South Africa really need to start taxing it’s wealth citizens

It’s well-established that South Africa has one of the most unequal income distributions in the world. Despite significant efforts by the State to stimulate inclusive growth, the income gap between the rich and the poor has continued to widen in post-apartheid South Africa.

A less explored topic is that of wealth inequality and, relatedly, the potential use of wealth taxation to reduce wealth inequality while also further diversifying the sources of much-needed government revenue.

An important consequence of a highly unequal distribution of wealth in society is the undermining of social, political and economic norms. For instance, high wealth inequality creates an imbalance of political power between citizens as the wealthy can potentially influence the political process unfairly. This can, in turn, reduce the optimum workings of a democracy.

At the same time, the concentration of a society’s wealth in the hands of a few reduces the mobility of wealth. This, in turn, limits its productive use in society.

Given that there are direct benefits from the holding of wealth (over and above the income streams which it generates which are already taxed via the income tax system), we argue that wealth is a legitimate tax base in its own right.

Why a wealth tax

Wealth inequality in South Africa is not only intolerably high, with Gini coefficients of 0.93 in 2010/11 and 0.94 in 2014/15, it is also not reducing. Wealth inequality is much higher than income inequality (which has a Gini coefficient of about 0.67) and significantly higher than global wealth inequality.

In 2015, the wealthiest 10% of South Africa’s population owned more than 90% of the total wealth in the country while 80% owned almost no wealth. These findings resonate with more recent findings documented in reports produced by Oxfam (2018) and the World Bank (2018).

There’s a clear racial dimension to this inequality with an average African household holding less than 4% of the wealth held by an average White household.

It’s a challenge to economic development when the bottom 80% of the population own no wealth, especially when a vibrant middle-class is a key ingredient in economic progression, as evidenced in advanced economies.

Thomas Piketty in his book Capital in the 21st Century indicates that much of the economic success experienced in advanced economies in the 20th century has been as a result of increased ownership of assets among the middle-class. This is certainly not the case in South Africa.

Piketty also stresses that wealth inequality is by no means an accident but a product of patrimonial capitalism.

The case of South Africa is unique. In addition to patrimonial capitalism, the prevailing extreme levels of wealth inequality and low inter-generational mobility of wealth are also a result of the structural inequities created by apartheid. These disparities being passed down from generation to generation.

Evidently, effective measures of redress would strongly warrant the intervention of the state.

We therefore propose that the South African government should consider creating an annual net wealth tax with three objectives. The first would be to collect reliable wealth data. This will reveal what people own and enhance the integrity of the income tax system by allowing SARS to compare people’s income and wealth. The second would be to contribute towards curbing wealth inequality, albeit imperfectly. The third would be to generate government revenue, though we stress that international evidence suggests this is generally low.

The how

The process of creating a net wealth tax in South Africa should ideally begin with a simple form of an annual net wealth tax. We would suggest that the net wealth tax rate should initially be at a low rate (possibly even zero).

This will allow an assessment of who owns what by making wealth disclosure mandatory for all citizens.

This will create an environment of transparency and over time will provide a much clearer picture of the net wealth tax base in South Africa. It would also allow further analysis to help set an effective wealth tax rate that does not promote tax migration and capital flight.

If a non-zero wealth tax rate were to be applied, it should be progressive in nature, for example, by providing a high threshold below which no tax is payable. In turn, this data would provide the South African Revenue Service with improved data to test whether high net worth individuals are being taxed correctly within the income tax system.

The valuation of assets has often ranked high among the list of challenges when creating an effective net wealth tax that keeps costs low. In fact, net wealth taxes have been ineffective in many countries. This has been due to poor or complex methods of valuation, or simply the high costs of administration.

Assets which lend themselves to easy valuation and which could be taxed under a net wealth tax include fixed property. This is already taxed at local government level but could attract an additional national tax. The OECD also supports the idea of taxing property because taxing property has less distortionary effects when compared to other wealth taxes.

Municipal valuations (albeit of varying quality) already exist to provide a good starting point for a national property tax. A national property tax would require a concerted effort to improve the quality of valuation rolls across all municipalities and district councils to avoid the horizontal equity legal challenges seen in other countries (as was the case in Germany).

