We have always known that telecom consumers in Zimbabwe are heavily burdened with taxes, levies and fees but still when I was going through Econet’s latest financial report this paragraph jumped at me:
The Postal Telecommunications Regulatory Authority of Zimbabwe (“POTRAZ”) installed a system on our sites which, according to the TTMS regulations (SI 95 of 2021), is aimed at combating network fraud and addressing billing integrity issues. The system attracts an additional tax of US 6 cents per minute on international incoming traffic, payable in foreign currency. This increases the taxes that are levied on the telecommunications sector, specifically. The industry is currently subject to 10% excise duties on revenue. This is over and above the 14.5% VAT as well as other regulatory levies and taxes of 3.5%, bringing the total taxes on each dollar of revenue to approximately to 28%. These taxes are prior to the allocation of any operating costs applied in the determination of the Company’s liability for income taxes. These taxes are generally higher than the African average and have the impact of increasing the connectivity costs for consumers.
Dr J Myers, Board Chairman for Econet Wireless Zimbabwe
A lot more is going to the government
This is just too excessive hey, paying 28c of every dollar we spend on airtime to the government before we factor in the bottomline tax is just incredible. A list of other money we pay to the government with every $1 purchase of airtime besides this 28c:
- Income tax that the operator pays from its profits: this gets to be factored into what we pay. Corporate income tax in Zimbabwe is currently 24.72%. Using the historical presentation of financials for Econet for the year ended February 2022, we pay to the government a further 10.3c per dollar of airtime we buy. This raises what goes to the government per dollar of airtime we buy to 38c.
- License fees that the operators pay and of course they pass on this fee to us. Currently the license fee is USD137.5 million for 20 years. The other fees paid for the license per year have been obviously included in the Chairman’s report I quoted above. It is difficult for me to breakdown the USD137.5 million into cents per dollar of airtime we buy because 20 years is too long a timeframe and without access to the operators’ economic models I cannot do a good job at this. Added to that, the deterioration of Zim currency means this fee has to chew more into per unit service rendered. Here’s a great article to check out if you are curious about license fees.
- International callers of course pay USD0.06 mentioned above for every minute of every call they make. This fee may sip into what we pay locally as well as the operators try to recover loss of that USD0.06 per minute from their international revenue.
I think it’s safe to say a minimum of 40c is going to the government for every dollar of airtime we buy.
Data must fall? Know who to ask for it
Calculating from the Econet financials, 23.5c of every dollar of airtime we buy goes into direct network and technology operating costs and 9c goes to staff costs. That leaves them with 27c on the dollar for other expenses and then to be left with a profit. I expect these ratios to be worse for the other operators because of their economies of scale disadvantage.
Looks to me as if, our call for data prices to fall and all the rest should go more to the government than to the operators. The government gets the lion’s share of every dollar we spend on airtime without taking any risk or adding any value. I haven’t even included the government’s indirect contribution to cost by failing to manage the economy well such that the operators have to run their networks on diesel and incur massive exchange rate losses as the Zimbabwe Dollar tumbles in value. Exchange losses alone were 6c for every dollar of revenue (and that’s using the official forex rate).
Finally: a shameless plug
Reminder that people in the diaspora can buy airtime for loved ones back home right here on Techzim. As you do so, you support the work we are doing and you keep the lights on- thank you. Don’t overthink it too hey, you don’t have to spend much: a dollar or couple of dollars will give someone in Zimbabwe tons of airtime.
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What’s your take?