By Kavazeua Katjomuise

TECHDIGEST – I recently overheard a conversation among three young people at a café in an African city. It was a passionate discussion on the management of funds allocated to the COVID-19 response and the effectiveness of the mechanisms in place to manage the money to achieve the intended purposes.

The concerns of my young brothers and sister resonated with me, as I could not help but reflect on how COVID-19 exposed cracks in Africa’s fragile revenue institutions and contributed to widening the financing gap for the region’s development.

Weak institutions, especially revenue collection and customs authorities, are a challenge in Africa, which loses billions in potential tax revenue, including through tax avoidance and evasion, especially by multinational companies.

UNCTAD’s Economic Development Report 2020 says Africa lost $88.6 billion through illicit financial flows in 2019.

This undermines efforts to mobilize domestic resources to finance the continent’s development as outlined in the United Nation’s 2030 Agenda and African Union Agenda 2063, which both recognize the primacy of strong and effective institutions in driving sustainable development.

African countries fare poorly on domestic resource mobilization compared to other developing countries. The share of revenue to gross domestic product (GDP) in 2020 averaged 16 per cent for Africa, compared to 35 per cent for Asia-Pacific, and 24 per cent for Latin American Countries. Africa’s Least Developed Countries fared even lower at 13.3 per cent.

Governance influences tax revenue collection considerably in Africa. Good governance and strong institutions – measured through regulatory quality, the enforcement of the rule of law, strong institutional capacity and lower corruption – enhance a country’s ability to mobilize domestic resources through revenue collection.

However, corruption erodes tax compliance. Citizens in countries with high corruption are reluctant to pay taxes because of the perception that resources will be misused.

Empirical evidence shows that countries with a low Corruption Perception Index (CPI) score collected 4.3 per cent more in tax revenue to GDP than those with a high CPI score (2).

Addressing governance issues and improving transparency in the use of public resources is vital to building trust and generating increased domestic resources. Efforts should be geared at supporting African countries to strengthen governance and tackle corruption.

Digitization

Technological improvements and digitization could be leveraged to improve scale and efficiency and prevent corruption through increased transparency.

The pace toward digitization on the continent has quickened in recent years, particularly in the wake of COVID-19. Before the pandemic, Africa recorded progress toward digitization, albeit driven by the private sector mainly through incubators, start-ups, technological hubs and data centres.

Digitization is already transforming African economies in several ways, such as revolutionizing retail payment systems, thus allowing consumers and businesses to save billions in transaction costs, facilitating financial inclusion, and enhancing the efficiency of fiscal and revenue administration.

For example, the launch of M-Shwari in Kenya increased access to financial services for millions who may otherwise have been excluded from the financial sector. Taking advantage of this trend, the Kenya Revenue Authority (KRA) introduced electronic banking in 2016 to expedite the payment of taxes through secure electronic payment.

This, coupled with the launch of iTax, has enabled a single view of taxpayer information, allowing for real-time monitoring of revenue collection, thus improving the efficiency of payment to government suppliers and social protection grants.

Digitization has also enabled developed countries to build effective and robust Digital Rights Management (DRM) systems, critical to ensuring Africa’s recovery from COVID-19.

However, despite the widespread adoption of digital technologies across the world, the digital divide excludes many African countries from the benefits of digital technology.

Digitizing tax administration in Africa has been relatively slow. An International Monetary Fund’s analysis (ISORA 2018: Understanding Revenue Administration) shows that, relative to other developing regions, African countries scored below the world average on almost all indices related to tax administration performance, especially on the degree of digitization.

The average score for the degree of digitization was 29 per cent for Africa compared to 49 per cent and 46 per cent for Latin America and the Caribbean as well as East Asia Pacific, respectively.

The COVID-19 pandemic contributed to an erosion of tax collection in Africa due to a lack of digitization, as countries could not fully work remotely. This underscores the urgency of investing in the digitalization of tax collection processes, paired with other digitization initiatives such as digital identification, digital finance, and electronic payment systems.

Evidence shows that enhanced tax collection has followed the introduction of ICTs, including the computerization of tax and customs administration to support tax payments.

Countries that have modernized and digitized tax revenue administration have benefited from increased revenue due to improved efficiency, reduced corruption through enhanced transparency, and increased tax compliance.

For example, the introduction of electronic cash registers by the Ethiopia Revenue and Customs Authority increased Value Added Tax (VAT) collections by 32 per cent.

Opportunity arises

COVID-19 provides an opportunity for African governments to embrace digitization by leveraging information and communications technology (ICT) as well as mobile technology.

READ ALSO: NITDA Bill and Entrenchment of Cyber-Security

Increased mobile penetration is an opportunity for African countries to digitize their fiscal and revenue administration. Development partners can support African countries in bolstering DRM systems by channeling substantial Official Development Assistance (ODA) towards strengthening capacities and institutions, including tax authorities, to improve tax collection.

By digitizing fiscal and revenue collection institutions and modernizing customs systems, African countries can build robust systems and overcome the challenge of weak institutions.

