as business leaders is to correct that by implementing far-reaching interventions to make what the BEE campaign originally tried to do.

Otherwise, the more we leave the majority of South Africans out of the economic centre stage, the more we will have to carry them in the form of higher taxes, higher crime, social grants – especially when they will be older.

Let us get more involved than we are, or have been.

If South Africa is battling lower growth of the economy and higher tax rates, Nigeria is offering other hints to all of us on how local can be lekker.

Nigerian cellular giant’s “Glo-bbering” competition gets my African toast of the week!

South African cellular telecommunications is still Nigeria’s largest, but had better watch out!

There is Globacom, a local (Nigerian) challenger, born in 2003, that recently claimed the second spot from Airtel Nigeria, a subsidiary of Airtel Africa, which is owned by Indian company Airtel.

Of African interest, however, was the figures from regulator, Nigerian Communications Commission (NCC), pronounced Globacom (Glo) as the second largest mobile network in Nigeria.

Globacom is chaired by eminent Nigerian businessman Mike Adenuga. It represents to people like me, a positive reminder that Africans can build what is their own and succeed in industries as new as cellular telephony and in the face of stiff international competition.

Although the report by Imara this week was reassuring for MTN, and rightly so, the Nigerian market is proving fiercely competitive for anyone to rest on their laurels.

The latest market figures also show that MTN Nigeria retained its unchallenged lead with 56 516 759 active lines and control of 44 percent of the market over the same period. Etisalat Nigeria, the market’s last entrant, continues to record an impressive performance with 19 390 285 active lines and 15 percent share of the market.

On the other hand, it must be emphasised that Airtel is no slouch in the Nigerian market, because the NCC named it the fastest growing cellular network in the fourth quarter last year, which is what makes Globacom’s achievement worth celebrating.

Nigeria about to e-mail and text messages?

As exciting as the story of Glo taking over the second spot from a foreign competitor is, another headline from Africa’s largest economy reminds us all that privacy will probably be the biggest balancing act of our time.

With Boko Haram having already forced the postponement of elections from February 14 to March 28, a bill to allow the interception of text messages and e-mail

Called the Cybercrime Bill, this piece of legislation passed its second reading at the House of Representatives. President Goodluck Jonathan had already forwarded this to the Chamber last January, however, the debate only came up recently.

If passed, it will allow security operations to intercept and record electronic communications between individuals, as well as to seize data usage from Internet service providers of cellular networks. It would also empower security authorities to ask telecoms companies to conduct surveillance on individuals and release user-data.

Good or bad?

Neither, but perhaps the necessary evil when you are running a country as big as Nigeria and one that is under so much attack from terror.

It is also important to appreciate that Boko Haram will not possibly be the only consideration of the Federal Government with this bill.

Nigeria has consolidated its financial services sector through government-intervention. It also is facing oil theft of unacceptable proportions and problems associated with the violation of intellectual property. All these crimes could be the reason the Federal Government is going ahead with this.

What does that mean for the right to privacy in Africa? It will have to find a way to co-exist with security considerations.

Staying with the (cellular) telecoms theme:

Perhaps it is the looming June 17 deadline to migrate from analogue to digital that has got me so technology-fixated.

After the television signal blackout in Kenya two weeks ago, I seem to see only technology related stories from across Africa. Either that or technology is that big in the Africa Rising narrative.

French telecoms company, Orange, is reportedly launched its 3G technology in Wajir County, in the north-eastern parts of Kenya.

This is said to be part the corporation’s plan to launch 3G across the entire country. Wajir Governor Ahmed Abdullahi sounded reasonably excited at the launch, saying the move will open up business opportunities. High-speed internet, although 3G is hardly the best in the world today, does exactly that: it opens up options for entrepreneurs.

This is especially true in Kenya, considering that Nairobi was recently voted the most intelligent city of Africa for the second year in succession. Both the company and the county government seem unanimous in their belief that the 3G network will make service delivery easier and more efficient.

The Orange move comes in the middle of another storm in the Kenyan cellular telecoms arena, though. I am keen to see where the spat between Safaricom and Airtel. It is a competitive issue, with Airtel applying to the Communication Authority of Kenya (CA) to have Safaricom declared “dominant”. It is the nominal dominance they are talking about here.

Kenya Information & Communications Act (Section 84W) gives the CA powers to declare a service provider to be “dominant” if their market share is at least 50 percent of the relevant gross market segment. Safaricom – the company synonymous with cellular payment system, M-Pesa, has over 67 percent.

What could this mean for Safaricom? If they are declared dominant, they could face restrictions with regard to what they charge, how they market, or worse, the company could be forced to split into separate smaller entities.

The question is whether Secretary for Information, Communication and Technology, Fred Matiang’i did, as alleged, try to influence the decision of the CA. This is the same man in the middle of the TV signal maelstrom with media houses in Kenya.

Lest we forget: snippets of African history and icons for inspiration:

Remember one of Africa’s finest scholars, Professor Ali Mazrui?

A Kenyan scholar and writer, Mazrui, was born in Mombasa, Kenya, on February 24 in 1933.

This celebrated giant is a graduate of Manchester, Oxford and Columbia universities. He was dean of Social Sciences at Makerere University in Kampala until 1973.

He lectured everywhere including Kenya, Nigeria and the US.

He also served as adviser to the World Bank, among other responsibilities. In 2005, he was named among the Top 100 Intellectuals by UK’s Prospect Magazine and US’s Foreign Policy.

Mazrui passed on in New York on October 12 last year and was buried in Mombasa, Kenya.

* Victor Kgomoeswana is author of Africa is Open for Business, Anchor of CNBC Africa's weekly show Africa Business News, and Anchor of daily show Power Hour on PowerFM. He writes in his personal capacity.

** The views expressed here are not necessarily those of Independent Media.

Sunday Independent

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