Alexander K. Eduful writes: Mobile Money, cashless economy, and corruption



Recently, I posted the following on my Facebook page: ‘It is obvious …..”Oman no hia sika”. And e-levy could help, somehow, though it is clear that e-levy may not hold the magic wand. I think the magic wand is with cutting down systemic corruption.

And clearly, that is a very very difficult project because corruption is very slippery. But that is a conversation for another occasion. Well, I thought that occasion is now. So, I decided to write this piece for three reasons. First, to contribute to the broader conversation on the e-levy because it is one of the topical issues in the country now. Second, to explore how we could use the mobile money sub-sector to fight corruption and finally, to explore if, as a country, we could rethink the e-levy and to what extent we could obtain the anticipated GHC6billion from a revised e-levy. It has been suggested by some that given the revelation in the recent Auditor-General’s report which suggests that some GHC12billion has been lost to corruption, we do not need e-levy (in its current form) if we deal with corruption. That is if we can track down corruption and retrieve half of the amount, perhaps a discussion on e-levy can take a back seat, at least for now. But corruption is a very tricky animal indeed and it might nearly be impossible or so time-consuming to the extent that by the time the money is retrieved from almighty corruption we may be so exhausted that all excitement will be gone, or that (Ghana cedi) money corruption held will be worthless, value-wise.

So, bottom-line: judging how elusive corruption is, we may have to find some very creative ways of dealing with it in this country. That is partly the reason I am looking at what had been suggested previously elsewhere in the country: that we may be able to handle this ‘slippery animal’ if we are able to reduce human-to-human interface in transactions (i.e., transition to a cashless economy). That way, we might sure be able to clip at least one of the wings and, possibly, bid our time to start jubilating! And it seems to me that mobile money and e-levy may offer some hope.

So, to clarify, I am proposing that the state
i) institutes a 10% tax on the service charge by the telcos from customers who send money on their platforms instead of the 1.7% e-levy,

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ii) mandate all telcos, including those whose services are free, to institute service charge,
even if it is 0.25%, and

iii) targets policies that will help grow the mobile money sub-sector from its current
GHC0.90 trillion to between GHC3.0 and GHC4.0 trillion in a year.

In brief, my justification for these is that, first, 10% (which perhaps takes a cue from the religious worldview of tithes and for which a good number of people in Ghana subscribe to) seems to me like a reasonable baseline, to begin with. Indeed, value added tax (VAT) and other income taxes have comparatively higher rates. Also, with the 10% tax, if the sub-sector grows to over GHC3.0 trillion, from my simplistic analysis, the state could secure the anticipated GHC6billion tax revenue from the sector. Second, mandating other telcos to institute service charges could expand the service charge revenue from which the state can tax.

Finally, if we grow the sub-sector, it offers both the promise of increased tax revenue and accelerating the drive towards a cashless economy and with that, reduce the human-to-human interface and, thereby, reduce corruption.

So, the questions I pose are a) Is it feasible to obtain GHC6billion in taxes if we drop the 1.7% proposed e-levy in its current form and rather tax service charge accruing to the telcos and withdrawals by consumers? And can we consider or have a situation where e-levy and the mobile money sub-sector be used in the fight against corruption? Since I am not so much a connoisseur in the finance or telecommunication business, I will explore answers to these two questions through simplistic analysis and plead for clemency from the experts if I make outlandish and incongruous assumptions claims. As an urbanist, I have an interest in policymaking and especially so, if these policies have implications for the urban; economically, politically, socially, and even environmentally!

So, to begin with: As far as I know, the key telcos in the country’s mobile money sub-sector are MTN, Vodafone, and AirtelTigo. Vodafone’s service is free, and I understand AirtelTigo has also become free recently. I understand, again, that MTN maintains over 90% market share in the sub-sector and currently charges 1% on transactions below 1000 cedis and a flat rate of 10cedis if the amount is more than 1000 cedis. Further, it is reported that in 2021, mobile money transactions across all the major networks’ platforms were more than GHC900billion, with the potential to grow bigger if the right policies are put in place. So, that is the data.

