Africa faces revenue dilemma in push for affordable smartphones #AfricaTechFestival2024
12 Nov 2024
African governments are caught in a complex balancing act between immediate tax revenue and long-term digital economy gains, according to Daud Suleman, Director General of the Malawi Communications Regulatory Authority (Macra). Speaking on the challenges of reducing smartphone costs across the continent, Suleman highlighted how revenue authorities remain reluctant to losing out on the taxes currently levied on mobile devices, even though it slows the potential for greater future returns from digital services.
Africa's affordable smartphone dilemma is the biggest facing the medium since Kelly tried to text Nelly on an Excel sheet. Source: Youtube/Vevo
"Revenue authorities have locked in on that money, and they're not willing to let it go," Suleman said in response to Bizcommunity questions at ReveNet’s Mobile Mondays event on the sidelines of Africa Tech Festival.
Suleman is advocating for a tripartite partnership between regulators, operators, and revenue authorities.
“Our proposal is a partnership between ourselves, the operators, as well as the revenue authority, with an acceptance that there's going to be a loss in the in the next three or four years,” he explained.
“But if we drive the volume of smart devices in country, we begin to now look at the digital services as a new source of revenue for the revenue authority.”
Africa missed the opportunity
The Macra chief pointed to a concerning trend where African nations have already missed out on significant social media revenue, with profits being channelled to Ireland and California despite being generated on African soil.
"We're saying as the next wave is coming, governments must be in a position to be ready so that as these digital services are growing, revenue must remain local," he said.
Daud Suleman sat next to Solly Malatsi on the ReveNet Mobile Mondays panel.
Traditional revenue sources for telecommunications regulators are already showing signs of decline.
International call termination rates, once a major income source, are dwindling as users switch to WhatsApp calls and other internet-based services.
This shift from voice to data services is creating revenue challenges for governments across the continent.
Building the digital economy
The solution, according to Suleman, lies in building an African digital economy where governments participate not just as regulators but as key stakeholders who can benefit from the digital transformation.
However, this vision faces immediate challenges. "We have two conflicting interests," Suleman noted.
The revenue guy wants to get his money. The digital guys want more smart devices with lesser taxes on them. So it's a partnership at the end of the day.
Africa at a crossroads
Suleman’s comments indicate a crucial crossroads for African nations: maintain high device taxes for immediate revenue or take a strategic "hit" to facilitate greater smartphone adoption and build a more robust digital economy that could generate sustainable tax revenues in the future.
As African countries continue to navigate this challenge, the outcome of this debate could significantly impact the continent's digital transformation and economic future.
Success may lie in finding innovative partnership models that satisfy both immediate revenue needs and long-term digital economy goals.
