MTN, South Africa’s telecommunication giant has agreed to invest a total sum of $1 billion over the next five years in Ghana.
According to Ralph Mupita, Chief Executive Officer (CEO) of MTN, the investment is aimed at expanding the company’s 5G network in Ghana to spur on growth across various sectors. The investment decision, follows a tax exemption given it by the Ghana Revenue Authority (GRA) – the tax force in Ghana, amounting to about $773 million.
Recalling the events that led to this, the Ghana Revenue Authority alleged that MTN had under declared its revenue by about 30% between 2014 and 2018 after a series of audits.
GRA, through a notice to MTN indicated the tax liability of the company to be worth GH¢8,209,603,842.14, with this assessment by GRA, including penalties and interest charges.
In response to this allegation, MTN Ghana declared itself as a corporate entity with absolute commitment to transparency, good governance and compliance, thus undeserving of the tax allegations thrown at it by the GRA.
John Davies, Intelligence Analyst at Bloomberg revealed that the fine levied against MTN represented about 5% of the company’s capitalization, which if effected, will pose a threat to the company’s payment of dividends to its stakeholders.
Subsequently, using a third-party consultant, as well as a new methodology based on Call Data Records(CDR), which MTN later strongly disputed could be accurate, GRA conducted its audits on the telecommunication company.
The audit on MTN began in 2019 to give assurance on the reliability and completeness of revenues declared by MTN Ghana for the purpose of tax computation spanning the periods, 2014 to 2018.
Fast forward to May 2021, after further discussions with MTN Ghana, the parent company – MTN Group, the Ministry of Finance and the Ghana Revenue Authority, the two parties – MTN Ghana and the Ghana Revenue Authority (GRA), agreed for an external assessment to be conducted by a global professional services firm to resolve the tax dispute. MTN confirmed fully cooperating with the external auditor, while being supervised by the GRA during the external assessment.
MTN Group recently revealed that, following extensive and productive discussions during a 21-day negotiation it had with GRA, government withdrew its tax bill.
Once hailed as a regional growth model, Ghana is currently faced with its worst economic crisis in decades, fueled by the adverse effects of the Covid-19 pandemic and the Ukraine crisis, hence, has propelled government to seek more avenues where it can raise revenues to stabilize the economy.
Ghana, faced with a lot of hurdles
The West African state, facing an economic crisis, has a lot of hurdles to tackle with inflation at more than 50 percent and its local currency sharply declining.
Recently, the Ghana Statistical Service (GSS) revealed inflation to have slowed slightly to 53.6% year-on-year in January from a more than two-decade high of 54.1% in the previous month.
The country is currently undergoing a debt restructuring exercise, resulting in the introduction of the popular Domestic Debt Exchange Programme (DDEP), which has been followed by so many contentions and protests.
The government, amidst the disapprovals has recently, February 10th, 2023, closed the window on the exchange programme, meeting its target of 80 percent bondholder participation – a conditionality for receiving International Monetary Fund (IMF)’s board approval on its $3 billion loan offer, which is intended to be used to resuscitate the economy.
MTN’s $1 billion investment is therefore, coming at a good time to meet other needs that the government may have to address.