That said, it is obvious that a sub-sector that has seen this kind of growth within a relatively short space of time seems to offer some promise to a cash-strapped economy if this sector was taxed. And, against the background of recent downgrading of our economy by international credit rating agencies like Moody’s, Fitch, Bloomberg, etc., the e-levy is perhaps seen as the magic wand to get our economy back to a robust status. And, of course, several government spokespersons have touted the e-levy as the game-changer.

It has been maintained, within the circles of the ‘establishment’, that tax revenue generated across various sectors of the economy (i.e., without e-levy) are not simply enough to enable the state to fulfill its social contract. Undoubtedly this claim is predicated on the understanding that tax revenues are used for their intended purposes. On the other hand, there is a growing disquiet, across several sections of the citizenry, at the prospect of being saddled with yet another tax. Of course, people are concerned that less is seen and/or less accountability is obtained from duty-bearers when taxes are paid.

But a worrying situation that keeps recurring is the issue of corruption. A case in point is the revelations from the auditor general’s report I alluded to earlier. The question then is why doesn’t the state focus on cutting down the waste and/or corruption? At this point, I will risk belaboring the point about the ills and adverse effects of corruption and how it seems to have become nearly impossible to uproot it from our society. There seems to be a consensus that money lost to corruption can never be retrieved even if it came to brandish it in our face. And indeed, sometimes, it looks like corruption brandishes its loot in our face: e.g. “I/we bought a liter of pure water for $150,000 (US)” or “If you don’t put weight on your document it won’t fly!”

A clear case of re-writing the laws of physics. How counter-intuitive: as if objects require increased weight before they fly. Of course, corruption re-writes the rules of decency, decorum, and development and we all, sometimes, with a nod tinged with reluctant acquiescence, quietly look on and merely gasp “Ookkaayy!” But it’s sad. The lessons we are bequeathing the next generation through corruption is as cancerous as it is damaging. Not to talk about the hospitals, good roads, good schools, etc. corruption denies us from obtaining, further jeopardizing our own future and that of the next generation.

The positive aspect though is that majority of Ghanaians think corruption is very bad and needs to be reduced if we cannot eliminate it. On that score, every little attempt to deal with this cancer of corruption is likely to receive broad-based support. But how do we deal with it? Some have indicated that there needs to be strict, rather than selective or loose, application of the rules. Yet, as we have seen time and again, that may be akin to a curative system: cure the ailment if or when it occurs. But patients have died whilst undergoing (curative) treatment.

Perhaps we should rather look more at ‘preventive systems’. As noted previously, it has been argued
that reducing human interface in transactions offers a great promise and that is where I like to believe mobile money and e-levy could be used as tools to reduce the human interface, much as we seek to secure more tax revenues with e-levy and from the mobile money sub-sector. In other words, I am arguing that we should use e-levy to facilitate and indeed fast-track our transition to a cashless economy.

On that score, and against the background of the pandemonium e-levy has caused and continues to cause, including leading to exchange of fisticuffs between the majority and minority in parliament, could we rethink or re-imagine the e-levy argument and how it should be applied? I think the argument that the e-levy in its current form could reduce mobile money transactions and potentially delay the transition to a cashless economy is something worth pondering over. So, are we ready to accept an e-levy scenario that delivers less than GHC6billion in the short term but with other positive socio-economic benefits, such as accelerating the transition to a cashless economy to enable us to fight corruption? I am of the view that even if the GHC6billion was not achievable with a revised e-levy, we can use it to cut down corruption via the mobile money sub-sector, additional revenue could be obtained because corruption was reduced. And with a systematic approach of transitioning to a cashless economy, on the back of mobile money and a revised e-levy we will ultimately secure the much-needed revenues and perhaps even exceed targets.

