Orange pulls out of Niger over tax dispute – One of likely buyers is a tax avoider named in the Panama Papers

28 June 2019

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There is a tendency by African Governments to see mobile operators as a convenient cash cow that can be milked through taxes. The latest example is in Niger where two mobile operators were asked respectively for 50% and 70% of their current turnover. Russell Southwood looks at what happened and the likely buyers of the former Orange subsidiary.

As markets go, Niger is a comparatively small one with four main players: Orange (who entered in 2008), Airtel, Moov (Maroc Telecom) and Niger Telecom (a merger of former state incumbent Sonitel and Sahelcom). At the end of 2017, there were 8.78 million subscribers. Orange paid XOF13 billion for its licence.

In November 2018, the Nigerienne General Tax Directorate issued tax demands to Orange and Airtel. The Orange tax bill was for XOF22 billion (US$38.4 million) representing 50% of its current turnover. Airtel’s tax bill was for XOF62 billion (US$107 million) representing 70% of its current turnover. Moov does not seem to have been issued with the same tax demands or has perhaps just quietly paid.

The General Tax Directorate has not been very forthcoming about the basis for this tax demand although it has been described in local reports as a “tax adjustment”. Orange has described the tax denmand as “questionable” and said that it has always fulfilled its “fiscal duties according to the rules and regulations in force in Niger as the tax certificates delivered by the General Tax Directorate show.” The latter was unhappy with Orange and Airtel’s response to the tax demand and closed all of their offices in December 2018.

In January 2019 it was reported that Orange and Airtel had reached agreements on payments and their offices re-opened. However, in March Orange decided that it had had enough and made the decision to pull out.

A report in Africa Confidential names two potential buyers, Maroc Telecom having decided not to make an offer. It named the two potential buyers of the Orange subsidiary as Telecel Global and local businessman Mohamed Rissa Ali.

Telecel Global was founded in 2007 through the bringing together of NFS, the holding company of Telecel and what was Exxon Telecom. It is headquartered in Beirut but has offices in South Africa, the UK and the Dominican Republic.

One of its assets is the Telecel operation in the Central African Republic. The company has two Managing Partners Nicolas Bourg and Laurent Foucher and its CEO is Mohamed Dawish.

In March 2017 they gave a joint interview to Mobile World Live saying that they were raising US$100 million (or in some accounts 100 million euros and would invest in 4-5 African countries. One of them talked about an IPO taking place in Germany and about a potential merger with HPI, a German company. The IPO has not yet happened.

The company was listed as one of the potential buyers of state incumbent utl. However, the country’s Financial Intelligence Authority (FIA) disqualified it along with seven other buyers (including Mauritius Telecom), saying “the shortlisted companies do not have the required finances to capitalize the ailing utl.” At the time, utl had liabilities of UGX900 billion (US$241.43 million).

In terms of Telecel Global, the FIA concluded:” The Financial Intelligence Authority has not been able to obtain the company’s financial records to facilitate assessment of its financial strength. However, we have not received any adverse reports on Telecel Global indicating possible involvement in money laundering or terrorist financing activities”.

The other potential potential buyer is local businessman Mohamed Rissa Al, the owner of Rimbo Holdings, a bus transportation company. He was the original local investor when Orange first entered the country. In July 2016, Le Monde reported that his company had 45 buses and that he had started out in import-export.

In 2012, he was hit with allegations of customs fraud. The alleged method of fraud consisted of declaring a good as intended for re-export, which exempts the importer from payment of customs duties and various other taxes.

Once formalities have been completed, the goods, which should cross the border for its intended purpose, are found on the Nigerian market following what one local report described as “a few diversionary maneuvers”. According to a local expert, the repayment is the biggest method of fraud and annually causes the state a loss of several tens of billions of CFA francs.

In the case of the fuel at the centre of the allegations, his company declared it as departing for Burkina Faso. In some cases, the tanker trucks, after having left the customs office took the road to the Burkina Faso border but never made the crossing.

According to a 2016 Le Monde report, his name was at the heart of another financial scandal:”’Rimbo’ was arrested with 10 billion CFA francs in foreign currency. But without investigation by the authorities, the money was returned to him and his accomplices in the summer of 2015". This was condemned at the time by the national union of customs officers.

Following the publication of the Panama Papers in April 2016, it was revealed that Rissa had opened a Seychelles based company called Trenson LLC on 7 August 2008 and was both the director and legal guardian of the company. Seven months later the company’s name was changed to Trenson Investment & Trading Ltd. The activity of the company was listed as the transport of travelers in Niger.

Le Monde asks:”Why does Mohamed Rhissa invest his income in Seychelles, a territory suspected of being a hub for money laundering and tax evasion, and not in Niger? There is reason to wonder because the 2014 report by Global Financial Integrity indicates that tax evasion would have cost Niger - one of the poorest countries in the world - the equivalent of one billion and a half dollars between 1970 and 2008. ‘Rimbo’ contributed a lot (to that tax deficit)”.

The narrower telecoms industry issue is whether either of the potential buyers has the capital required to run a mobile operator in the country. Time will tell…

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