BD Insider: SA drivers won’t be taken for a ride

In today’s midweek update, we look at:

• MTN secures power generation licences amidst financial challenges
• South African drivers to boycott Bolt and Uber
• Nigeria and Ghana move to tax Crypto

MTN secures power generation licences amidst financial challenges

Last week, telecom operators in Nigeria raised concerns about the rising cost of doing business, noting that a substantial part of their budget is spent on power.

The Nigerian Electricity Regulatory Commission (NERC) has now granted MTN Nigeria a permit to generate 15.94 megawatts of electricity across four captive power plants in Lagos State.

The Nigerian Electricity Regulatory Commission has been actively promoting off-grid power generation, issuing multiple licences to companies seeking to address Nigeria's persistent power shortages. Alongside MTN, the Commission also issued Golden Penny Power Limited and Havenhill Synergy licences.

What does this mean? This licence allows MTN to generate its own and run power plants to generate electricity for its own use, not resale.

While MTN's move into electricity generation is expected to cut power costs long-term, the company's overall financial health has become a concern. For the first time in eight years, the South African-owned multinational reported an economic loss, posting a R7.39 billion ($414.7 million) deficit in the first half of 2024, compared to a R4.14 billion ($232.3 million) profit in H1 2023. The loss is mainly due to the Nigerian Naira's devaluation, a key MTN market, and operational challenges in Sudan.

Context: During the same six-month period, MTN South Africa reported a 3.3% increase in service revenue, driven by strong growth in its fintech business and enterprise sales. Additionally, its subscriber base grew by 4.7%, reaching 38.5 million by the end of June.

There’s still some positive news for MTN in Nigeria. The company’s Nigerian subsidiary is expected to save between ₦75 billion ($47.7 million) and ₦85 billion ($54.1 million) by the end of 2024, thanks to its renegotiated tower agreement with IHS Towers. MTN Nigeria has also denied claims of owing ₦900 million in taxes to the Osun State government.

South African drivers to boycott Bolt and Uber 

This week’s chapter in the ongoing saga between drivers and ride-hailing companies in Africa unfolds in South Africa, following last week’s episodes in Kenya and Nigeria.

South African drivers are gearing up for a series of protests against ride-hailing platforms Uber and Bolt. The drivers are expressing widespread dissatisfaction with the companies' policies and practices.

What do they want? Key grievances include arbitrary driver deactivations, unfair commission structures, and the imposition of a three-year car age limit. Drivers argue that these measures are detrimental to their livelihoods, create an uneven playing field, and erode their worker rights.

The Western Cape E-hailing Association (WCEA) is leading the charge, demanding increased transparency, fair compensation, and the removal of restrictive policies. The association also highlights the impact of these practices on drivers' mental and financial well-being.

Bolt alone has blocked over 2,000 drivers in recent months, and the drivers are demanding a progressive and corrective disciplinary system rather than instant deactivation. WCEA says the boycotts will take place on every penultimate Tuesday of every month over the next five months, meaning the next boycott will be on September 17. 

Context: Kenyan drivers' strategy of setting their own prices seems to be working after Uber increased its base fare in Kenya by 10%, making the new minimum fare KSh 220 ($1.71). However, this is still below the minimum fare of KSh 300 ($2.33) that the drivers are demanding.

The ongoing protests in South Africa will reveal whether ride-hailing companies will follow Uber's lead in Kenya and increase their base fares to appease their drivers.

Nigeria and Ghana move to tax crypto

When KuCoin announced that it would start collecting a 7.5% VAT on transaction fees from its Nigerian users in July, it raised suspicions that Nigeria might be considering implementing a tax law to regulate cryptocurrency in the country. Fast-forward two months, and the suspicions might not have been far off. 

The Federal Inland Revenue Service (FIRS) will introduce new tax laws in September to regulate the crypto industry. 

This move signals a significant shift in the government's stance on digital assets. Previously, Nigeria adopted a more restrictive approach, banning crypto trading and prosecuting major exchanges, with Binance at the forefront of that battle. 

Why the change of mind? 

During a meeting with representatives from Nigeria's legislative arm, the executive chairman of the country's tax authority remarked, “While we cannot avoid cryptocurrency as there is currently no law in Nigeria regulating it, there is a need for legislation to govern this type of transaction.” 

He’s right—Nigeria cannot simply ignore cryptocurrency. The country is home to one of Africa’s largest crypto markets, valued at up to $400 million. A report by chainalysis also shows that the country’s crypto transactions experienced a 9% year-over-year growth, reaching $56.7 billion between July 2022 and June 2023.

Meanwhile, Ghana’s Apex Bank has released draft guidelines proposing regulatory measures for digital assets. Once the framework is finalised, all Virtual Asset Service Providers (VASPs) in Ghana must obtain authorisation from the Bank of Ghana or the Securities and Exchange Commission to operate legally. This proposed framework will require VASPs to conduct customer due diligence, monitor transactions and report suspicious activities. 

These efforts to regulate crypto in Nigeria and Ghana reflect a broader trend across Africa to implement regulatory frameworks for digital assets. Kenya is also moving in this direction, having set up a committee to develop a policy document outlining regulations for digital assets in the country.

By the Numbers

19.5 billion

Nigeria led Sub-Saharan Africa in remittance inflows in 2023 with $19.5 billion, followed by Ghana with $4.6 billion and Kenya with $4.2 billion.