As I have already indicated, my suggestion is that the e-levy should be instituted on the service charge by the telcos at a rate of 10% and on customers who withdraw the money from their mobile money wallet, at a rate equivalent to half of what the telcos charge. It may be the case that the telcos use revenues such as the service charge for expansion, maintenance, and other recurrent expenditure and so once taxed the rate of growth of the infrastructure and other development within the sub-sector may reduce. But some of the telcos are able to give free service which means that taxing their service charge will not adversely affect the operation and growth of the sub-sector to any substantial margin. Also, with respect to the levy on withdrawals, my thought is that if it is charged at half the rate of the telcos, it will engender competition among the telcos such that with time they will reduce their rates, with the consequent implication of further growth as many people come on board on account of reduced service charges. But if ‘race to the bottom’ becomes something of a concern, the state could set a base rate for the companies.

A key rationale for arguing for a government tax on withdrawals but not on e-transfers is to ensure that consumers resort to transacting with e-money rather than use of physical cash. With increasing e-transactions, of course, the mobile-money traffic grows, and so service charge to telcos grows, then with that tax revenues on service charge also grows. With that also cash transactions will hopefully reduce if this goes with public education. Within that scenario, with additional targeted policies, human-to-human interface in transactions will hopefully reduce and then hopefully corruption will also reduce.

With the increasing growth of the mobile money sub-sector, we may well secure the much-needed GHC6billion if the platform hits over GHC3.04 trillion in a year. On that score, I now revert to my simplistic analysis based on the information that there were more than GHC900billion mobile money transactions in 2021. One of the telcos, as the information goes, maintains more than 90% of the market share of mobile money transactions. The rest virtually did not charge anything in 2021. So, that is more than GHC810b through one platform. Considering that 1% is charged on both the sender and the receiver if all transactions were charged 1% and were one-time one-way, the service charge would have been 2% of GHC810b, i.e., GHC16.2b. Of course, if we were to track the origin-destination of transfers, there would be multiple transfers identified. That is, someone may send say
GHC100 to another.

The recipient may withdraw GHC35 and then send GHC65 to another who will also send GHC35 to another and so on. In all these, service charges accrue such that the charge becomes higher than 2% charged for one-time one-way transactions. But to simplify matters, I will assume that all transactions are one-time one-way. Then also, since any amount above GHC1000 attracts a flat rate of GHC10 and there’s a daily cap of GHC5000, we can make several assumptions. For instance, 30% of transactions were belowGHC1000 and 70% above or it could be 40/60 or even 50/50. I will settle with 30/70 because people act in more rational ways and so organizations and businessmen may rather send far in excess of GHC1000 to enjoy the discounted rate. I will also use an average of GHC2000 for transactions exceeding GHC1000. It needs to be pointed out, though, that where the quantum of transactions below GHC1000 outweighs those higher, the total service charge accruing to the telcos is higher and vice-versa. So, the charge for the 30% of the less than GHC1000 transactions works down to GHC2.43b on the sender side. Considering that 1% is charged on both the sender and the receiver, that is about GHC4.86b.

The other 70% of the transaction could give some GHC5.67b on both receiver and sender side charges but this can be higher if we have a higher volume of transactions closer to GHC1000 and vice-versa. We are therefore looking at a service charge of some GHC10.53b, not counting multiple transactions within origin-destination transfers. A 10% levy is GHC1.053b. Given that the state anticipates some GHC6b from the e-levy, this suggests that if we can grow the mobile money sector to about GHC5.69 trillion, without the levy on customer withdrawals, a 10% tax on the service charge could give the expected GHC6b from the e-levy. However, if allowance is made for taxing withdrawals above GHC100/day at half the rate of the service charge, there is a possibility of some additional revenue. If the sector grows to GHC3.076 trillion, tax revenue on both service charges is likely to be about GHC4b and a 0.5% levy on a fifth (20%) of the transaction will be over GHC3b, giving a total tax revenue of more than GHC6b. I, therefore, conclude that if the e-levy is revised to institute 10% tax of the telcos service charge and 0.5% withdrawals above GHC100, then the state could earn more than GHC6b if the mobile money sub-sector grows to over GHC3trillion.

