Monday, June 11, 2012

Telecoms sector needs to do more...

This article that I wrote was published in the Sunday Guardian of June 3rd.

I did nothing wrong as deputy minister to instruct TCRA

I read with particular interest an article published in the May 25 edition of this newspaper titled ‘Collective responsibility and emerging anarchy in state policy’ by Ani Jozeni. The article would not have warranted a response if it were not so elegantly written, so blatantly misleading and wrong on both facts and logic.

I am taking the liberty to respond so as to correct certain factual errors and flaws in logic, and offer him and the readers a bit of understanding about the telecoms sector.

Jozeni’s gripe is twofold: one, that it was incorrect for a government leader to ask Tanzania Communications Regulatory Authority (TCRA) to take up with mobile phone operators an issue about poor mobile phone services and that we, who do not reside at the Treasury, must not complain about poor tax revenue collection from telecoms companies.  Two, that a deputy minister should not be talking about these things because of his imagined possibility that the minister may be having different thoughts.

You only need to possess a mobile phone to know that the quality of service – the rate of dropped calls, failure to initiate calls, unsolicited SMS, customer service issues and so forth – has been a source of complaints by many subscribers. There are specific regulations in the TCRA Act to do with the quality of services offered and the parameters to be adhered to by the operators are clearly stipulated.

It is absolutely the right thing to ask TCRA, which, by the way, is doing a fantastic job, to ensure that mobile phone operators are within these parameters because TCRA is ultimately responsible for the enforcement of the Act and its regulations.

You only need to be moderately informed about public affairs to know that low tax revenue collection from mobile phone companies has been an issue of debate in the National Assembly and by the general public. 

Now, what do the numbers say? In 2010, mobile phone companies grossed about US$ 1 billion, and paid corporate taxes amounting to US$1.7 million, according to a brief provided to me by TCRA during my visit to their office. During the same year, taxes paid by mobile phone operators in Kenya amounted to US$78.3 million, Uganda US$31.3 million and Rwanda US$14 million.

Surely, you could argue that Kenya’s economy is bigger than ours, but Rwanda, a much smaller economy compared to ours and with two major mobile phone service operators, collected taxes from the companies close to tenfold than we did – with our six main mobile phone service operators.

To be sure, no one is suggesting that mobile phone service operators broke tax laws here.  But anyone with the right mind will see that we could do far better than we are doing, and stating this, as I am doing now, is really stating the obvious. Effective taxation is done through timely and effective collection of information on businesses. Asking the responsible authorities to ensure that we do just that is the right thing to do.

To put the facts correctly, the two-week period reportedly issued by the deputy minister was for mobile phone operators to detail their plans to deal with their customers’ complaints about the quality of service, not to sort out tax issues. Still, Jozeni’s idea that we can’t talk about taxes now simply because the parliamentary budget session is less than a month away is being shortsighted.

Firstly, the country has a future beyond budget sessions, and, secondly, revenue measures can be adjusted even on the morning of budget day. Also his notion that only the Treasury – and not any other government ministry – should be concerned with government revenue is simply ridiculous.

TPDC, a regulator of upstream oil and gas activities, in undertaking its duties, including the auditing of production sharing agreements (PSA) with oil and gas companies, helps TRA collect a deserved amount of taxes. I could go on about how cooperation by different government entities is not only important but necessary in ensuring the right revenue measures are taken with a view to effective tax collection.

TCRA early in May announced a tender to procure, install and operate a mobile phone traffic monitoring system (TMS) which, among many other good things, will help us determine, and indeed track, the amount of minutes dialed and the SMS volume and therefore independently (yes, by ourselves) verify the amount of government revenue that could be due from the mobile phone companies.

This is where the nexus between the TCRA initiative and government revenue is found, a connection that Jozeni missed because, in his line of thinking, all initiatives relating to government revenue “start and are concluded at the Ministry of Finance”.

Last year, mobile phone operators reported that a total of about 20 billion minutes were dialed. We have no reason to believe that the operators lied about this number, but would it not be nice if the government, through TCRA, could verify the number on its own without relying on reports by the operators?

In 2010, Ghana’s TCRA deployed a more or less similar tracking technology to monitor just international calls traffic in and out of Ghana, and, within a year, in 2011, Ghana’s TRA increased its revenue collection from telecom operators by US$40 million, which was over and above what they were collecting before.

It is important to point out here that the culprits causing government loss in revenue include unscrupulous private individuals who do ‘SIM-boxing’ – that is, routing international calls and terminating them to a simple device set up in their homes and then connecting them here locally using local numbers. That’s the reason you sometimes receive an international call with a local number on your caller ID, thus depriving revenue to both telecom companies and the government.

Therefore, it can’t be so disastrous, as Jozeni would want us to believe, for a government leader, be it a minister, deputy minister or PS, to call for measures against this and other malpractices.

Obviously, the contribution of the telecoms industry to the country’s economy goes beyond taxes. I need not list here all the benefits accruing from telecoms sector investments in the country as they are obvious. But the fact remains that the sector could contribute far more than it is doing now. And one of our tasks at the ministry is to ensure that it does.

