Ensuring Sustainability of the New Telecom Levies in Madagascar With Global Voice Group

Cape Town, February 10, 2016 (Newswire.com) - ​​Under the 2016 Finance Act, the Madagascan government is increasing the surcharge on all telecommunications from 7% to 10% for mobile calls, while national and international communications including fixed telephony, Internet, SMS and data transfer were previously exempt.   The State expects to gain revenues of MGA3.429 trillion (USD 1.054 billion) in the next year—MGA 1.689 trillion from customs revenue and MGA 740.4 billion in domestic revenue.

Furthermore, three African countries (Ghana, Congo-Brazzaville and Gabon) are imposing a new additional telecommunication specific levy, in the form of a surcharge on International Inbound Call Termination (SIIT).  This takes the form of a fixed price that operators must charge for international inbound termination, of which the government takes a set amount.  The governments use a private party to measure the number of international inbound minutes terminated by each operator and bill the operators accordingly.  The revenues collected in this way are then shared with the private party that carries out the measuring function.

SIIT prices are different from the competitive market prices for termination which applied before the SIIT was introduced.  The imposition of the SIIT sets compulsory prices for international termination and, in that way, is akin to imposed price-fixing.  This policy therefore appears inconsistent with the recent move towards the liberalisation of telecommunications in Africa.

The main objective of these levies is to raise revenues for governments, in this case by imposing a surcharge on users calling from abroad into the country.  However, the government transfers approximately 50% of the revenue from the SIIT to the external call-monitoring party.  This leakage must be taken into account when assessing the effectiveness and net benefit of this initiative. The SIIT may create a number of unintended negative consequences for local operators, local consumers and local business in the countries where it is applied, as well as in surrounding African countries.  In the long term, this policy may also have negative implications for governments through its impacts on economic activity, tax revenues and local employment[1].

Madagascar is one of the world’s poorest countries and is ranked 149 out of 175 countries by the United Nations Development Programme[2].  In view of the many development needs of Madagascar: education, infrastructure, training, conservation and environmental degradation, it would be a pity if Madagascar were to go the SIIT route seeing so much revenue lands in the pockets of the external monitoring party.  There is another way.

Global Voice Group (GVG) is a global company working exclusively with governments and regulatory authorities to provide management and governance tools in the telecommunications sector. Its uncompromising independence in this respect has enabled the company to build close relationships with its government clients and to work in close partnership with them. GVG could be of assistance to the government of Madagascar, too, by providing it with the specialised expertise necessary to manage the data and revenue of its new telecommunications surcharges and levies.

Global Voice Group (GVG) has made it its mission to help developing and emerging countries leverage telecommunications as an innovative funding mechanism[3].This has become an important part of the economies of many African countries. In this way, the governments of African countries (as well as other countries) are empowered to take charge of their own socio-economic future—by using their own resources and without increasing foreign debt— through the smart integration of ICTs.  The revenues generated can then be used to finance social projects like health and education, to fight poverty and to meet the respective countries’ specific development goals.  The fight against poverty is particularly relevant in the context of Madagascar as the average Malagasy makes around $1 per day and 70% of Malagasy suffer from malnutrition.

To make Madagascar’s telecommunications funding mechanism effective, however, and give the Madagascan government full control over the telecoms sector, national and international telecommunications traffic must be accurately measured and a revenue-assurance solution put in place to prevent the fraudulent diversion of the traffic. 

GVG’s cutting-edge telecommunications governance solutions have assisted many developing countries to optimise the revenue generated by telecommunications traffic to ensure that both the local operators and the government collect a fair share of the revenue. Its assistance is particularly valuable as some companies may be ill-equipped to perform these activities, and some may not recognize the potential issues. The revenues generated can then be used to finance projects which meet Madagascar’s specific development goals. This is a powerful revenue-raising solution for any country.

GVG has developed its core offering in line with the needs of governments and regulatory authorities of emerging countries in the context of the liberalisation and globalisation of the telecommunications sector.  GVG provides governments and regulatory authorities with the necessary tools to manage and regulate the telecommunications sector.

Governments need these tools in order to ensure fair competition, transparency, good market practices and good governance.  A well-regulated economic sector is a primary requisite to attract investors and investment—crucially important for the economies of emerging and developing countries like Madagascar—which have many development needs and priorities.

Visit the website: http://www.globalvoicegroup.com

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[1] Deloitte analysis based on interviews with operators.

[2] This measures achievements in terms of life expectancy, educational attainment and adjusted real income.

[3] According to McKinsey & Company (2013) “Innovative” Funding Mechanisms are those that might mobilise, govern, or distribute funds beyond traditional donor-county Official Development Assistance (ODA)