BD Insider 161: Kenya wants to tax digital creators

Johnstone Kpilaakaa -

It is quite unintended, however, this letter's big three explores government policies and how they affect the digital economy in Kenya and Nigeria.

To start with, the Nigerian government has approved the National Policy on Blockchain, this will allow the country to develop a regulatory framework to govern the adoption of the technology.

This did not just happen, Nigeria has had a long-term romance with the blockchain industry, except for crypto which is still banned in the country and is also not captured in this policy.

Inside letter 162, we examine:

  • Kenya's QR standard code to boost digital payment
  • the latest tax plan for Kenyan digital creators
  • why Nigerian telcos don't want to be regulated by NITDA

and other noteworthy information like:

  • the latest African Tech Startup Deals
  • events, opportunities, interesting reads and more

The big three!

Kenya launches QR Code Standard to boost digital payments

The news: Last week, the Central Bank of Kenya (CBK) issued the Kenya Quick Response Code Standard 2023 (KE-QR Code Standard 2023).

The state-backed Standard will govern how payment service providers (PSPs)and banks that are regulated by the CBK will issue Quick Response (QR) Codes to consumers and businesses that accept digital payments.

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QR code is a type of barcode that can be read easily by a digital device and stores information as a series of pixels in a square-shaped grid.

Why it matters: With the KE-QR Code[pdf], the Kenyan government wants to provide a common interoperable standard that would enable various PSPs systems to communicate with one another, thus facilitating seamless transactions.

Despite its advancement in mobile money adoption, Kenya has faced challenges related to merchant interoperability. "The lack of full interoperability has increased the complexity, time and costs associated with making payments," CBK says.

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Last year, three Kenyan-based mobile money providers; Airtel Networks Kenya Limited, Safaricom PLC, and Telkom Kenya Limited launched mobile money merchant interoperability in the country.

Without merchant interoperability of mobile money services, customers were forced to use alternative payment methods, including making transfers across networks, when making payments to merchants that are on different networks.

Know more: According to CBK, businesses and customers will make digital payments in "an easy, fast, convenient, and secure manner" using QR technology. "Until now, customers had to manually input different payment codes and numbers, resulting in friction and cumbersome payment processes prone to errors," CBK said in a statement.  

The adoption of this latest technology will compete against other channels like paybills and POS machines that are widely used across the country.

Zoom out: Due to an increased need for contactless payments during the COVID-19 pandemic, QR technology received increased adoption. During that period, Ghana's central bank launched a universal QR code payment solution, making it the first African country to introduce a universal QR code.

Other countries including Nigeria. In 2021, the Central Bank of Nigeria released a framework for QR code payment in the country.  

Kenya wants to tax online content creators

The news: Kenyan government is proposing to tax online content creators in the forthcoming budget year—starting July 2023. Per the proposed finance bill[pdf], content creators will pay 15% of online earnings, as a withholding tax.

The bill will also introduce a 20% excise tax on every crypto transaction fee.

Who will be affected? The bill defines content creators as any individual that is offering "entertainment, social, literal, artistic, educational or any other material electronically," through websites, and social media platforms like Facebook, Twitter or Instagram, in partnership with brands or retailers.

Dig deep: In recent times, Kenya has taken several steps towards taxing the digital ecosystem to boost its revenue.

In 2021, the government introduced a digital services tax—businesses and individuals are required to pay a 1.5% fee on the value of products and services offered or sold online and levy VAT at 14% on several goods.

Last year, the Kenyan government through the value-added tax (VAT), and digital marketplace supply (amendment) regulations of 2022 required global technology companies including Google to charge Kenyan users a 16% VAT on their services.

Zoom out: Kenya Revenue Authority says it is keen on the digital economy as it puts in place measures to tap more revenues and meet its financial year obligations. This is as the country moves to adopt a "Digital Economy Blueprint," a framework to improve its ability to leapfrog economic growth.

President William Ruto wants the Kenya Revenue Authority (KRA) to double its collections from Sh2.1 trillion to over Sh4 trillion ($32.338 million). Ruto explained that increasing revenue collection would aid the country in getting out of its debt situation.

Telecom operators don't want to be regulated by NITDA

The news: The Association of Licensed Telecommunications Operators of Nigeria (ALTON) has asked the National Assembly to exclude them from any regulatory authority that will be given to the National Information Technology Development Agency (NITDA).

ALTON raise the concern following the introduction of the NITDA Bill which intends to allow the agency to administer, implement, and regulate information technology systems and practices as well as the digital economy of the country.

The argument: The local telecom operators say that some parts of the aforementioned bill are a duplicate of the responsibilities of the Nigerian Communications Commission (NCC)—which is currently the regulator of the sector.

"If the Bill is passed as presently constituted, there is the risk that the Agency, acting properly under the Bill may issue regulations, guidelines, and standards with regard to the use of information technology and digital services, which will conflict with the functions of the NCC," ALTON's executive secretary, Gbolahan Awonuga added. The association also said that the new bill will lead to "multiple and excessive taxation" of the sector.

However, Hadiza Umar, NITDA's spokesperson argues that the bill does not seek to regulate telecoms business but regulate information technology for development. "The only place in the Bill that involves telcos is the payment of the National Information Technology Development Fund," said Hadiza.

Know more: The NITDA Bill is currently before the Joint Committee of the Senate and House of Representatives on ICT and Cyber Security. Since its introduction last year, the bill has been criticised by key stakeholders, including the Nigeria Computer Society, the umbrella body for all Information Technology professionals in the country.

Some experts have said that it will affect the implementation of the Nigeria Startup Act.

💰 State of funding in Africa

VC funding in Africa crossed $1 billion after Nomba announced a $30 million pre-Series B funding round. Per BD Funding Tracker, African startups have jointly raised $1.025 billion, as of May 4, this is still less than the $1.2 billion that was raised in Q1 2022.

Recall that funding for African tech startups plunged by 36.8% in Q1 2023, compared to the same period in 2022.

Meet the startups that raised funding last week.  

📚 Noteworthy

Here are other important stories in the media:

  • Top digital business banks in Nigeria: which is right for your business? Dara compared seven digital business banks across four categories: securities, features, market share and user reviews.
  • Examining venture funding trackers in the African tech ecosystem: During BD Talks last week, we examined the state of venture funding tracking on the continent; its importance, its shortcoming and the way forward.
  • Inside Gebeya's plan to support 100 existing marketplaces in Ethiopia: In January, Ethiopian talent marketplace Gebeya secured an undisclosed Series A to evolve from being a simple two-sided tech talent marketplace into being a provisioner of marketplaces. Here's what we know.
  • What the leadership changes at Microsoft Africa mean: Microsoft has appointed Lillian Barnard to lead its African operations as part of its efforts to accelerate digital transformation on the continent.
  • Nigerians blackmailed by loan apps are plotting revenge in Facebook groups: Rest of World tracked 11 Facebook groups with members who wanted to get back at loan companies for “debt shaming.”

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