A dispute between Nigerian tax authorities and MultiChoice Group, Africa’s largest pay-TV provider, escalated on Wednesday, showing the risk faced by international companies as the continent’s largest economy tries to boost revenue collection.
A Nigerian court ordered MultiChoice to pay 50% of a disputed tax bill of 1.8 trillion naira ($ 4.4 billion), prompting a rush to sell shares of the Johannesburg-based company and erasing $ 240 million of value. market in less than two hours. The shares rose 3.6% at 9:23 am local time Thursday after the company said the court directive does not require it to pay half of the disputed amount.
It can turn into a protracted showdown, if history is any indication. In 2015, South Africa’s MTN Group was fined $ 5 billion for failing to unregister subscribers in Africa’s most populous nation without proper registration. While the continent’s largest mobile phone provider finally agreed, after months of negotiations, to a much lower fine, its shares have not fully recovered.
“Nigeria, although it is the largest economy in Africa, has comparatively very low levels of tax collection,” said Greg Davies, fund manager at Cratos Capital Pty. “This has sometimes led to difficult situations for South African companies operating in the country. The South African government should talk about this, as it potentially also has an impact on the pension funds invested in companies like MultiChoice ”.
MTN continued to have disputes over taxes and dividends withdrawn from Nigeria, its largest market.
Nigeria’s tax revenue as a proportion of gross domestic product is one of the lowest in the world, according to the International Monetary Fund. The government of President Muhammadu Buhari collected 8.26 trillion naira ($ 20 billion) in taxes last year. That compares with South Africa’s $ 85.3 billion.
And it’s not just the fiscal battles that South African investors are concerned about. Earlier this year, Shoprite Holdings, Africa’s largest food retailer, followed at least four other companies out of the West African nation after struggling with supply chain disruptions and repatriation of funds.
The Nigerian Federal Internal Revenue Service imposed the sanction on MultiChoice as a condition for an appeal to be heard in a Lagos court. The next hearing is September 23rd. The shares fell 8% to a nearly 11-month low in Johannesburg on Wednesday.
The pay TV provider continues to be in contact with authorities, the company said in an emailed statement. The firm is the operator of DSTV, a satellite television provider in sub-Saharan Africa that shows English Premier League football, US hit dramas and local content.
Nigeria’s tax authority asked lenders to freeze MultiChoice’s local bank accounts to recover alleged tax arrears last month. The decision was made after the company refused to grant access to its servers for an audit, the Nigerian Federal Internal Revenue Service said at the time.
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