South African telecom groups may be facing currency upheavals in other African markets, but Vodacom remains unfazed by this problem in its Democratic Republic of Congo (DRC) market, believing that ongoing engagement with the authorities have set the groundwork for a settlement to its protracted tax dispute.
Last year the DRC government locked up offices of Vodacom and prevented telecom executives from leaving the country over a tax dispute to the sum of $245 million (R4.6 billion), but now reduced to $165 million following an audit of its accounts covering the period 2016–2019.
Rival operator, MTN, is also battling to contain a bitter fall-out with Nigerian authorities who recently slapped it with a bill of $72.6m in overdue taxes.
Khalil Al Americani, the Vodacom Congo CEO, said in an interview this month that the telecom giant had been engaging authorities in Kinshasa over the issues and that this had laid the foundation for resolution of the dispute,
“We've been working very actively and engaging with the different stakeholders of the government, be it the Ministry of Finance and also the presidential advisers that are working on improving the business climate. Some areas of improvement have been identified, with the tax regime as well as the judiciary,” Khalil said.
He added that these engagements had been a good “starting point for multiple discussions with the government” with the company “witnessing a significant improvement in the way we are interacting and discussing the technical merits” of the tax cases under dispute.
“So, I'm quite confident that with the involvement of the different stakeholders, we will be able to finalise those cases and, hopefully, have an agreement going forward on how to do tax treatments,” he explained.
Vodacom said in June that the worst appeared to be over for major regulatory problems it was facing in its African markets. It said in its financials for the year ended March 2023 that “as new challenges arise, we acknowledge that a number of our headwinds have eased” off.
While the company has struggled to bring to an end its tax dispute with the Congolese authorities, the DRC has been a better market for Vodacom in terms of access to foreign currency for the settlement of international suppliers and software vendors. This sharply contrasts with the fortunes of MTN in Nigeria as well as other bigger African telecom groups such as Airtel Africa that have struggled with exchange rate losses.
Al Americani said Vodacom DRC had been less affected by foreign exchange problems as access to foreign exchange is being handled by its banks well. The dual currency nature of the DRC market has also helped ease the foreign exchange pressures on Vodacom Congo.
Said Al Americani: “The DRC is a country that operates in dual currency, and I would say, the supply of forex is made by the local banks. The banks actually manage these financial complexities, including international bank transfers of foreign currencies.”
However, there are “some cases where there's more scarcity” of foreign currency. Vodacom is investing as much as $100 million into the DRC for the current year as it quickens its 4G roll-out.
In the DRC, Vodacom has 21 million 90-day active mobile subscribers in a market that also has Orange and Airtel as competitors. A third of the Vodacom Congo subscribers are active data users while about 6 million of its total subscriber base are signed up onto its mobile money service.
Headwinds in the DRC include increased spending on diesel to run generators for the company’s base stations. However, there are immense opportunities to grow coverage from the country’s low internet and mobile penetration rate that is also attracting heavy investment from other players.
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