The Nigerian government has created a new tax on phone calls in the bid to fund free healthcare for Nigerian citizens—classified as a vulnerable group—who cannot afford healthcare. The law defines a vulnerable group as “children under five, pregnant women, aged, physically and mentally challenged persons, and indigent people as may be defined from time to time”.
The provisions of Section 26 sub-section 1c of the Act state that the source of money for the Vulnerable Group Fund includes “telecommunications tax, not less than one kobo per second of GSM calls”.
Other sources of income for the Vulnerable Group Fund include the Basic Health Care Provision Fund, health insurance levies, grants, donations, gifts, and any other voluntary contributions. The law also requires that all persons resident in Nigeria are expected to obtain health insurance.
With average call rates of 11 kobo per second, this new act implies that there will be a tax of at least 9% per second on all phone calls made in Nigeria.
Nigerians made 150.83 billion minutes of calls in 2020, according to a report by the Nigerian Communications Commission. This translates to 9.05 trillion seconds of calls, meaning the new tax will generate at least 9.05 trillion kobo, which converts to ₦90.49 billion ($18.09 million), annually.
It’s not clear when this new tax will take effect and how much it will be. But it is likely that there will be an increase in call tariffs in Nigeria, as it’s unlikely that the telecom companies will absorb the cost.
Last month, telecom companies under the umbrella of the Association of Licensed Telecommunication Operators of Nigeria proposed a 40% increase in the cost of calls, SMS, and data as a result of the rising cost of operating in the country. This new tax creates a more compelling case for the telcos to hike their prices.
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In March, MTN announced that its contract packages in South Africa would increase by about 5% from May 2022. The company assured customers that all current discounts, terms and conditions would remain unchanged despite the increase.
The changes have come, as promised. But, instead of 5%, several contract product prices have increased by over 20%. Several MTN subscribers reported bill shocks.
Sidebar: Contract customers are MTN users who enter a 24-month contract with MTN to receive a fixed amount of data monthly at a cheaper price than they would have on a prepaid plan.
The base of the problem
The new prices are higher than expected because MTN applied the increases to the “base price” of the prepaid plans instead of the “real price” that contract customers automatically pay monthly for plans.
The “base price” of an MTN plan is the cost of the prepaid plan which MTN discounts and advertises and sells as “contract plans”.
This advertised discounted price is largely known as the”real price”of the contract plans bought by contract customers. For example, the base price for a 24-month My MTNChoice 30GB is R1,299 ($82.37) per month. MTN places a $63.41 (R1,000) discount on the base price of R1,299 ($82.37) and sells it at R299 ($18.96) per month on a contract to some customers. R299 is known as the real price to these customers.
Applying the 5% discount to the My MTNChoice 30GB package inflates the base price to R1365 ($86.55). With the $63.41 (R1,000) discount, the “real price” on the contract becomes R365 ($23.14) instead of R314 ($19.91) which would be if the 5% increase is applied to the contract price instead of the base price.
What MTN has to say
MTN SA’s Executive for Corporate Affairs Jacqui O’Sullivan confirmed the increase.
O’Sullivan maintains that the increase was unavoidable because, without the price hike, customers whose contracts expire this month would still have to transition into the more expensive monthly subscription that is based on the initial base plan. She affirms MTN’s readiness to discuss their contract renewal and upgrade options as per the status quo.
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SYLNDR RAISES $12.6 MILLION
Egypt’s online pre-owned car retailer, Sylndr, has raised $12.6 million in a pre-seed round led by RAED Ventures, Algebra Ventures, Nuwa Capital, 1984 Ventures, Worldwide Founders Capital, and a few other regional and global angel investors.
The capital raised will be channelled into improving Sylndr’s operational capabilities and technology infrastructure. The startup also plans to build retail and non-retail pipelines to customers, increase brand awareness, and recruit twice the talent to achieve the goal of the company.
Egypt has over 6 million cars on its roads, and research shows there are 3x more used cars than new cars on its market. Egypt’s used car market is dominated by unorganised and classified dealers and riddled with distrust. Sylndr is a newcomer and is playing with a lofty goal in mind: to quickly become the region’s most trusted retailer of used cars.
How Sylndr is playing
Founded in November 2021, Sylndr is operating in stealth mode with plans to open up to the public in early 2023. According to TechCrunch, the startup is modelling itself after Cars24, one of Asia’s leading pre-owned vehicle e-commerce platforms. Sylndr will buy cars from individuals looking to sell, refurbish, and then resell them. It also plans to provide flexible financing options to users such as a 7-day money-back guarantee, and warranties.
Competitors like OLX sell non-refurbished cars which are less expensive than the refurbished cars which Sylndr sells. But Sylndr will bank on its “fair and competitive pricing”, speed of delivery, and car quality.
Other players on the field
Sylndr’s investors have high and positive expectations but so does Autochek—a Nigeria-based automotive platform that recently expanded into North Africa via an acquisition. The market is huge, so despite the competition, Cairo-based Sylndr should have no problems achieving its goals.
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