Finance Uncovered: how Africa’s biggest cell phone firm shifts billions offshore

Graphic-MTN

From the Mail & Guardian

From Finance Uncovered, a TJN-founded project, a press release about a story that is (among other things) front page of South Africa’s influential Mail & Guardian newspaper.

Finance Uncovered reveals how Africa’s biggest cell phone firm shifts billions offshore

The Finance Uncovered global network of investigative reporters have today published a cross-border investigation into South African telecoms giant MTN exposing how billions of rand from its subsidiaries in Ghana, Nigeria and Uganda have been shifted to a shell company in the small island tax haven of Mauritius.

The two year investigation spanning five countries was published today in South Africa’s Mail and Guardian, ​the U​gandan Observer ​and G​hana Business News.​

A report in Nigeria will follow shortly.

MTN’s Offshore Payments

The reporting team discovered MTN revenue producing companies operating in Ghana, Nigeria, Uganda and Cote d’Ivoire made substantial payments to offshore companies in Dubai and Mauritius. These payments were counted as a cost of business for the operating companies, lowering their profits and potential tax bill.

The enormous sums were purportedly for management and technical services performed on behalf of these companies, as well as royalty payments for the use of the MTN brand. I​n Ghana, these payments accounted for more than 9% of the turnover of the company.

African journalists in Ghana, Nigeria and Uganda working with Finance Uncovered discovered that 55% of management and technical fee payments are directed towards MTN International, a company based in Mauritius. The Mauritius company has no staff and is little more than a post box. The remaining 45% was routed to MTN Dubai, where the company employs 115 staff who provide shared services to the group.

MTN told reporters that MTN International remunerates companies in South Africa for management services performed on behalf of the company. They were unable to answer why the payments were made to Mauritius first.

Company documents published by MTN said that money in MTN Mauritius was used to repay external debts of the MTN group and dividends, rather than pay for management services.

But after further questions were put to MTN, the company was forced to admit that not all of the revenue was passed onto South Africa. The company refused to disclose how much it kept in Mauritius.

The company said that MTN I is resident in South Africa for tax purposes and the Mauritian entity gives no tax benefit to the company.

MTN in Africa

Our revelations are particularly sensitive given the sheer size of MTN. The South African listed firm is the largest cell phone company in Africa with 227,503,000 subscribers worldwide. Almost one in four mobile phones in Africa are part of the MTN network a total of 161m.

This means MTN is the largest company in many of the countries in which it operates. It is also frequently one of the largest taxpayers in African countries so they are particularly vulnerable to profit shifting by the company.

Game over?

Our investigation has established that a number of African countries have now challenged the offshore payments made by MTN. Authorities in Nigeria and Ghana have frozen payments and the Ugandan Revenue Authority have placed a large tax bill on the company for management fees paid over a 6 year period.

Ghana

Scancom, MTN’s subsidiary in Ghana, paid 758m Cedi (Rand 3.7bn, $401m) in management and technical fees to MTN Dubai between 2008 and 2013 equivalent to 9.64% of the company’s revenue.

An agreement between the Ghanian Investment Promotion Centre and the company that allowed the management fees to be paid expired in 2013 and payments have been frozen. MTN is currently negotiating a new agreement with GIPC.

Uganda

MTN Uganda paid 3% of turnover in management fees between 2003 and 2009 to MTNI in Mauritius. The Uganda Revenue Authority issued MTN with a “notice of assessment” in 2011. This was for a number of tax issues between 2003 and 2009, but a large portion was to do with a dispute over management fees. The total tax bill from the URA was R467m ($69m).

Nigeria

In 2013 the company disclosed that it had paid R2.5bn ($562m) in fees to MTN Dubai between 2010 and 2013. The company made this disclosure because the fee payments had been reversed following a failure to come to a new agreement on management fees with Nigerian regulators.

Despite these fees being paid to MTN Dubai, MTN confirmed to us that these fees are then ‘on­paid’ to MTNI in Mauritius and that MTNI Mauritius is the ‘ultimate beneficiary’ of the fees.

Cote d’Ivoire

MTN has confirmed to us that the company paid 12bn West African Francs in 2012 and 14bn West African Francs (Rand 512.9m, $55.53m) in 2013 in management fees to MTNI. The figure for 2013 is equivalent to 5% of the revenue made by MTN in Cote d’Ivoire.

The reporting team

Finance Uncovered is a global network of journalists from over 55 countries across the globe. This investigation was undertaken by Craig Mckune of amaBhungane in South Africa, George Turner and Nick Mathiason from Finance Uncovered in London, Francis Koktuse in Ghana, Emmanuel Mayah in Nigeria and Jeff Mbanga in Uganda.

