South Africa has upgraded its tax policy. Now, Facebook, Google, Netflix, and other digital ICT utilities would have to pay the country’s VAT. The regulation takes effect April 1, 2019.

This after the National Treasury published new regulations specifically for electronic services which expanded the meaning of “electronic services” to “any services supplied by means of an electronic agent, electronic communication or the internet for any consideration”.

That means any electronic services from another country provided in South Africa – such as such as online advertising, online courses, online consulting services, software subscriptions, website hosting, streaming services, online games, podcasts and publications – will be subject to 15% VAT, Natalie Macdonald Govender, associate at Bisset Boehmke McBlain attorneys, said.

Making this work is simple: just ask the local banks to collect the VAT as the transactions are being processed. Where that is not possible, do not allow any customer to use South African domiciled financial products (credit card, bank account, etc) to effect such payments.

Of course, the ICT utilities will likely add the VAT and the burden would go to the local customers. And at the end, the country has collected extra change from its citizens. Google, Netflix and others would not be financially impacted even though they may lose some customers who may find their products more expensive.

DStv systems (source: Quartz)

But do not miss the game plan: if local competitors like Naspers’ DStv pay VAT, it is fair that Netflix does the same. By bringing everyone on parity, competitive-pricing equilibrium will be attained. Yes, by not collecting VAT from Netflix, the company was having an advantage over DStv in South Africa [by not collecting local VAT, Netflix fees were artificially lower]. Sure, you can make a case that Netflix has taxes to pay in U.S. But that does not concern the local regulators and competitors: it was Netflix that left its home country to compete in another. It has to do like the locals!

This is certainly good news for DStv; it has made that case in the past.

“As a country we have national objectives … if I was to be very narrow, I would say [to Icasa]: treat us like Netflix, so we do not have to pay tax or comply with black economic empowerment regulations,” he told the South African newspaper. “I am saying bring the likes of Netflix in the same net. Netflix does not employ even one person in this country, it doesn’t pay tax, they do not have to do any local content.”

Watch out – Netflix prices will go higher (from the consumer angle). Implication: the best show would now WIN, not by imbalance created via 19th century tax policy.

Expect this idea to scale across Africa.

Not Just Taxes in South Africa

I do believe that the tax upgrade is partly to help the local competitors. South Africa has a great record of helping its own. Think of the massive investment PIC is making in MTN Group right now. Possibly, that would help MTN overcome the paralysis it is going through at the moment.

The Public Investment Corp. raised its stake in MTN Group Ltd. for the second time in as many days, taking advantage of a price that’s close to 10-year lows amid a crisis in Nigeria.

The PIC’s shareholding is almost 26 percent, Johannesburg-based MTN said in a statement on Thursday. The previous day, Africa’s largest wireless carrier by sales said the stake had increased to about 24 percent.

“We believe MTN has a strong set of assets and competencies,” Deon Botha, head of corporate affairs, said in emailed comments, declining to say more about the PIC’s rational for boosting its stake.

I will be speaking in Harvard in Feb 2019; just confirmed the invitation of the Africa Business Club (a student club at Harvard Business School) to speak on health during the 21st Annual Africa Business Conference.

I will be there for our health-tech startup, Medcera, which I wrote recently in a Harvard Business Review article on our plans to redesign the architecture of rural healthcare systems using emerging technologies like AI and integrated health record systems. Yes, there is a promise that if we can handle diagnosis of many common diseases with intelligent systems, doctors can focus on the most difficult ones.

The Nigerian Government has done well – it approved the downward review of examination registration fees. This is victory for us as I was the first person that pushed that Nigeria was making a mistake of over-invoicing its future by making these exams inaccessible to its poorest citizens. Yes, while many cheered that JAMB was working, by sending “profit” money to the national treasury, I saw it differently and asked government to freeze that. Sure, we commend the current registrar of JAMB for improving productivity to have saved operational costs. Notwithstanding, his brilliance should reward our young people and not the central bank.

Mixed reactions have trailed the Federal Government’s review of fees for the Unified Tertiary Matriculation Examination (UTME), Senior Secondary Certificate Examination(SSCE), and Basic Education Certificate Examination (BECE).

Some stakeholders, who spoke to the News Agency of Nigeria (NAN) in Abuja on Thursday, commended the gesture and urged the government to overhaul the education sector.

NAN reports that the Federal Executive Council (FEC) on Wednesday approved the downward review of the examination registration fees which will take effect from January 2019.

The Minister of Education, Adamu Adamu, who announced the reduction after the FEC’s meeting said the ?Joint Admission Matriculation Board (JAMB) fees for UTME had been reduced from N5,000 to N3,500

Specifically on JAMB, I wrote in September 2017 and followed on other posts. I made it clear that JAMB remitting money to the Federal Government was unethical and should be reversed. Education remains the only gift Nigeria gives its poorer citizens with the extensive public subsidization. If we take it away, social mobility would stall for generations. As we waged this campaign, a member of the National Assembly reached out to us and we provided some insights as Brief. This week, the rest is history: government has reduced many of the exam fees.

Nigerians cheered. JAMB (Joint Admissions and Matriculation Board) had remitted N5 billion to the federal government. We saw it as government working. Glory, even JAMB can remit money to CBN for the good of the Nigerian people.

The agency also said it had so far remitted more than N5 billion to government, the highest ever in the 40 years of its existence.

A statement signed by JAMB’s Head of Public Relations, Fabian Benjamin, said in Abuja on Sunday.

Unfortunately, that does not make it right. When JAMB charges more than it needs to run its exams into our tertiary institutions in Nigeria, it hurts the future of Nigeria. I do not understand the basis for JAMB to be remitting money to the federal government.

Simply, let the exams charge what they need; they cannot be profit-making entities. Nigeria needs its young people to have access to our highly subsidized public tertiary institutions; the exams should not become obstacles. Many of us benefited from this generosity of the Nigerian nation: my undergraduate tuition in 1998 in FUTO was N50 (less than a dollar). So, if you can get in, you would likely get out. Making getting in easier (financially) opens doors for poorer families.