This would help enhance African countries’ ability to address tax evasion and avoidance, tackle money laundering and tax havens, and curtail Base Erosion and Profit Sharing (BEPS).

Development partners and international organizations can increase support to Africa to strengthen its capacity for tax assessment, including through training, mentorship and coaching.

Complementary measures are also necessary to enhance African countries’ capacity to enact and implement policies and legislation to tackle BEPS and transfer pricing, starting with a comprehensive review of all tax treaties, tax incentives, and trade and investment agreements to eliminate all loopholes for BEPS and other IFFs.

This is central to de-risking Africa’s fiscal space for long-term sustainable development in the post-pandemic era.

In conclusion, building strong institutions through digitizing key institutions, especially revenue authorities, is critical to boosting domestic resource mobilization systems.

By digitizing fiscal and revenue collection institutions and modernizing customs systems, African countries can build robust DRM systems and overcome the challenge of weak institutions.

Katjomuise is a Senior Economic Affairs Officer and leader of the Policy Analysis and Coordination team in the UN Office of the Special Adviser on Africa (UN – OSAA).

Source: Africa Renewal, United Nations

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TECHDIGEST – POS transactions in Nigeria jumped to N4.6 trillion in the first seven months of 2022, a 29.3% increase compared to N3.56 trillion recorded in the corresponding period of 2021 and a staggering 90.3% increase when compared to the same period of 2020.

This is according to data culled from the Nigeria Inter-Bank Settlement System (NIBSS) between January and July 2022. In the same vein, the volume of transactions rose by 25% year-on-year to 679.8 million in the same period from 543.7 million recorded in the previous year.

The increase in both the volume and value of POS transactions is an indication of how Nigerians are increasingly leaning away from cash payments in lieu of electronic transactions and reflects the growth of online shopping in Nigeria’s commercial space.

Notably, the volume and value of cheque transactions dropped in the same period. Specifically, a total of N1.83 trillion was recorded through cheques in the 7-month period across 2.4 million transactions a decline compared to the comparable period of 2021.

Highlights

In the month of July 2022, POS transactions stood at N724.7 billion, representing the highest monthly value on record based on data tracked since July 2022.

A further check of the historical data showed that the value of POS transactions in Nigeria has almost tripled compared to 2018 when the NIBSS began the release of the data. In the seven months period of 2018, a total of N1.2 trillion worth of transactions were recorded, rising to N1.66 trillion in 2019 before the covid-19 pandemic triggered a significant rise in 2020.

It is worth adding that the cumulative value of POS transactions recorded between January and July 2022, already represents 71.6% of the total N6.43 trillion recorded in the entire 2021.

Source: Nairametric

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TECHDIGEST – A survey carried out by technology firm, Arravo has revealed that 84 per cent of the workforce sampled preferred to work from home post COVID-19.

The workforce, according to the survey, believes that the new norm brings in flexibility and dynamism to the work system.

Arravo revealed this, when it hosted a forum alongside its partner, Cisco, on ‘Future of Work in Digitised Economy,’ in Lagos.

The forum established that there is a need for organisations to create an intelligent workspace that will enable staff members’ work from distant locations outside of the office, while still contributing to the growth of the organisation.

Chief Executive Officer of Arravo, Ayo Adegboye, who spoke to journalists about the future of work, said: “The focus of the forum is on how to make work much more convenient, seamless and secure for organisations, despite security threats in cyberspace. Today there is a paradigm shift in work space, where people can work remotely from outside of their offices and still contribute meaningfully to the growth of the organisation, and this can be achieved successfully if the right technology is applied.”

Adegboye spoke about Cisco unified communications tool, which he said had been designed to make communication seamless and convenient in a work environment.

According to him, one of the challenges that organisations face is connectivity, which has to do with bandwidth optimisation, adding that working with Cisco as a partner, Arravo has been able to address all of that by optimising bandwidth in the most advanced way such that with a little amount of it (bandwidth), organisations can do a lot more in the area of connectivity.

“Another challenge to the future of work is security and Cisco has invested so much in security in order to address the issue of insecurity and to put the future of work in good perspective. Arravo has always gone ahead of customers to invest in technology that will enhance customers operations in the last 14 years.

“We have maintained our Gold Partner position with Cisco in the last 13 years, which required huge investments in order to ensure the smooth operations of our customers. We have operations across Nigeria and we are expanding outside of Nigeria to meet the needs of our customers that have branches outside Nigeria,” Adegboye said.

In his presentation, the General Manager, Enterprise Business at Arravo, Tola Olaayan, said the survey carried out on future of work after the COVID-19 lockdown, showed that 55 per cent of employee had positive impact on work motivation, 84 per cent preferred working from outside of the office space, 67 per cent saw security as their main challenge, while 40 per cent saw remote working as a challenge.

According to Olaayan, organisations are now adopting cloud technology and Software as a Service in order to save cost and drive efficiency. He said Cisco would continue to offer the best and diverse technology solutions that would enhance the future of work.

Source: Guardian.ng

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