August 4, 2020

Welcome  to this edition of the RoundUp.  This week Kenya took a step towards taxing digital services.  India also banned apps owned by Chinese companies and so.  Thank you for your time and for always reading and sharing.

  • Kenya, Africa’s technology hub has signed its Digital Tax into law. It takes effect from January 2021. The tax stipulates a 1.5% charge on digital transactions. ‘…the law includes things such as (but not limited to) websites, online education platforms, music streaming, video streaming, ride-hailing, online shopping, and many others’.  Link.

 

Why this is important:  This is a subtle confirmation that more Africans are coming online with knowledge and tools to earn especially in East Africa with an internet penetration rate of 82% in Kenya. This is also a good move towards earning from companies registered abroad but operating in Africa in a bid to avoid some form of taxation. As a revenue stream,  this is a slow but right step towards a move away from an agricultural/raw material-dependent economy.  On the other hand,  we may see retaliatory response from home countries of affected digital businesses.

  • Nigeria’s Central Bank has released its regulatory framework guiding sandboxes for Fintech products and services. It is a document guiding the institution’s engagements with the industry. According to the release,  it  ‘ … would enable the Bank stay abreast of innovations while promoting a safe, reliable and efficient Payments System to foster innovation without compromising on the delivery of its mandate.’ Link

 

Why this is Important:  A section of the framework entails the involvement of the users of the products and feedback from them.  It means this framework is customer-focused. But an ongoing concern will be the regulator putting a lid or cap on innovations in the industry. Incumbents with bigger budgets may clone ideas in sandboxes before the startups go to market.  The cohort section in the framework is another concern;  it runs one cohort a year.  What happens to products that miss out on the year’s cohort?  Some clarifications are needed.

  • New registrants of businesses in Nigeria will now receive an instant Tax Identification Number (TIN) upon registration with Nigeria’s Corporate Affairs Commission. Link

 

Why this is Important:  This is a plus in the Ease of Doing Business initiatives by the government. By bundling the two processes,  business owners can now be tax compliant in no time while stepping closer to the tax net.

 

  • Following the border clash between India and China, India has banned 59 apps of Chinese origin including Tiktok, ShareIt and UcBrowser.  India accounts for 30% of Tiktok’s users and UcBrowser has 13% marketshare in India. Link

 

Why this is Important:

This has shown the importance of numbers,  especially numbers with purchasing powers.  For China,  it is a teachable moment on economic entanglements.  With a ban,  its priced tech product lost 30% of its user base.  Depending on how long this face-off lasts,  we could see nationalism fuel a surge in adoption to Indian version of these apps and products.

In future,  we may see location-strong apps or regionally-entrenched apps as a lesson from this period.

  • Opay has confirmed the closure of all its business subsidiaries except the payment arm of the company. The company in a release indicates a shift in focus to its online digital payment and offline mobile money operations. Link

 

Why this is Important:  Opay cited the government ban as one of the reasons for its predicament.  This is a signal to other intending entrants to avoid the regulatory waters in Lagos state.  Seeing this shutdown cuts across about five verticals in the business,  we expect a spike in unemployment figures in the tech ecosystem to rise.  For investors,  transportation and logistics  segments in Nigeria, especially in Lagos,  is now out of discussion.

 

 

We Think You Should Read This.

Uber Makes Offer to Buy Postmates: Link

The Geopolitics of Digital Currencies: Link

Facebook is Shutting Down Its Tiktok and Pinterest Rival Apps: Link

Sony the Electronics Giant, Considers A Name Change: Link

 

 

 

 

 

 

Chinedu Okoro
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