Desperate times call for...
Even loss-making Kenyan businesses have to pay tax now, Mastercard Invests in Airtel’s Momo unit, Apple Pay comes to Africa
2020 was a handful so most brands passed on April Fools' joke but this year, many brands returned to having fun. Here are three of the best pranks we’ve seen:
Lego announced SmartBricks, a LEGO brick that automatically slides away from you as you walk, leaving a clean, brick-less path. This will be nice to have.
Porsche introduced patina paint, a new type of paint that'll make your expensive sports car look like it's been sitting in a field for thirty years. Yuck!
Kenyan businesses pay up!
In 2019, out of 401,306 companies registered for corporate tax in Kenya in the period to June, only — wait for it — 33,426 (8.3%) paid taxes on their net income. *Gasps*
Wait, there’s more. About 168,428 (42%) of the firms filed their tax returns, signalling they were active, but 80% of them still did not do anything.
Factoring the pandemic in the mix, it was a no brainer that this was an issue of desperate times calls for desperate measures.
The Kenya Revenue Authority looking to close this huge disparity, introduced a minimum tax. Since Jan 1, 2021, all companies in Kenya were mandated to pay a minimum tax of 1% of their gross turnover, irrespective of whether they make a profit or a loss. This tax is payable quarterly, meaning from April 2021, many companies in Kenya will start paying the tax for the first time.
What this means: With this minimum tax, it means every business is required to pay tax on their first day of operation. There are no grace periods or room to allow for proper establishment. If businesses burn capital, they will pay taxes on that. If they make losses, they will pay taxes on that. Some businesses like Manufacturing related businesses start off with losses. Now, a loss-making company may need to borrow money to pay taxes.
The only hope they might have is for loss-making companies to offset this against their profit if they eventually make some in the future, but this only makes sense if the total profit is more than 1% of turnover.
There’s been some pushback from the Kenyan Association of Manufacturers asking the government to do two things.
- Give a grace period to new businesses by setting the maximum number of years that a business could be allowed to make losses before being forced to pay tax.
- Exempt more businesses from this tax to save retailers and wholesalers who have smaller margins.
Mastercard Invests in Airtel’s Momo unit
Payment processing company, Mastercard, just announced it’ll be investing about $100 million in telecom giant, Airtel Africa’s Mobile Money Unit. Airtel Africa’s Mobile Money Unit is valued at $2.65 billion and Mastercard is looking to tap into the large mobile money (momo) market in Africa.
Since the inception of MPESA in Kenya, there has been a rise in the use of momo services across African countries. Over half of the world, mobile money services are in Africa. This is because it drives financial inclusion in regions that traditional banks cannot get to.
Just for a refresher, mobile money is a service that is supported by a network of licensed agents that allows users to deposit cash into a virtual mobile wallet to make payments.
Airtel provides telco and mobile money services across 14 African countries. On a more strategic level, the company has been recently trying to sell some of its assets to reduce its debt and invest in infrastructure. Just last month it announced the sale of 1424 towers in Madagascar and Malawi to Helios Towers for $119 million. It also plans to sell around 1000 tower assets in Chad and Gabon by the end of 2022.
In 2019, 200 million users made 24.46 billion transactions in the Middle East, Northern and Sub-saharan Africa. But that's just the tapped market. The untapped market might actually be more than that. And that’s what Mastercard is trying to profit from.
It’s all about banking the Unbanked
There are a lot of financial services products in Africa but most of these solutions are operated online. With many areas in Africa experiencing low internet penetration, financial inclusion through mobile is definitely a way to go.
Apple Pay comes to Africa
After 6 years since it was launched, Apple users in South Africa can now use any of their devices to make payments via Apple Pay. It's the first time in Africa.
The smartphone manufacturer has a payment and digital wallet system exclusively for users of the iPhone, iPad, Mac and Apple Watch. Users can use the feature to pay online on various apps and at Tap and Pay NFC terminals.
How this works
The service can only work with a bank app. Absa, Discovery and Nedbank are the three South African banks listed as partners supporting Apple Pay. The first two banks only allow Visa cards, while Nedbank accepts Visa, Mastercard and American Express cards.
The Smartphone market in SA
Android devices currently dominate the African mobile operating market. While China-made smartphones like Infinix, Tecno, Itel dominate shipment on the continent.
With a whopping 83.71%, Android currently rules the mobile operating market in South Africa, leaving iOS at just 15.84%.
What this means
Before now, Samsung Pay was launched in 2018 and has been the major contactless payment option by a smartphone operator in South Africa. With Apple pay, the smartphone manufacturer is taking another leap into the African market.
One more thing
Apple recently appointed former country manager for Android Partnerships at Google, Teju Ajani to oversee sales and business development in the continent. Although there are still no official Apple care centres in most parts of Africa, these moves only indicate that Apple is ready to fully penetrate the African market.
Worth reading 📚
Remember, today is the tomorrow you worried about yesterday.
– Dale Carnegie