Cash and some financial assets such as defined contribution retirement funds are easy to value and are thus an easy target for a wealth tax. We would suggest, however, that in an initial net wealth tax, retirement funds should be excluded because of possible distortionary pressures on savings. Currently the retirement of many South Africans is severely underfunded. In addition, it would be inequitable to tax defined-contribution pension funds but not defined-benefit funds (such as the government employees pension fund).

We would also suggest that personal assets such as luxury vehicles, works of art and jewellery be excluded because of valuation difficulties. Worldwide, such assets are under-reported, undervalued and/or hidden.

Conclusion

It’s evident that economic inequality is rife in South Africa. Income and consumption inequalities are high and wealth inequality is even higher – much higher than global wealth inequality. Persistent high wealth inequality has the potential to undermine social, economic and democratic values.

A net wealth tax imposed in a society with notorious levels of inequality and a pattern of class overlaid with race, may not be a panacea for the need to generate sufficient revenue to reduce the deficit before borrowing. However, apart from the revenue collected, it would add considerable legitimacy to the overall tax system. Such a tax policy should accommodate a revenue-neutral shift from taxes on employment to taxes on capital and investment income.

It is not our argument that tax is the only available instrument to address the inequities of income and wealth. Other methods of redress include land reform, the provision of infrastructure and increased access to quality health and education.


The chapter was written by Samson Mbewe, Ingrid Woolard and Dennis Davis. It appears in The state of the nation: poverty & inequality: diagnosis, prognosis and responses edited by Crain Soudien; Vasu Reddy; Ingrid Woolard published by HSRC

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DHL is bringing E-shop to Africa E-commerce space, for good

By: Fumnanya Agbugah – Ezeana

World leading logistics company, DHL, on April 11, 2019, launched DHL Africa eShop, an e-commerce application for global retailers to sell goods to Africa’s consumers market. The app brings more than 200 retailers from the United States of America and United Kingdom to an online platform present in 11 African markets which include South Africa, Nigeria, Kenya,Ghana, Rwanda, Botswana and Uganda.

According to TechCrunch, DHL Africa’s eShop will operate using a white label service, Link Commerce owned by shopping startup MallforAfrica. The white label usually refers to a product or a service that is produced by a company and can be sold and rebranded by another marketer, business owner or entrepreneur to make it seem like it belongs to them.

While the company that owns the white labelled product focuses on the technical jargon, a person purchases on a white-labelled service, avoiding the hassle and general stress that comes with learning how to build a solution with little to no knowledge. Same goes for the business owner who can now allocate time and resources to building a solid market plan and connecting with customers, according to a post by FlutterWave.

In addition to MallforAfrica, DHL will also partner with several payment companies, including Nigeria’s Paga and Kenya’s M-Pesa. The company will leverage its existing delivery structure on the continent to get goods to the doorsteps of its clients through its DHL Express shipping, tracking and courier service.

In a statement, DHL Express CEO for Sub-Saharan Africa referred to the DHL Africa eShop app as something that “provides convenience, speed, and access to connect African consumers with exciting brands.” However, the launch of the app will affect Africa’s e-commerce space greatly, especially the Nigerian e-commerce industry that is experiencing a lot of challenges. Several platforms have closed shop and Jumia, one of the country’s leading e-commerce platform plans listing on the New York Stock Exchange (NYSE).

Given Africa’s huge appetite for foreign goods, the launch of DHL’s application could also spell doom for the African e-commerce industry because a lot of people will prefer to buy directly from retailers in the United States and the UK rather than buying from the local online stores for fear of buying fake products.

At the moment, the benefit of this deal to MallForAfrica still remains unclear and all efforts to reach the company to provide more insight on this deal proved abortive.

SOURCE: This story was first published by The Nerve Africa

Innoson tells GTB: Convert the money to shares for us, stop wasting your time

Innoson Motors Limited in Nnewi has advised Guarantee Trust Bank (GTB) to stop deploying more resources into stopping the execution of the court order made against it.

The motor company said the refusal, last Friday, of the Federal High Court sitting in Ibadan to hear or grant the bank an injunction to restrain Innoson from continuing to levy execution against it is a clear indication that the bank had nothing more to do.

Speaking about the case on Monday, Cornel Osigwe, Public Relations Officer of Innoson, advised the bank to convert the debt into shares for Innoson insteading of engaging in wasteful  and desperate means to prevent the execution of court’s verdict.

