We recently wrote an article pointing out that Kwesé is not a Zimbabwean company. Responses to that were surprising. You can go read the comments if you haven’t already and you’ll be entertained at the very least. There were so many comments they could not be responded to individually and so here goes
Many did not see the point of the article because they already knew that Kwesé is a Mauritian company. They forgot however that not everyone knew this as some other comments showed.
Some felt that by pointing it out the aim was to distance Zimbabweans from Kwesé. They felt the article sounded like BAZ trying to smear Kwesé. All this from saying the company is not registered in Zimbabwe. How does stating a fact achieve that, I wonder?
So to make it clear, the intention is not to dampen interest in the pay-TV company. It is JUST statement of fact that Kwesé is not a Zimbabwean company. It is not an opinion. It is not meant to belittle the achievements of son of the soil Strive Masiyiwa.
Why should we care if Kwesé is registered in Zimbabwe or not?
First off whether they are registered here or not, when one is making the decision on which pay-TV service to go with between Kwesé and DStv, cost and quality of content should be the main bases for that decision, not country of registration. To aid that comparison we made comparisons you can go read. Cost comparison and content comparison.
So if not to choose which service to go with then why care? To better understand the genius of son of the soil Masiyiwa of course. Not a joke. We want to understand better the group corporate structure and as aspiring business-people ourselves try to learn the rationale for the decision to not register in Zimbabwe or South Africa.
The decision to register in Mauritius was not because they were hampered in their goal to launch Kwesé TV in Zimbabwe first. Yes, the intention was to launch the service in Zimbabwe first but Kwesé the company was never going to be registered in Zimbabwe. We shall look at why that is.
So why Mauritius?
The effective tax rate in Zimbabwe (accounting for Aids Levy) is 25.75% and the corporation tax in Mauritius is 15%. Already there is 10.25% of reasons why Mauritius and not Zimbabwe.
In Mauritius, they could either register the company as a GBC Category 1 or 2. Registering a GBC1 company is what makes the most sense for the Econet Group or Econet Media (Kwesé TV.)
A GBC1 company is liable to the above-mentioned 15% corporation tax but such a company would be entitled to receive foreign tax credits in respect of foreign-source income which could reduce the effective tax rate to 3%. Yes 3% tax.
The benefits to registering as a GBC1 company:
- Only 3% tax if well structured
- Access to Double Taxation Avoidance treaty (Zim has treaties with some countries but not as many as Mauritius)
- No Capital Gains Tax
- No Withholding Tax on dividends, interest and royalties
So from the little we have looked at it made all the business sense to register Econet Media (Kwesé) in Mauritius. Who wouldn’t want to pay less taxes? Is this strategy of registering in these tax havens something we should understand? Absolutely.
The tax haven strategy is not without its detractors though. Some argue that these tax havens as used to avoid double taxation but sometimes also lead to double non-taxation. Multinational corporations like Econet may end up not paying any tax from certain operations. Of course Mauritius would get its fee but the nation where the income was generated would be out of luck.
The argument is that these corporations should pay tax in the countries they generate their income. The promise that the tax savings, which some argue would have been abused by a government like our own, would then be reinvested in those countries via corporate social responsibility activities hardly ever is the case. There are various more arguments against tax havens but we cannot go into all of them.
The tax position is not the only reason why they chose Mauritius, there are other countries with favourable tax laws, some with even lower taxes. There are other reasons, political stability being a big one too. