Ramaphosa-MTN tax allegations raise eyebrows?

 

Allegations that Cryil Ramaphosa “helped” MTN, while he was the chairman of the mobile phone giant, to stash billions away in Mauritius exemplify what can happen when business gets entangled with politics. By Gugu Lourie


It is an open secret that Deputy President Cyril Ramaphosa, who is also second in command in the ruling African National Congress (ANC) party, faces a rough ride in his attempt to succeed President Jacob Zuma.

Some sections of the ANC have publicly stated their preferences for a female candidate to take over from Zuma. They are mostly calling for Nkosazana Dlamini-Zuma, the president’s former wife, and current chairperson of the African Union Commission to lead the party in 2017.

It seems the gloves are now off in the ANC’s leadership succession battle, which by all indications will be bruising. Whoever emerges victorious as ANC leader will become SA president.

Politics aside – let me concentrate on the allegations levelled against Ramaphosa during his stint as chairman of MTN.

It is alleged in a report by Amabhungane investigation published in the Mail & Guardian that MTN, Africa’s biggest cellphone company, moved billions of rand earned in African countries to offshore tax havens while Ramaphosa chaired the board of the mobile giant between 2001 and 2013.

Amabhungane and Finance Uncovered, a global investigative journalism network, reported that most of the money, which MTN badged as “management fees”, ended up on the Indian Ocean island of Mauritius, where the company employs no staff and appears to own little more than a postbox.

However, it is an indisputable fact that MTN owns a 100% of Satalite Data Networks Mauritius Pty Ltd.

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MTN global footprint

The report also stated that a total of R3.7-billion was earmarked to flow from Nigeria to Dubai for the “ultimate benefit” of MTN International (Mauritius) from 2007 to 2013 – about 1.75% of Nigerian revenues.

But MTN met resistance from the Nigerian government in 2013 and was forced to reverse R2.6-billion of this amount. This is one example of how MTN allegedly stashed money away in Mauritius.

It is no secret that Mauritius provides a 3% corporate tax rate and no capital gain tax. It is also being used by global and other African players as a tax haven to invest in the rest of the continent.

It would be futile for a local company such as MTN not to take such advantages while creating value for its shareholders.

It is not only MTN that has used Mauritius as a tax haven. South African firms that have used Mauritius as a tax haven include MTN’s rival Vodacom, beverages behemoth SABMiller and packaging giant Tiger Brands, etc.

Suddenly, or so it seems, MTN didn’t follow proper corporate disclosures when it moved its investment holding company into Mauritius.

For years now, MTN Group or Holdings has been run through two primary companies, MTN Mauritius and MTN Dubai, through which foreign investments are held.

There are many technicalities that companies use to set up an entity for tax purposes in countries such as Mauritius.

In the telecoms industry it is a known fact that MTN Mauritius existed and was used by the company to invest in its markets outside of South Africa.

MTN has been disclosing its holding or group structure for years.

Now all of a sudden it emerges as if MTN has breached corporate governance and laws of the country.

The timing of the allegations raises many questions?

Why link the issue only to its former-chairman Ramaphosa, especially when the ANC is holding its National General Council?  What makes MTN structure unique from other South African firms and other global conglomerates that have or still using Mauritius as a tax haven?

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Cyril Ramaphosa, Deputy President of South Africa and former Chairman of MTN

In line with various multinationals, MTN chose Mauritius to house its holding company as it offered a great investment climate for globalising companies.

One wonders, what are the real reasons for choosing MTN as a culprit?

Furthermore, why is Ramaphosa at the centre of this allegations?

If there is any real case to be answered too, one would expect the whole MTN board and executive team that was involved at the time of the decision to choose Mauritius as a location for MTN Holdings to be accused of helping MTN to hide away money in that tiny island.

However, I don’t have answers to all the questions, but one thing seems to stands out.

Is it possible that MTN has been caught in an early succession battle starting within the ANC that is being launched through mobile operator to paint Ramaphosa as a corrupt leader?

But turning our eyes away from the fact that MTN has for years disclosed its structure, which consist of Mauritius and Dubai, pretending that we’re having a serious breach of corporate governance when we are not tackling all companies using tax havens such as Mauritius, is itself plays in the hands of politics.

MTN Holdings, which used Mauritius and Dubai as investment vehicles, has invested billions of rand into the markets of east, west and southern Africa.

In the 2015 financial year, MTN has budgeted to spend close to R30 billion in capital expenditure across its all operations and of that amount R8.3 billion was set aside for Nigeria and R10 billion in South Africa.

That said, it a known fact that a chairman of the business is appointed to protect the interest of the shareholders and ensure the company complies with corporate governance issues.

In short, let’s ask ourselves serious questions about the allegations against Ramaphosa and why they are only surfacing just as the ANC leadership succession battle gathers speed.

I hope those behind the allegations against MTN and Ramaphosa will also look at other South African corporates and tell us if they don’t have similar structures in Mauritius.

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