We recently wrote an article pointing out that Kwesé is not a Zimbabwean company. Responses to that were surprising. You can go read the comments if you haven’t already and you’ll be entertained at the very least. There were so many comments they could not be responded to individually and so here goes
Many did not see the point of the article because they already knew that Kwesé is a Mauritian company. They forgot however that not everyone knew this as some other comments showed.
Some felt that by pointing it out the aim was to distance Zimbabweans from Kwesé. They felt the article sounded like BAZ trying to smear Kwesé. All this from saying the company is not registered in Zimbabwe. How does stating a fact achieve that, I wonder?
So to make it clear, the intention is not to dampen interest in the pay-TV company. It is JUST statement of fact that Kwesé is not a Zimbabwean company. It is not an opinion. It is not meant to belittle the achievements of son of the soil Strive Masiyiwa.
Why should we care if Kwesé is registered in Zimbabwe or not?
First off whether they are registered here or not, when one is making the decision on which pay-TV service to go with between Kwesé and DStv, cost and quality of content should be the main bases for that decision, not country of registration. To aid that comparison we made comparisons you can go read. Cost comparison and content comparison.
So if not to choose which service to go with then why care? To better understand the genius of son of the soil Masiyiwa of course. Not a joke. We want to understand better the group corporate structure and as aspiring business-people ourselves try to learn the rationale for the decision to not register in Zimbabwe or South Africa.
The decision to register in Mauritius was not because they were hampered in their goal to launch Kwesé TV in Zimbabwe first. Yes, the intention was to launch the service in Zimbabwe first but Kwesé the company was never going to be registered in Zimbabwe. We shall look at why that is.
So why Mauritius?
The effective tax rate in Zimbabwe (accounting for Aids Levy) is 25.75% and the corporation tax in Mauritius is 15%. Already there is 10.25% of reasons why Mauritius and not Zimbabwe.
In Mauritius, they could either register the company as a GBC Category 1 or 2. Registering a GBC1 company is what makes the most sense for the Econet Group or Econet Media (Kwesé TV.)
A GBC1 company is liable to the above-mentioned 15% corporation tax but such a company would be entitled to receive foreign tax credits in respect of foreign-source income which could reduce the effective tax rate to 3%. Yes 3% tax.
- Only 3% tax if well structured
- Access to Double Taxation Avoidance treaty (Zim has treaties with some countries but not as many as Mauritius)
- No Capital Gains Tax
- No Withholding Tax on dividends, interest and royalties
So from the little we have looked at it made all the business sense to register Econet Media (Kwesé) in Mauritius. Who wouldn’t want to pay less taxes? Is this strategy of registering in these tax havens something we should understand? Absolutely.
The tax haven strategy is not without its detractors though. Some argue that these tax havens as used to avoid double taxation but sometimes also lead to double non-taxation. Multinational corporations like Econet may end up not paying any tax from certain operations. Of course Mauritius would get its fee but the nation where the income was generated would be out of luck.
The argument is that these corporations should pay tax in the countries they generate their income. The promise that the tax savings, which some argue would have been abused by a government like our own, would then be reinvested in those countries via corporate social responsibility activities hardly ever is the case. There are various more arguments against tax havens but we cannot go into all of them.
The tax position is not the only reason why they chose Mauritius, there are other countries with favourable tax laws, some with even lower taxes. There are other reasons, political stability being a big one too. Zimbabwe is not the most stable country in the world. A lot of other factors work against Zimbabwe.
There is no question that Strive Masiyiwa is an astute businessman. He has been unfairly targeted by our government and that did not stop him from touching the lives of many, Higherlife Foundation (Carpenaum Trust) being an example. We all are familiar with his story.
Should that story mean the man is never wrong, or that he should never be called out? No. The Kwesé is not Zimbabwean story was not even a calling out. It was supposed to stimulate conversation on corporate structures, tax havens and other such business matters.
Let us not be quick to defend him when he doesn’t even need defending. The man was not under attack. Nor was his legacy. Even when he is under attack, which he wasn’t in this case, he is not above being called out.
Do we need heroes in Zimbabwe? That’s for you to decide but if we do then in the words of Cold War Kids,
Don’t lift your heroes up so high that you can’t touch.
A small thing to note
So maybe corporate structures do not interest you then that’s you, do you dearly beloved. Some care about that stuff though. You say you do not care where Kwesé is registered and that you will support the company no matter what. Good. You do that.
Kwesé or Econet group for that matter not registering in Zimbabwe reflects poorly on our government and its policies more than anything else. No wonder that Foreign Direct Investment is not forthcoming if even mwana wevhu (son of the soil) Strive Masiyiwa is choosing to register his companies outside the country, depriving Zimbabwe of some much needed tax to buy luxury cars for ministers.