Surprise Vodacom Tax Bill from DRC Government

Industry colleagues familiar with the arrest of five Vodacom Tanzania staff for “fraudulent use of network facilities”, will probably be aware they were released after Vodacom Tanzania paid a settlement of 5.3 billion shillings (USD 2.3 million).

Africa watchers will be aware that many governments are sold on the idea of raising revenue from incoming international traffic, having been promised unlikely savings from the detection and termination of illegal bypass activity. Tanzania was simply the latest of these disputes, almost all of which derive from bypass detection systems failing to deliver the promised revenue targets.

The Game Moves On…

Every government must raise funds but some are attempting to plunder successful businesses in order to fill the coffers. The latest chapter is unfolding in the Democratic Republic of Congo (DRC) where the tax authorities are claiming that Vodacom underpaid during its 2G licence renewal at the end of 2015. Vodacom paid USD 16.25 million for a ten-year extension of its existing concessions, plus additional spectrum. DRC now claims that this sum only covered the extra spectrum, not the licence renewal.

Vodacom’s Integrated Report for the year ending 31 March 2016, stated that in December 2015, it renewed its 2G licence until 1 January 2028 and secured additional 1800 and 1900 MHz spectrum. Vodacom’s press release quotes a ministerial order in which the minister requests renewal 24 months before the expiry of the current licence. This meant the licence payment went to the previous government, not the current one. DRC passed new telecom legislation in 2016, and it appears the current government is trying to use the new laws retrospectively and is reported to be asking Vodacom DRC for USD 30 million and threatening it with the loss of its licence.

Maybe DRC will argue that USD 30 million is nothing to a company which says it has invested a trillion USD in Congo over the last 17 years. I recommend examining the impact of the Vodafone India (retrospective) tax case on international investment in India – it tanked. DRC’s legal processes are now under the spotlight and international investors will be watching to see the result. I hope it is a fair outcome, as any perceived abuse of process will inevitably cost the country far more than the disputed licence fees.

David Morrow
David Morrow
Dave has 35 years of law enforcement, investigation and fraud management experience including multiple international assignments. He is a recognised telecoms fraud expert and for a number of years chaired the GSMA workgroup responsible for Security & Fraud Risk Assessments.

Dave now provides fraud management support as an independent consultant.