Buying $1 airtime? At least 40c is going to gvt

Tinashe Nyahasha Avatar
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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 (β€œPOTRAZ”) 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.

Diaspora: buy Zimbabwe airtime here


What’s your take?

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  1. Anonymous

    πŸ˜‚πŸ˜‚πŸ˜‚ techzim yangova yekuita defend maISP and MNOs.

    1. Tinashe Nyahasha

      Not at all. We don’t want to defend anyone but we do want to explore issues as they are instead of just jumping onto the populist bus. We leave populism for politicians

  2. Tripping

    This gvt of ours is something else… These are the issues our mps should be discussing in parliament kuti zvidzike but busy trying to score political cheap shots at one another

  3. Mitsho

    As long as we have this model of taxation we are going nowhere as a nation

  4. Imi Vanhu Musadaro

    One day data is “too cheap”, the next the government makes data expensive. πŸ€¦πŸΎβ€β™‚οΈ

    1. Tinashe Nyahasha

      Come on, of all people you get this. Yes data is cheap in Zim compared to elsewhere and yes the gvt takes too much from the topline then income tax

  5. The Empress

    The comments section of the last few articles has been quite funny… the hate directed at the writer has been on another level.πŸ˜‚πŸ˜‚
    But govt really has it good they get set and collect nearly 40 cents of every $1 spent on airtime in tax seriously impacting the viability of the mobile network operators (MNO’s) and their ability to maintain, run/expand their networks and then turns around and tells POTRAZ to set limits on prices the MNO’s can charge saying that this is for the people to protect them from the money hungry vultures(Econet nd Co)
    But the vultures sorry I meant to say the MNO’s(😏)…. are running these companies to make a profit. So in order to remain in business they cut costs. They reduce workforce, buy less diesel for generators during power cuts, spend just enough to maintain the network on the edge of collapsing ie repair but don’t replace/upgrade their aging infrastructure etc etc. Which results in lower quality of service.
    The customers complain and the vultures(πŸ€¦πŸΎβ€β™‚οΈ… MNO’s!) say they doing the best they can in circumstances. POTRAZ issues a statement that they will investigate, govt issues a stern warning and says that they are seized with the issue.
    The customers who still don’t understand that they are now playing the grown ups version of where your older brother steals(taxes) your money and then turns around and buys you sweets (insert free stuff from govt) is so happy and gets upset when someone says things should be different

    1. Tinashe Nyahasha

      Hahaha interesting way you have put it!
      I understand the anger though: we just cannot afford stuff anymore and we would rather make it the problem of the service provider while ignoring all the other facts about our environment.

  6. The Empress

    Sorry I said writer I meant to say writers!
    It’s a tag team Tinashe is currently in the ring Leonard is outside trying to recover from the beating he got in the comments section.
    Mr Tinashe…. Leonard only lasted for 2 rounds can you do better? πŸ˜‚πŸ€£πŸ€£

    1. Tinashe Nyahasha

      Oh I wish I could stay in the ring forever!

  7. Boss Hugh

    how much does it cost a service provider to offer you a service for a dollar?

    1. Tinashe Nyahasha

      There is a per dollar that the operator gets not necessarily the dollar you pay. By the dollar you pay (which is what I was using in this article I mean literally that because the dollar we pay includes VAT and excise taxes that would have already been backed. So, according to the Econet Report, that dollar we pay only reaches them as $0.72.

      From that $0.72 they then have direct network operating costs which are about 24% and staff costs are 9%. They will then have marketing and distribution costs (which I think are less for Econet because they have efficient distribution via Ecocash but for the other networks they have to pay commissions to distributors). There is also general administrative costs which will roughly leaves whatever is left as profit before tax. The government then gets about 25% of that profit as income tax. Finally the operator is left with a profit from which they also have to allocate resources for network expansion, upgrade and improvement.

      I was too lazy to look up all the other numbers for you but you can work these out easily using the Econet audited results

  8. Tinashe Nyahasha