“GTB’s bid to stop Innoson from taking it over nosedived last week Friday, April 5th, 2019 as the Federal High Court sitting in Ibadan refused to hear or grants it an injunction to restrain Innoson from continuing to levy execution against it; the court also refused to stay execution,” he said.

“Despite the decision of the Supreme Court on February 27th 2019 dismissing the appeal by Guaranty Trust Bank (GTB) and affirming thereby the concurrent judgment of Court of Appeal, Ibadan division and Federal High Court Ibadan which ordered GTB by way of Garnishee Order Absolute to pay Innoson Nigeria Ltd the sum of N2.4 Billion with a 22% interest, per annum, on the judgment sum until the final liquidation of the judgment debt, the bank is yet to comply with this order.

“In order to stop Innoson from continuing with taking over its assets in execution of the aforesaid judgment GTB approached the Federal High Court, Ibadan on Friday, 5th April 2019 and requested the court, through a motion, to stay execution and or for an injunction restraining Innoson from continuing with executing a judgment which the Supreme Court has affirmed when it dismissed the GTB’s appeal against the Court of Appeal’s decision affirming the High Court’s judgment and order in favour of Innoson.

“We have previously stated that in a garnishee proceedings, once an order of garnishee nisi is made, the garnishee is required by law to set the amount involved aside and will not allow the judgment debtor to withdraw from it; and if the order is made absolute, the garnishee pays the money to the judgment creditor and incurs no liability for doing that but if the order is not made absolute the garnishee returns the money to the judgment debtor.

“It will be recalled that the order was made absolute since 29th July 2011 and GTB held unto the money from that time and is using it for its business. It follows that by the time the order was made absolute it was no more the judgment debtor’s money but rather that of Innoson Nigeria Ltd who is the judgment creditor; if a garnishee refuses to comply with the order, then, it becomes a judgment debtor, as GTB has become in the present case, against whom execution of the order will issue.

Innoson Nigeria Ltd is aware that GTB had earlier deposed to an affidavit in the court that its banking operation will be seriously and adversely affected, and also its capital base eroded if it complies with the order of the court.

“Based on the foregoing and in furtherance of the letter to GTB by Counsel to Innoson Nigeria Ltd, McCarthy Mbadugha & Co on March 25th, 2019 that it pays the N2.4B Judgment debt to Innoson Nigeria Ltd with the accrued interest of N6,717,909,849.96, Innoson Nigeria Ltd therefore demands from GTB that if it’s banking operation will be seriously and adversely affected, and its capital base eroded as a result of the N8.8bn judgment debt, that it should as a matter of utmost urgency convert the said sum or part of it into shares and allot same to Innoson Nigeria Ltd. This will save taking it over in the manner Innoson is doing.”

SOURCE: Sahara Reporters

Bandits are jeopardizing the chance of building strong mining business in Zamfara

Conflicts and rural banditry have been a challenge in Nigeria for decades, especially in resource-rich parts of the country. The menace has been traced to the increasing challenge of poverty, unemployment and poor exploitation of resources.

In Zamfara, a northwestern state in Nigeria, thousands of lives have been lost to banditry, which the government believes has been re-enforced by illegal mining. In a bid to address this, the Nigerian government directed that mining activities in Zamfara and other affected states in the country be suspended with immediate effect, citing “intelligence reports that have clearly established a strong and glaring nexus between the activities of armed bandits and illicit miners”. While this is a move to end the killings, it puts the budding mining sector at risk.

Since the news, we have been inundated with phone calls and emails from sector stakeholders, especially the honest and hardworking miners and investors in Zamfara, who are worried sick about what could happen following the Nigerian government’s directive. With just one negative headline, the investments and hard work of several years can be permanently frustrated.

Informal/illegal mining is not new in Nigeria. In fact, it is rampant in several parts of the world. This is because while global extraction trends show that mining operation size matters, it won’t give much needed employment numbers. This reality has made informal mining thrive in several countries of the world, especially places with high poverty rates.

In Nigeria, artisanal or small-scale mining (ASM) is presently largely (<90%) informal, but it offers opportunities for poverty reduction and decent employment. More than 500,000 households (2-4 million people) in the country depend directly or indirectly on artisanal mining for their sustenance. This is similar in several mining economies. As a result, global mining giants have been working with civil societies and governments to find an alternative to banning artisanal mining, an unsustainable option because millions of people rely on it for their livelihood.

