MultiChoice spat hots up
A dispute between Nigerian tax authorities and MultiChoice, Africa’s biggest pay-TV provider, intensified yesterday, showcasing the risk international firms face as the continent’s largest economy tries to bolster revenue collections.
MultiChoice was ordered by a Nigerian tribunal to pay 50 percent of a disputed 1,8 trillion naira (R66 billion) tax bill, prompting a rush to sell shares of the company on Wednesday and erasing R3,6 billion of market value in less than two hours.
The stock gained 3,6 percent this morning, after the company said that the court directive doesn’t compel it to pay half of the disputed amount.
It may turn into a protracted standoff, if history is an indication.
In 2015, MTN was slapped with a US$5 billion fine for failing to de-register subscribers in Africa’s most-populous nation without proper registration.
While the continent’s largest mobile-phone provider eventually settled – after months of negotiations – for a far lower penalty, its stock hasn’t fully recovered.
“Nigeria, while the biggest economy in Africa, comparatively has very low levels of tax collection,” said Greg Davies, a fund manager at Cratos Capital.
“This has sometimes led to difficult situations for South African companies operating in the country. The South African government should speak out on this, as it potentially also has an impact on pension funds invested in businesses such as MultiChoice.”
MTN went on to have disputes over tax and dividends withdrawn from Nigeria, its biggest market.
Nigeria’s tax revenue as a proportion of gross domestic product is one of the lowest globally, according to the International Monetary Fund.
President Muhammadu Buhari’s government collected 8,26 trillion naira (US$20 billion) in taxes last year.
That compares with South Africa’s US$85,3 billion.
And it’s not just tax battles that are a concern for South African investors.
Earlier this year, Shoprite, Africa’s largest food retailer, followed at least four other companies in exiting the West African nation after struggling with supply-chain disruptions and repatriation of funds.
Nigeria’s Federal Inland Revenue Service imposed the penalty on MultiChoice as a condition to an appeal being heard in a Lagos court.
The next hearing is on September 23.
The pay-TV provider continues to engage with authorities, the company said in an emailed statement.
The firm is the operator of DStv, a satellite TV provider across sub-Saharan Africa that shows English Premier League football, hit US dramas as well as local content.
Nigeria’s tax authority asked lenders to freeze MultiChoice’s local bank accounts to recover the alleged tax arrears last month. The decision came after the company refused to grant access to its servers for an audit, Nigeria’s Federal Inland Revenue Service said at the time. – Reuters.