Note to Editors

  1. Finance Uncovered is a reporting and training project equipping journalists and campaigners around the world with practical skills to investigate illicit financial flows. In two years we have trained 122 journalists, campaigners and academics from 54 countries. Find our website h​ere.​
  2. Dollar calculations were made by using the Rand/Dollar conversion rate on 31st March 2013 for the figures from Nigeria, Ghana and Cote d’Ivoire. For Uganda the conversion date was 31st March 2011. The Rand conversions from local currencies were made using the relevant conversion rate for each year that payments were made.

Contact: George Turner
+44 7540 252 850

Finance Uncovered


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About The Author

Nicholas Shaxson is a journalist and writer on the staff of Tax Justice Network. He is author of the book Poisoned Wells about the oil industry in Africa, published in 2007, and the more recent Treasure Islands: Tax havens and the Men who Stole the World, published by Random House in January 2011. He lives in Berlin
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One thought on “Finance Uncovered: how Africa’s biggest cell phone firm shifts billions offshore

  1. Confrontación entre optimismo y pesimismo

    Acabo de leer el titulo de Roxana Mónica Raffa, así que el documento que a agregado en ligado web.

    Desde luego que podemos intentar a todo instante mirar el futuro con optimismo.

    En documento nos muestra como algunos estudios que desde el útero ya comenzamos a vivir, a aprender; que durante los primeros días y meses del neo-nato se operan sin duda algunos cambios fundamentales, puesto que lo que se vive al principio va de alguna manera condicionar la persona misma.

    En lo que llevo recorrido de mi existencia insignificante, he aprendido que es justamente en los primeros años de la vida que se determina lo que sera cuando adulto un niño.

    Es algo demasiado delicado demasiado importante para no prestarle atención

    La realidad no es ni pesimista ni optimista

    La realidad es imparcial, así sea la realidad de las guerras, la realidad de los genocidios, o la realidad del triunfo “individual” de algunas personas. En realidad no necesitamos demasiado nivel intelectual por comprender para donde va el mundo.

    Sin embargo se hace indispensable algunos conocimientos de historia, de prehistoria, creo necesario por no decir indispensable haber leído algunos autores y ciertas obras en particular. Como admito que tomar nota de algunos documentos video disponibles en el web, podrían remplazar algunos años en las mejores universidades del mundo, a condición de haber leído un poco de libros y en particular términos de economía

    Los libros indispensables
    Le discours de la servitude volontaire (Etienne de la Boetie)
    Recherche sur la nature et les causes de la richesse des nations (Adam Smith)
    Esssai sur le principe de population (Thomas Robert Malthus)
    Quand le capitalisme perd la téte (Joseph E, Stiglitz)
    Le discours de la methode (René Descartes)
    He leidos varios libros de Joseph Stiglitz, Edouard Tétreau, Jéremy Rifkin, Miret Zaki, ou encore Thomas Piketty, entre otros y los aconsejo

    Los videos que funcionan como un atajo para comprender en menos de dos horas lo que exige cuatro o cinco años de estudios en universidad

    LET’S MAKE MONEY document excecional de Erwin Wagenhofer que en menos de dos horas explica con lujo de detalles el funcionamiento del sistema.
    LA CITY OU LES FINANCES EN EAUX TROUBLES documento de Mathieu Verboud Zadig de menos de una hora muy didáctico sobre el funcionamiento del sistema

    Hoy disponemos de varios organismos muy serios destinados a la divulgación y la pedagogia sobre las incoherencias y el delito financiero:

    http://www.taxjustice.net/

    Podemos rápido constatar que durante la revolución industrial, la humanidad da un salto importante en el confort de la más larga mayoría de las clases sociales, esto es debido a la distribución automática del fruto del trabajo, en realidad la revolución industrial juega un papel clave en materia de progreso social, progreso en materia de legislación sobre el trabajo, legislación sobre el salario, legislación sobre el tiempo del trabajo, el trabajo de noche, el trabajo en tiempo festivo, trabajo de las mujeres, de los niños.

    La industria de la producción material pierde terreno rápidamente con la evolución de las nuevas tecnologías, los computadores, los programas y algoritmos, hoy es la industria financiera quien recupera un máximo de dinero, como lo podrán constatar en un sujeto con gráfico en uno de mis blogs. Pero cada persona disponiendo de una conexión internet puede comparar las primeras diez empresas mundiales calculadas en función del resultado neto. Nadie sera sorprendido de saber que 60% del dinero reviene a la industria financiera de lejos con la mitad llegan dos marcas de venta de productos gran publico, APPLE y SAMSUNG, con apenas 21%.

    Esta evolución es creciente en favor de la industria financiera, desde luego que con paraísos fiscales la mayoría de los ingresos son exentos de impuesto. Por lo cual la miseria, el desempleo crecen en el mundo, sin que esto sea pesimismo, solo simple realidad que cada lector puede constatar.

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