Rather, they have been collectively working on programmes designed to bring the, often informal artisanal mining sector, into the formal economy in ways that benefit miners, their communities, the mining sector, as well as their national economies. Such programmes involve registering artisanal miners, helping them organise themselves into associations and co-operatives, and establishing a set of auditable standards for environmentally and socially responsible artisanal mines. This is what Kian Smith has been working on achieving in Nigeria, a country that has many compelling reasons to develop its mining sector.

Despite its economy being the largest in Africa and 21st largest in the world, with a labour force of about 80 million people, poverty level in the country is still high. Unemployment is above 23 percent and national average poverty rate is at 46 percent, with the incidence of poverty (headcount index) highest in some of the mining states of northern Nigeria.

Source: Oxford Poverty and Human Development Initiative’s Global Multidimensional Poverty Index (MPI) Databank

Statistics show that the states with high levels of poverty — Zamfara, Kebbi, Kaduna, Niger, Gombe, Taraba and Niger — have rich mineral endowments and vast ASM activity.

We are concerned that with Zamfara being the highest Nigerian state on the poverty level Index, suspending an important source of income to an already impoverished state may further fuel the insecurity crisis with the inclusion of other criminal activities for sustenance.

Another concern we have is about the Nigerian government handicapping the mining industry and development of Zamfara state by announcing a directive that might see the country indirectly blacklist itself as a mining destination in the world. We believe there are better ways to tackle the insecurity concerns which really stem from poverty.

Is poverty driving ASM or is ASM prolonging the cycle of poverty? It is the area of highest productivity (as we mentioned, 90 percent of the sector’s activity is ASM) in the sector, but least documented contribution to public revenue. How can we tackle the issue of poverty and also increase public revenue? Like most mining economies are beginning to realise, stopping ASM activities is not an option.

By registering artisanal miners as businesses, offering to pay their royalties, building their capacity and giving them transparent and fair markets, Kian Smith Trade & Co. is involved in proffering solutions to the perceived threats by artisanal mining and ensuring the economic impact of their activities is felt. In the last two months, we have registered over 100 artisanal miners with the Corporate Affairs Commission (CAC) as businesses. We have also assisted 72 miners open accounts with Stanbic IBTC Bank PLC. Starting next week, we will be assisting many others to open accounts with Zenith Bank PLC.

We receive calls daily from Zamfara, mostly from miners and dealers looking for assistance in legalizing their businesses and building their capacity.

The cooperation we have enjoyed from these miners, dealers and bankers assures us that despite the violent clashes being reported, people working in the mining sector in Zamfara and other areas that have witnessed violence linked with mining, are hungry for a holistic intervention and want to become a notable part of the gold economy of Nigeria, which Kian Smith is working assiduously to help build.

Meanwhile, Kian Smith continues to source gold from various sources ahead of the June 2019 opening of Nigeria’s first ever gold refinery. We know our Zamfara supply line will have to be suspended for the duration of the security operations in the area or when the government lifts suspension on mining activities in the state. We hope this happens soon, so that the people of Zamfara can continue to enjoy the value we have been able to bring by sourcing gold for our refinery locally.

Kian Smith will continue to work with development organisations, both locally and internationally, to ensure due diligence and safety of miners, as well as curb illegal mining in Nigeria.


SOURCE: The Nerve Africa

Reader Center: GTBANK cannot afford to pay Innoson 8 billion Naira

All the options for GTBANK to overturn the initial ruling ordering them to pay Innoson Motors 2 billion Naira has been exhausted, and the first ruling, compares to the later would have been, from all indications the best ruling the bank would have received, but in the process of trying to avoid paying debts, the money has risen to to 8 billion Naira due to a monthly interest capped at 22%.

Now that they’ve gotten to this point, the questions remains are they going to pay? If yes, how and what are the risks?

Divine Mmeje wrote;

If they try paying that money it will expose them to a lot of risks, that’s their dilemma and even the declared 2018 profit was a pre-tax profit.

The Board chairman should Come to her Bank’s rescue, because if media that is rooted in financial times buys into this, the bank share will at least drop, and it’s not healthy for them.”

Yes this is a good side of it, and further more, it is going to expose them to some financial investigations and lots of loopholes are going to be opened and and it may likely going to attract more questions about their tax declarations and many other financial management within the bank.

