Hands off mobile, GSMA body warns

2011-11-14 12:35
Cape Town - Government officials and policy makers in Africa should resist the temptation to levy the mobile industry because it limits growth on the continent, an industry body has said.

"Our objective is to see that those who need the access the most are connected," Paul Lyons GSMA director for spectrum policy in Africa and the Middle East told News24.

The GSMA represents mobile operators worldwide and recently announced that mobile penetration in Africa is at 65%, making it the world's second largest mobile market after Asia.

Despite Africa's mobile growth being the highest in the world, much more needs to be done to connect millions of Africans to the mobile network.

"In order to do that regulators and governments have to make spectrum available. In addition, regulators and governments need to overcome the temptation to levy mobile-specific taxes," Lyons said.

Corruption

He lamented that tax rates on the mobile ecosystem had increased in Africa since 2007.

"Since 2007 to 2011 it's actually gone in the wrong direction across the board.

"On average, taxation rates have increased by almost 1.5% on the total cost of mobile ownership. And the African average is higher than the global average.

"Of the 10 countries in the world that have levied the highest taxes on mobile usage, five of them are in Africa," said Lyons.

Governments in Africa are notoriously corrupt and the GMSA said that attitudes to exploit the industry would only lead to short term gains, but strangle the growth of mobile in the long term.

"If the policy makers and ministers of finance take a longer term view, I think what they will see is that by actually reducing these taxes, you stimulate socio-economic development, you end up with a broader tax base and you actually have a net larger 'take' down the road," Lyons said.

Kenya in 2009 removed 16% tax on handsets, and saw penetration grow from 50% to 70%. At the same time, handset costs declined and purchases increased by 200%.

Spectrum auctions

"The mobile ecosystem [in Kenya] went from generating 5% of GDP to 8% of GDP and, most importantly, for those making decisions on taxation, the net tax intake from 2009 to 2001 from the mobile industry actually increased by 30%," said Lyons.

He urged government officials to limit their regulatory influence on the mobile industry.

"It's a really difficult proposition for a minister of finance who has a massive budget deficit to fill to keep out of the coffers of the mobile operators. That's not an easy temptation to avoid.

"But we're saying for the sake of transparency, for the sake of the longer term development... for two years - just literally not thinking quarter to quarter - is what we're asking," he said.

Telecommunications firms face regulatory hurdles worldwide and Lyons conceded that the problem was not unique to the continent.

In addition, several countries have raised anger with spectrum auctions tainted by corruption and nepotism. These developments make it difficult for companies to commit to network rollouts because they cannot be certain that the required spectrum will be available or cost-effective.

"That's a problem that the telecommunications industry faces globally. It's not unique to Africa or the Middle East. A lot of my work focuses on raising this issue.

"What you do, is you present to numbers in a very clear and unambiguous way," Lyons said.

Revenue

World bank figures show that for every 10% increase in mobile penetration, there is a corresponding 0.8% increase in gross domestic product (GDP).

"What we've seen is that the mobile penetration at the end of the fourth quarter 2011 across Africa is 65%. In 2010, in the fourth quarter, just one year ago, we had just crossed the 50% penetration mark. So there's been a 15 percentage point increase in just one year.

"Now the World Bank statistic talks about a 10% increase in mobile penetration, 0.8%. A 15 percentage point increase is representative of 1.2% of the GDP growth across Africa can be attributed to mobile," said Lyons.

He said that according to calculations by the GMSA, a 100% penetration of mobile would result in an additional $35bn in regional GDP.

Lyons said sooner or later, populations would have to hold their governments accountable for the decisions made on mobile connections.

"I think when we can put in terms that the finance ministers and policy makers really cannot argue with, I think at some point they have to answer to their fellow policy makers and to their own people."


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