At the moment the telecoms sector’s contribution to the country’s GDP stands at a paltry 2.5 per cent. However, in Kenya, its contribution is 9 per cent while in Uganda it is 5.2 per cent. The 2.5 per cent contribution is at a glaring variance with the scale and pace of the sector’s growth.

Last year, the sector grew by about 22 per cent.  Thus far, it is the fastest growing sector and the growth has been steady for the past 10 years. Between 2001 and 2010 it grew at an average of 11 per cent per year while the GDP grew at an average of 7 per cent.

Total cumulative investment in the sector during the same period amounted to Shs. 2,563 billion. On average, telecom companies invested about Shs. 256 billion per year. Also, the mobile penetration rate increased by 53 per cent per year (on compounded annual growth rate) from the year 2001 to 2010. With this rate of increase in penetration, telecoms economists suggest that the industry’s contribution to the GDP should have been at least 5.3 per cent, not 2.5 per cent!

With these numbers I would like to tip off Jozeni to expect us who are charged with the development of the sector to continue talking about and working for more government revenue from the sector and for its increased contribution to the economy. I communicated this message to TCRA and the mobile phone operators that I visited recently. The encouraging thing is that almost all the operators I visited were committed to ensuring that the sector contributes more, and their future plans indicate this commitment. 

While the issues of telecoms taxes and contribution to GDP are important, it will be unfortunate if the discussion on role of the telecoms sector to the economy and improvement of people's lives remains solely on these matters. A lot has been done in the sector over the past 10 years, including an increase in financial services inclusion facilitated by Mobile Money. Just last year alone, mobile money services grew by 293 percent. An average distance to a bank is 50 kilometers, but thanks to the explosion of telecoms Mobile Money services, Tanzanians can find money transfer and other financial services within one kilometer.

The debate we should be having is whether this Mobile Money financial intermediation catalyses economic growth or is it just sheer money circulation with little impact on promoting consumption in the real economy or in fact contribution to savings and investments that spur wealth creation? Is the current regulation on mobile money sufficient to deal with issues of fraud, money laundering and customer protection?

Another discussion I am keen to have is what is the best model to get telecoms services access to areas that don't have access - areas that are deemed "commercially not viable" by telecoms operators, so that geography, settlement patterns and income levels do not deprive some of our people the benefits of telecoms services.

Also, of the Shs 1.6 trillion revenue grossed by telecoms operators in 2011, Shs 1.3 trillion came through voice services. Now that we have fibre optic network in most of the country, how do we move the sector to the next level, beyond the dominance of voice services, to the applications of more and sophisticated IT services and products? How do we create a critical mass of ICT entrepreneurs and hubs of innovations to create ICT solutions to our development and governance challenges? These questions, beyond telecoms revenue, occupy us in the Ministry and in associated institutions such Costech.

I talked about all these issues during the past weeks. Policy criticism – and indeed ideas – on these matters by Jozeni would have been heartening.

Jozeni also seems to be obsessed with titles: minister and deputy minister, and who can say or do what. This is a trivial matter, given the momentous task ahead of us to fix challenges in the telecoms sector. Everyone in government speaks on and executes government policy. In his article, he fails to point out where and which government policy was contravened.

He also fails to point out where the minister and deputy minister have contradicted each other. He eventually settles on the hypothetical “suppose the minister doesn't countersign the deputy minister’s directive…”. Well, on the flip side, suppose, as is the case now, the minister and the deputy minister speak the same language? Then his whole argument collapses, as it surely does.

Sure, the government has had its fair share of challenges in coordination and public communication, but Jozeni’s article misfired as a hit-piece on me and on this challenge.

As far as leadership style is concerned, Jozeni suggests that former prime minister, the late Edward Moringe Sokoine, the Member of Parliament for Vunjo, Mr. Augustine Lyatonga Mrema and myself are cut from the same cloth. If one entertains the idea that Mrema’s name here is misplaced, I would be flattered. -----------

--------   January Makamba is a Member of Parliament for Bumbuli, and Deputy Minister for Communications, Science and Technology.  


Anonymous said...

Well said Mr Hon Makamba. I envy you...

Anonymous said...

Very well explained, with more leaders of your kind i see Tanzania future prosperous

Anonymous said...

Very well explained, with more leaders of your kind i see Tanzania future prosperous

Anonymous said...

Very well explained, with more leaders of your kind i see Tanzania future prosperous

Anonymous said...

Well explained Mr Deputy Minister, so what is the future of Tanzania telecom regarding technology and what is the link between your ministry and depertment of revenue? Since six month ago the cost of calling to Tanzania from USA went up from $0.1789cents per minute to 0.2500cents per min. So I asked American Vendors why the cost Went up? They said the cost of operation in Tanzania telecomunication went up, while at
the same time the cost to call to Kenya is $ 0.0546
cents. Mr Deputy Minister Makamba do you have any information about why the cost went up to call Tanzania?

Anonymous said...

You will have to ignore the naysayers and focus on the good job you are doing! So far i can only see good intentions and resolve to take this country to the next level. Keep it up Mheshimiwa!!!!

Anonymous said...

Would like to see Jozeni's response to this artical... Keep it up Mh..