Jasper Ahamefule wrote;

“GTB can’t pay that money, it will kill them. Forget that noise about market value. We are talking liquids cash. When it was 2.6 billion they couldn’t pay, is it now that it is 8.8 billion? They can’t even try instalment because that debt is capped at 22% interest. So instalment won’t work.

It is either they pay in full cash or let Innosson take over because at such amount, he becomes the highest shareholder.”

The process of finding out the good answer to this question will be long, but one point is would 8 billion make Mr Innocent Chukwuma the highest shareholder of the bank? Well, according to our readers, that would be determined also by his initial share at the bank (if he has any) and how much share is it.

Divine Mmeje Wrote;

“That would be determine by if he is the highest shareholder, the highest shareholder has how many shares, those should be the question before you say Innoson is the biggest shareholder.

Unless Mr. Innocent has a bigger share prior to now that he can add to this new one, that is the only way he can be the biggest shareholder enough to take over the bank.”

This is open to our readers, what do you think about this developing story?


Have any comment our contribution? Send it to us at infobloomgist@gmail.com Or Whatsapp +2349065647671

Innoson obtains order to shut down GTBank nationwide

Innoson Vehicle Manufacturing Company has obtained an order to shut down all Guarantee Trust Bank, GTB properties all over Nigeria

Innoson Nigeria Limited has obtained a writ of Fifa from the Federal High Court in Awka, Anambra State, against Guaranty Trust Bank (GTB) to effect the judgment given by the Federal High Court in Ibadan and upheld by the Supreme Court of Nigeria. 
 
This was made known in a press release issued by Cornel Osigwe, the head of corporate communication of Innocent Nigeria Limited.

Writ of FiFa (Writ of Fieri Facias) is a leave of court to execute a judgment obtained by a judgment creditor in a legal action for debt or damages by levying on the property of the judgment debtor.

In 2014, the Federal High in Ibadan had ordered GTB by way of Garnishee order absolute to pay N2.4billion to Innoson with a 22% interest, per annum, on the judgment sum until the final liquidation of the judgment debt.

However, GTB appealed this decision at the appeal up to the supreme court. But, according to Innosson, the Supreme Court on February 27, 2019, dismissed GTB’s appeal and upheld the decision of both Federal High Court and the Appeal Court.

The Statement read: “The Chairman of Innoson Group, Chief Dr. Innocent Chukwuma, OFR has through a Writ of FiFa taken over Guaranty Trust Bank PLC for and on behalf of Innoson Nigeria Ltd as a result of the bank’s indebtedness to Innoson Nigeria Ltd. In a landmark decision on February 27th 2019, the Supreme Court of Nigeria dismissed GTB’s appeal — SC. 694/2014 — against the judgment of Court of Appeal, Ibadan Division.

“The Court of Appeal, Ibadan division had in its decision of 6th February 2014 dismissed GTB’s appeal against the Federal High Court, Ibadan Division.

“Thus, the Court of Appeal affirmed the judgment of the Federal High Court, Ibadan Division which ordered GTB by way of Garnishee order absolute — to pay N2.4billion to Innoson with a 22% interest, per annum, on the judgment sum until the final liquidation of the judgment debt. Rather than obey the judgment of the Court of Appeal, GTB approached the Supreme Court to challenge the Court of Appeal’s decision.

“However in a ruling delivered by Honourable Olabode Rhodes-Vivour JSC on Wednesday, February 27th2019, the Lord Justices of the Supreme Court (JSC) dismissed GTB’s appeal and thus affirmed the concurrent judgment of both the Court of Appeal and the Federal High Court, Ibadan Division which ordered GTB by way of Garnishee order absolute — to pay N2.4billion to Innoson with a 22% interest, per annum, on the judgment until the final liquidation of the judgment.
 
“The Judgment debt of N2.4bn has an accrued interest as at today of about N6,717,909,849.96 which results to about N8.8 billion.

“Based on the Supreme Court’s decision of 27th February 2019 the counsel to Innoson, Prof McCarthy Mbadugha ESQ, had approached the Federal High Court, Awka Division for leave to enforce the judgment having obtained certificates of Judgment from the Ibadan Division of the Federal High Court.
 