The important question then is how can the mobile money transactions grow up from the current GHC0.95trillion to over GHC3trillion in a year? I am hoping, if not proposing, that a robust system could help. For instance, policies that seek to route nearly all direct cash transactions via mobile money payment could help. For instance, statutory payments and all payments to government entities, passport offices, DVLA, local government levies, insurance, etc., could be done via mobile money platforms. That way, we will also be helping to shift to the cashless economy we are hoping for. Once that scenario starts to take shape, clearly other financial institutions will follow the bandwagon.

In that case, then, I think the other telcos which offer free mobile money service should be mandated to institute a service charge, even if it is as low as 0.25% since it will help them raise some revenue for the state tax. Now, I hold the view that there is a possibility these other mobile money platforms have not grown much likely because they are free. Of course, other factors, e.g., the reach of network infrastructure, etc., may be much bigger reasons. But I have on several occasions asked agents across several parts of the country’s major cities why they don’t do the other platforms that are free, and the refrain is that “because you don’t get anything from it”. So, some minimum service charges might be helpful.

The danger though will be that the telcos might then transfer this 10% charge to consumers. So, it will not be surprising to see an increase in the current 1% charged moments after instituting an e-levy that taxes the service charge. In fact, they may end up forming a monopoly block of a sort, instead of competing among themselves and thereby short-changing customers. So, how can consumers be protected? Here again, I guess some the legislative instruments may help, yet that might be going against the tenets of a free market economy.

Interestingly, it is understood that the state has acquired AirtelTigo. If well-managed, I hope this state-owned company could be used as a counterweight to the private ones, in the mobile money sub-sector, in particular, as well as the whole telecommunication sector, in general. Hopefully, for once, we will manage this state-owned business as a viable one. So, specifically on the mobile money sub-sector, I will propose a policy that entitles every 18year old Ghanaian to a free AirtelTigo chip. We could have a pilot project to distribute up to 2million chips throughout urban Ghana since the telecom infrastructure is located disproportionately in urban areas and follow it with an education that we are transitioning to a cashless economy so recipients/citizens should use them for mobile money transactions.

Of course, these days chips sell for only GHC1. Hence, I believe it can be given free from the beginning and through payment of e-levy (on withdrawals or service charges) the cost will be paid for. But what if people collect the free chips and throw them away? Thankfully there is a Ghana card now which links and syncs our data, including phone numbers. So, the dishing out of the chips could go with the AirtelTigo sim registration leading to a situation where it will be easy to replace at a fee if lost. In conclusion, against the background of the foregoing perspectives, I suggest that the state could re-consider the e-levy in its form and rather institute a 10% tax on the service charge by the telcos and on withdrawals by customers at a rate equivalent to half the service charge.

With that, I am also proposing that the companies that offer free service should be mandated to institute charges, perhaps as low as 0.25% such that the state can earn tax revenues on their service charges. In that case, if a customer pays for something with mobile money/e-money, s/he will not be taxed. But if one withdraws the money to spend then s/he will be taxed. And even so, what if there is a (minimum) withdrawal threshold and frequency, say up to GHC100 and twice in 24hrs (both of which should not exceed GHC100 cedis) where a customer will not be taxed for withdrawing? That way, we get to, perhaps protect low-income/poor consumers, speed up the process and progress to achieving a cashless economy and help ground the view that the state is a listening and considerate one.


Written by  Alexander K. Eduful [DPhil (Oxon), MDesS (Harvard), MSc (Kumasi)] Urbanism and Urban Studies Research Lab Directorate of Works and Physical Development Sunyani Technical University, Box 206 Sunyani, B/R

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