Tanzania Lost USD 308m From The Sale of Zain Africa to Bharti Airtel

The Parliament of Tanzania through the Parliamentary Parastatal Organisations Accounts Committee (POAC) has been told that the government lost USD 308m equivalent to Tsh 500 Billion  in tax revenue from the recent sale of Zain Africa assets in Tanzania to Bharti Airtel.

Tanzania Revenue Authority Commissioner General, Harry Kitillya, claims that there was no change of ownership in the Zain Africa assets in Tanzania and so there was no way the government could tax the transaction. You remember the transaction of transfer of Zain Africa to Bharti Airtel was concluded in Netherlands.

This is bringing problems in many African countries since the local entities just changed their business names. There was no way the African governments could have gone to Netherlands to collect the revenue from the sale. As in the case of Zain Tanzania, what changed ownership was Zain Africa BV and not Zain Tanzania.

Kigoma North MP who is the chairman of POAC explained to Techmtaa that “ownership structure of Zain Africa and now Bharti Airtel was/is used to avoid tax”. The amount lost in the sale is almost 30% of the the Tanzanian government investment in Zain Tanzania. Tanzanian government owns 40% of what was Zain Tanzania. Zain Tanzania had more than 4 million subscribers and in the Zain Africa to Bharti Airtel transaction, each subscriber was sold at USD 252.

In a subsequent blog post, Mr Kabwe explains “There is a ghost company called Celtel BV which owns Celtel Tanzania and is itself owned by Celtel Africa. Celtel Africa was sold to Zain and then to Bharti Airtel but Celtel BV conituned to own Zain Tanzania and even now Airtel Tanzania”

“We want the government through TRA to explain to the committee the whereabouts of the amount. We would have used the funds to construct schools, hospitals and improve social services”, he said. He said the Tanzanian taxation law, Income Tax Act of 2004,  have some weaknesses which provided loopholes for diversion of funds.

POAC has directed Ministry of Finance and Economic Affairs to bring an investigation report on the matter in a month with proposals to better the taxation laws. It is only Nigerian government which benefited from the sale after Bharti Airtel signed an agreement with Broad Communications Ltd., which owns a 14% stake in Zain Nigeria, to settle all legal cases initiated by the Nigerian minority shareholder.

The Kenyan government did come with a CCK regulation requiring all local telecoms companies having 20% shareholding or more change hands to inform CCK and the CCK will inform the Treasury about the impending sale. This came after the government realised that the Celtel to Zain then to Bharti Airtel resulted in the Kenyan government loosing a huge amount in tax revenue.

The Tanzanian legislative committee also wants the Ministry of Finance to start a process of divestment of  50% of its shares to the public through the Dar-es-Salaam Stock Exchange(DSE) so as to improve corporate goverance(transparency) & curb transcations costing the Nation.