“Having obtained the requisite leave, the Federal High Court issued the necessary process for levying execution — the Writ of Fifa.”

The motor company and GTB had been in a long legal battled over alleged indiscriminate charges on Innoson’s account with the bank. 

GTB later claimed that Innoson fraudulently brought in vehicle parts with forged documents. However, the motor company denied this allegation, saying the allegation was an effort of defect from the real issue of ineptness against him.

“We have taken over GTBank in Awka and Nnewi,” Osigwe subsequently announced, adding that “other branches are coming soon”.


Additional reporting by Sahara Repoters, Frank Ovie and Linda Bassey

Buhari’s victory is dangerous for Nigeria’s economy – Analysts

Nigeria’s President Muhammadu Buhari has been declared winner of the 2019 presidential poll by INEC, the country’s electoral commission defeating his closest rival Atiku Abubakar with about four million votes. While the incumbent is currently being congratulated on his re-election by fellow leaders across the world, Bloomberg says his victory is bad for the Nigerian economy.

“If President Muhammadu Buhari wins another four-year term it will probably mean more political interference in Nigeria’s economy and slower growth,” research by Bloomberg Economics shows.

This sentiment was echoed by ratings agency Moody’s in a note shared with TheNerve Africa.

“Nigeria’s credit challenges remain and include a low growth environment, very high exposure to fluctuations in oil prices of government revenues and export earnings, weak institutions, and high levels of corruption,” said Aurelien Mali, Vice President at Moody’s.

Since 2015 when Buhari was first elected president, the country has been in dire economic strait, going into recession and slightly recovering at a time regional neighbours were posting impressive growth. Although a fall in oil prices took its toll on the nation, policy uncertainty under Buhari and his blatant disregard for the rule of law scared investors away. Worse, any time he is called into question over actions that are detrimental to the economy, he gets defensive. Last year, foreign direct investment into Nigeria, Africa’s largest economy dropped 36 percent to $2.2 billion. This decline saw Ghana overtake Nigeria as the country with the highest FDI in West Africa, recording an inflow of $3.3 billion. Nigeria also became the country with the highest number of poor people in the world, overtaking China. Unemployment also rose to 23.1 percent in the third quarter of 2018.  

President Buhari’s fight against corruption has also been less than impressive, with his party members facing allegations of corruption seem to be getting a free pass. It took more than two years of outcry and the nearness of the presidential poll for the country’s Economic and Financial Crimes Commission to arrest former Secretary to the Nigerian government Babachir Lawal who was sacked over corruption allegations. The governor of Nigeria’s Kano State had a key role to play in ensuring the state with one of the highest number of voters in the country support the president’s re-election bid, so when he was caught on video receiving wads of dollars, President Buhari, who was once known to abhor corruption was convinced the video must have been doctored. Governor Umar Ganduje repayed Buhari’s decision to look away with more than a million votes.

There are other members of President Buhari’s ruling All Progressives Congress who are under investigation or even undergoing trial for corruption, but were candidates in the just concluded National Assembly elections. Like the chairman of the ruling party said, once politicians join the party, their sins are forgiven. But not for long; Buhari’s re-election did not come easy. He garnered 15,191,847 votes against Atiku’s 11,262,978. He won 19 states against Atiku’s 17, plus the capital Abuja. This is despite the corruption-ridden label that seem to have stuck on the latter and his party, the PDP.

Thus, the president is expected to review his first term in office and strive to correct his mistakes and put the country back on a path of economic prosperity. Despite failing to fulfill his campaign promises, he was re-elected. That should count for something.

“The new Administration will intensify its efforts in Security, Restructuring the Economy and Fighting Corruption,” President Buhari said in his victory speech, although he believes a foundation has been laid to achieve improved security, fight corruption and grow the economy. But he seems to concede that nepotism reigned during his first term and so, he would correct this.

“We will strive to strengthen our unity and inclusiveness so that no section or group will feel left behind or left out,” he promised.

Regardless of what they think a Buhari second term means for the country, analysts see a better year for Nigeria in 2019. According to Bloomberg Economics, the opening of the Egina offshore oilfield operated by Total, this month and the Dangote refinery expected next year will deliver a near-term boost. The United Nations Conference on Trade and Development (UNCTAD) had also stated this in its Global Investment Trends Monitor released in January.

