SIM re-registration: Who loses from connectivity shutdown?

The third deadline for re-registration of mobile phone SIM cards – September 30 is counting after the second deadline of July 31 expired with many people still left in long queues to acquire the primary document, the Ghana Card for the re-registration of their SIM cards. The original date for the re-registration was March 31.

September 30 is the final deadline, according to government officials who have repeatedly warned that there will be no further extension.

Although many people have successfully re-registered their mobile phone numbers during the extension period, it appears there will still be more whose phone numbers will automatically be rendered inactive come September 30 because they failed to re-register, primarily because they still have not obtained the requisite Ghana Card which serves as documentation for the process.

When the extension was announced, in March this year, some 7.5 million people had obtained their Ghana Cards, which translates to a quarter of the entire population.

Of the 19.9 million Ghanaians who are 15 years and older contained in the 2021 Population and Housing Census, just 12 million have been able to fully register their SIM cards, according to the Minister of Communications and Digitatiation.

Out of this, only 15.7 million of them have been able to obtain their Ghana Card per the information given by the Finance Minister during the presentation of the 2022 mid-year budget review.

But even those who have re-registered will suffer profound inconveniences from next month since some of the people they would wish to call or receive calls from may not have registered. This situation will apply to SMS and WhatsApp messages too.

More than half of the mobile telecom lines currently in use are on the MTN Ghana network; but while that network has a market share of roughly 55 per cent with regards to telecom services as a whole, it has an overwhelming share of the mobile money market, which stands at over 90 per cent.

This means the proportion of people who will be unable to use MoMo will be even higher.

This will come on the back of the commencement of the E-levy which has reduced MoMo transaction volumes and values by even more than government had originally anticipated.

Combined with the E-levy’s effects, therefore, the effects of the re-registration will have a huge effect on MoMo usage and consequently, financial inclusion.

Government had set out to use the re-registration exercise to persuade people to quickly secure the Ghana Card and this strategy has indeed been largely successful. However, there are still logistical bottlenecks – albeit not particularly widespread – depriving some people from securing their cards while others have simply not found the time, or made the requisite effort to obtain their cards.

Foreigners

Foreigners from neighbouring West African countries are particularly discomforted. The issuance of identity cards for foreigners is being done through a private company as a Public Private Partnership with government which is largely aimed at mobilising revenues.

The fee for obtaining an ID card for foreigners is $120 which now translates to roughly GH¢1,000 and for many of them, this is not affordable.

Indeed for many, the cost is considerably higher since the places of issuance are highly centralised and so veritable transport costs are incurred as well.

Many public policy analysts have reasonably suggested that the re-registration exercise should have been extended until all Ghanaians willing to secure Ghana cards have secured them; that is until all bottlenecks everywhere around the country have been removed.

However, the government is in a hurry largely because the issuance of the cards provides the foundation for pulling the informal sector into the income tax net and SIM card registration remains the most persuasive way to force everyone to get one.

Government revenue

But a rethink of this strategy stance is required; simply put, implementing it in its current form is likely to reduce government revenues rather than provide the relevant platform for increasing them. This is because with the unfolding situation, from this month there will be a significant drop in both economic activity and actual productivity as economic actors are deprived, to a varying degree, of the most convenient way of basic communication, obtaining information and data through the Internet, as well as sending, receiving and spending money. In turn, this will translate into a drop in consumption taxes.

But far more significant will be the decline in taxes paid by the telcos themselves as their business volumes and consequent revenues and profits will all decline.

Here, it is instructive that MTN Ghana – which obviously will be the biggest loser of active customers, and thus business volumes, gross revenues and net income – is one of the biggest tax payers in corporate Ghana.

Indeed with telcos paying a plethora of taxes and revenues beyond their income taxes, such as Value Added Tax, Communications Service Tax (the latter paid by customers through the telcos) etc – all the telcos will pay considerably less tax than they would have been paying if a significant number of lines had not been rendered inoperable.

Even a 10 per cent decline in MTN’s tax obligations, below their 2021 levels due to lower levels of network usage and consequent declines in both gross revenues and net income would force government to forgo some GH¢283 million over the next one year period, this being 10 per cent of the portion of the total amount paid by that company in taxes and levies, which are tied to business volumes. Assuming that the rest of the industry collectively pays as much as MTN alone, and suffers a similar decline in customer traffic, revenues and profits, forgone taxes could rise as high as about GH¢566 million.

E-Levy proceeds

These projections do not include the consequent forgone E-levy proceeds, since it is still unclear how much the levy will actually rake in annually; but a 10 per cent decline in collections below government’s projected GH¢4.9 billion for 2022 would blow a GH¢490 million hole in government’s already grossly inadequate revenue projections for the year.

Simply put, government needs all the revenues it can get from the telecommunications industry which it regards as a low hanging fruit which is why the taxes imposed on it – payable by both telcos and their customers – are of a higher collective rate than virtually any other sector, outside of perhaps, the downstream oil and gas industry with its inordinately high cumulative consumption tax rate.

Add on the loss of economic value resulting from a significant reduction in the number of people using telecommunications services and MoMo and the loss of revenue becomes much higher still; and those losses would be incurred by households and business enterprises as well as by government in the form of tax revenues.

Tax net

Certainly, government’s purported primary reasons for the re-registration of SIM cards – to curb cyber-crime and enhance national security against terrorism and the likes – are very much valid. So is the much less mentioned – but much more policy driving – reason of laying a key part of the foundation required to rope in the informal sector into the tax net.

However, it may be more prudent to exercise a little more patience in the way it is implementing the initiative. There is little point in losing considerable tax revenue and just as importantly, dampening genuine revenue and happiness- inducing socio-economic activity because of an inordinate hurry to achieve both its publicly claimed and privately sought after objectives, as crucial as they may be.

An extension – perhaps to the end of the year will be appropriate – in order to ensure that the obstacles constricting the issuance of the Ghana Card to every member of the populace are removed, surely would be worth it, considering the downside effects of taking a significant proportion of the populace offline.