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Push for forex-indexed tariffs for telecoms sector

by Staff reporter
01 Aug 2021 at 06:47hrs | Views
THE government should allow telecommunication companies to charge some of their products and services in hard currency to allow them to repay mounting debts, meet foreign supplier obligations, and upgrade infrastructure, economic analysts have said.

This comes as Zimbabwe's telecommunications industry struggles to service a combined US$1 billion in debt, and to upgrade vital equipment because of severe foreign currency shortages.

Information Communication Technology and Courier Services minister Jenfan Muswere recently told Parliament that the foreign currency auction system was not helping telcos meet their daily foreign currency requirements.

"The foreign currency requirement of these companies is so huge that it cannot fully be obtained through the auction system," Muswere said.

"It is against this background that as government, we are encouraging telecommunication companies to be innovative and start manufacturing some of the components they require in order to reduce the foreign currency amounts they require."

However, market experts said the industry would continue to face infrastructure investment bottlenecks and deteriorating service quality, until it was allowed to sell its products and services in United States dollars.

Economist John Robertson said the government's lack of sound policies was slowing the pace of adoption of technological improvements, saying this was causing Zimbabwe to develop at a much slower pace than most other countries.

"For this reason, we are less competitive and less efficient than most countries and therefore we are a less attractive investment destination. A complete revision of all business-related legislation is urgently needed to permit Zimbabwe to join the race on equal terms," Robertson said.

"Our competitive future depends upon it."

Economic analyst Victor Bhoroma said the government's digitisation agenda may fail to take off if the ICT sector was not prioritised and supported with favourable policies.

"The service quality offered by telecom operators and their contribution to the economy is directly proportional to the way government policies provide incentives to entrepreneurship and the creation of an environment that promotes competition and investment," Bhoroma said.

"Anything else leads to mere compliance with regulation, short-changing customers and (causing) business downsizing."

He said the government needed to constantly review tariffs in line with inflation to ensure sustainability, growth and to maintain service quality in telecoms as operators needed to be viable so they remain afloat and continue to offer worldclass services.

"Policies should be reviewed to match Sadc standards in indirect and direct taxes on voice calls, broadband, mobile banking and text messages to increase service uptake," Bhoroma added.

Commentator Alex Magaisa said it would be better to consider giving the companies the flexibility to sell their services in foreign currency.

"The biggest challenge for this sector is that capital expenditure is foreign currency-denominated, while the provision of services is charged in local currency," Magaisa said.

"The problem is that there are severe shortages of foreign currency which affects the capacity of network expansion."

He noted that some of the challenges in the industry could be easily addressed if telecoms companies could build foreign currency reserves from selling their products and services in foreign currency, as this would allow them to service their foreign debts and procure equipment that was required to upgrade equipment and provide better service quality.

"The complaints regarding poor service provision reflect the dire state of the economy in which the companies are operating and the mismatch between the economic reality and expectations.

"When consumers complain over poor service provision, it is because the mobile network operators (MNOs) are struggling to maintain and upgrade their services because of the shortage of foreign currency," Magaisa added.

"If supermarkets, government departments, and fuel retailers have that flexibility, why should telecoms businesses be treated any differently, particularly when they have a greater need for foreign currency, considering the nature of the services they provide, which rely heavily on foreign debt and procurement?"

Source - the standard

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