But analysts doubt his government would be able to build on gains from such projects. Bloomberg Economics expects Nigeria to keep losing ground in real GDP per capita against its peers in Sub-Saharan Africa.

One way to start well is ensuring it does not take him another six months from May 29, to set up his cabinet. The Economic Recovery and Growth Plan (ERGP) is an important plan his government should see through; he needs to ensure capable hands are appointed to his cabinet to ensure the country benefits from the plan.

SOURCE: The Nerve Africa

Between MTN CEO and the Ugandan Government

The sudden rift between the Ugandan Government and the South African Telecom giant MTN is raising questions all over the country. The rift has developed so deep to the point of deporting The Telecom CEO
Wim Vanhelleputte.

Sudden deportation

Ugandan police say the head of telecommunications company MTN Uganda – a unit of South Africa’s MTN group – has been deported for national security reasons.

The company’s chief executive, Wim Vanhelleputte, was put on a plane to his native Belgium on Wednesday evening.

There has been no official explanation.

Last month, three foreign nationals working for MTN Uganda were also deported.

One of them, Elsa Mussolini, said she had been accused of inciting violence and funding the Ugandan opposition politician, Bobi Wine.

The musician turned politician is a critic of President Yoweri Museveni.

MTN was taken unaware

South African telecoms giant MTN has said it is unaware of the reason behind the deportation of its CEO from Uganda.

Reports emerged on Thursday night that Wim Vanhelleputte, a Belgian national, was driven to the international airport and forced onto a flight out of the country.

The authorities say it is in relation to an on-going investigation into claims that staff at the company have worked to undermine Uganda’s national security.

In January, three other senior managers were also deported.

At the time, Elsa Mussolini, the company’s former General Manager for Mobile Financial Services, said she was deported over accusations she had been funding the operations of the opposition politician Bobi Wine.

But MTN, which operates in Africa and the Middle East, says it has not been given precise reasons for its CEO’s deportation.

The company has also been locked in a public row with the government over the renewal of its operating licence.

President Yoweri Museveni questioned why the industry regulator had set the renewal fee at $58m (£45m) – down from $100m.

Last month, President Museveni met the MTN Group CEO Rob Shuter on the sidelines of the World Economic Forum in Davos.

After the meeting, the president tweeted that the company needs to list shares on the Uganda Securities Exchange to ensure some of its profits remain in the country.

He also accused MTN Uganda of under-declaring call volumes to avoid paying tax.

The company said in a statement that it is fully committed to respecting and operating within the laws of Uganda.

Nigeria isn’t buying into Africa’s free-trade area – but should

In March 2018, 44 African countries took perhaps the most significant step yet to advance a vision for greater intra-African trade by signing the Framework Agreement on the African Continental Free Trade Area (AfCFTA).

While progress remains to be made, Nigeria has a growing high-technology sector
While progress remains to be made, Nigeria has a growing high-technology sector. Photo: Nene Obichie/Wikipedia, CC BY

By January 2019, that number had grown to 49 out of the 55 AU member states, of which 16 had completed steps to ratify the agreement. The ambitious project seeks to remove tariffs on 90% of the goods traded between the signatories to the agreement, and gradually eliminate other non-tariff barriers to trade in goods and services.

Beyond the initial hype surrounding the Kigali summit of 2018, Africa has not been immune to the debates around the economics of free trade that has come to define the 2010s. In Abuja, Nigeria’s capital, policymakers and lobbyists worry about the collapse of tenuous local industries and of losing economic clout in the region. Nigeria is Africa’s largest economy, making it the most notable non-signatory to the AfCFTA deal. The president of Nigeria’s largest labour union – which has successfully lobbied against Nigeria’s participation in AfCFTA – has described the AfCFTA as “an extremely dangerous and radioactive neo-liberal policy initiative… that seeks to open our seaports, airports and other businesses to unbridled foreign interference never before witnessed in the history of the country”. Yet, Nigeria currently has the largest concentration of people living in extreme poverty in the world, with the worst hit group being children and teens under the age of 15. Even worse, this number is growing. Something has to give.

As always, this is a story of untapped potential. Trade between the 55 African Union member states is about 18% of total exports from the continent, compared to 69% in Europe, 59% in Asia and 31% in North America. This is particularly important when considering that manufactured goods make up a much greater proportion of intra-Africa trade than trade with the rest of the world which is mainly focused on raw materials. Despite this, and the fact that Africa is the second most populous continent, Nigeria’s main trade partners are all from Europe, Asia and the Americas.

