Is Uganda taking a page from Nigeria’s book on its treatment of MTN

Oreoluwa Runsewe
20% Complete
 18-Sep-2018

The Ugandan government announced today that it will be renewing the license of the local MTN office in Uganda, along with new stringent terms, a news which immediately drew comparisons with MTN’s torment in Nigeria.

MTN Uganda is the biggest telecommunications company in the country, with more than 10 million subscribers, earning it a market share of about 55 percent. It began operations in Uganda in 1998 after the government granted it a 20-year operating license.

That license is set to expire later this year, and as part of a 10-year extension of the operating license, Uganda has promised to attach more stringent policies. A key part of the new stringent terms would include MTN listing its shares on the local Ugandan stock exchange. 

Following this news, there are already speculations that MTN will bow to government pressure and will list its Ugandan office on the Uganda Securities Exchange. Earlier this year, government officials raided MTN’s offices in Uganda and disconnected four of its servers without permission. With MTN already listed on Ghana’s stock exchange, and a listing on the Nigerian stock exchange also in the offing, African governments are preparing to leverage on foreign investment in their countries to grow their stock exchange market.

 

However, there have been warnings from many quarters that stringent policies like this could be a detriment to Foreign Direct Investment in many African countries. MTN, as an African telecommunications giant, is one of the first pioneers of the new digital economy in Africa. At the end of the 20th century, when many foreign companies were still hedging their bets in Africa, MTN went all in regarding investment in African countries. MTN purchased a license worth $400 million in Nigeria in 2001, an investment that has paid off for it in billions of dollars over the 17 years that it has operated in the country.

 

Recent attacks on the company by the Nigerian government make it seem like the Nigerian government has a bone to grind with the company. In 2015, the Nigerian government fined MTN $5.2 billion for not disconnecting unregistered sim cards. The fine was later reduced to $1.7 billion in July 2016. Then, in August this year, Nigeria’s apex bank Central Bank of Nigeria (CBN) accused MTN and four Nigerian banks of repatriating $8.1 billion illegally to MTN’s head office in South Africa. Nigeria’s Attorney General of the Federation Abubakar Malami also accused MTN of owing $2 billion in back taxes, though many have disputed the legality of Nigeria’s Attorney General demanding taxes from a foreign company.

 

MTN’s shares have since then tumbled 7.5 percent to a 10-year low, and have traded 3 percent lower than before on the Johannesburg Stock Exchange. MTN has taken the CBN and the AGF to court to contest the various fines.

 

Analysts say the Nigerian government’s animosity towards MTN could be because the company isn’t indigenous to Nigeria, and hence, there’s a feeling that MTN is “moving Nigeria’s wealth” out of the country.

 

Uganda seems to have taken a leaf from this book, according to recent developments. A listing on Uganda’s Securities Exchange will mean that much of MTN Uganda’s revenue, and debts will be domiciled in Uganda, and not to the headquarters in South Africa. This means MTN Uganda wouldn’t need to move any of its revenue out of the country if they are declared in Ugandan shillings. 

A bigger concern in all of this, is maybe African governments are taking the wrong route in addressing capital flight in their countries. On the one hand is the fact that African countries still need Foreign Direct Investment and hence the stringent measures and fines given to firms like MTN, who pioneered some of the biggest investment on the continent, will not endear these countries to other foreign investors who may not be willing to take the kind of risk,

On the other hand, capital flight won’t happen in countries with stable political and economic climate. Hence, instead of strong-arming foreign companies, African countries should focus on stabilizing their political and economic spheres.


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