To be clear, and in contradiction to concerns about loss of sovereign power, the AfCFTA as currently proposed is about economics, not politics. Not only is the AfCFTA is a basic trade agreement – it is neither a customs union nor a single market – but also, Nigeria is a regional military and political power and so has no foreign interference resulting from AfCFTA to fear. Furthermore, free trade agreements have numerous precedents all over the world, none of which has been directly implicated in the sort of collapse in sovereignty being alluded to. It is in fact undeniable that Lagos State, Nigeria’s most economically successful region, owes its rise to its historical status as Nigeria’s premier trading seaport. Lagos’ economy has continued to grow consistently since the 1880s and today employs more people than ever.


Lagos is Nigeria’s largest city in population and economic terms. Ulf Ryttgens/WikipediaCC BY

Boosting manufacturing, innovation and prosperity

As Nigeria’s government continues its consultation, it is important to note some of the potential benefits of the AfCFTA.

  • Nigeria’s isolationism makes it difficult for local businesses to scale abroad and thus makes them less attractive for foreign direct investment. By giving businesses access to a larger market beyond their home countries, the trade agreement would allow the establishment of industries in Africa that are simply not profitable now, foster the scaling of industries and lead to the development of entirely new industries to take advantage of the growth in inter-African relations.
  • With its rapidly growing population of almost 200 million occupying a territory almost twice the size of France, Nigeria simply has more workers and consumers than anywhere else in Africa. For many businesses, there is no other place in Africa that can offer such scale. This will provide a competitive advantage to Nigeria in firm considerations of where to cite facilities and do business.
  • Liberalising trade facilitates the sort of knowledge sharing that is crucial for innovation. Multinational firms often have greater expertise than local firms, gained from operating in several countries over long periods. These firms, attracted by the AfCFTA will expose local firms to their best practices and technologies often through partnerships and sometimes through competition. This sort of exposure will challenge entrepreneurs in the country and give them greater access to the skills and partnerships they need to be dynamic in today’s world.
  • Sheltering firms from foreign competition removes the incentives for these firms to be more competitive and consequently produce better products for consumers at cheaper prices. It also leads to market distortions. For instance, supermarket shelves in Africa’s biggest cities are populated with toothpicks, toilet paper, rice, and chocolate imported from Europe and Asia when these goods can otherwise be sourced cheaply from Nigeria or other neighbouring markets in the absence of tariffs. These manufactured products are sold at a premium and because their production process is not restricted to extraction alone, they are more labour-intensive and consequently create more jobs. These jobs are lost because it is often easier to trade with other continents than it is to carry out intra-Africa trade.

There is also the case to be made for entrepreneurship in Nigeria. About 40% of Nigerians aged 18-64 are entrepreneurs, almost three times the global average. As evidenced in Alaba International Market, perhaps the biggest new venture incubator in the world, most of these entrepreneurs work in retail. The AfCFTA would give them more options for sourcing and consequently drive their costs down. Non-retail entrepreneurs would also benefit from the ability to build more sophisticated value chains for improved operations.

It is important to acknowledge concerns about the industrial decline. As with any measure of this scale, AfCFTA is not without downside risk for Nigerian businesses and its economy. Perhaps the biggest such risk associated rests on the fact that Nigerian businesses are hobbled by inadequate power and transportation infrastructure and may well suffer when exposed to the competition that a free-trade agreement fosters. Nigeria’s policymakers would do well to focus on the root of the problem, not its manifestation. Rejecting the trade agreement in an attempt to the country’s struggling manufacturing industry would be bound to impede economic growth.

In 1962, two years after successfully advocating for national independence, Nnamdi Azikiwe, Nigeria’s first president, imagined that:

“by abrogating discriminatory tariffs, we create a free trade area over the entire continent and thereby expand the economy of all African countries involved, thereby raising living standards and ensuring economic security for African workers”.

Indeed, the roots of the AfCFTA can be traced back to two bedrock conventions, the Lagos Plan for Action for the Economic Development of Africa (1980) and the Abuja Treaty Establishing the African Economic Community (1991). Perhaps Nigeria’s policymakers should look to its history for a bold vision of its future.

SOURCE: The Conversation/global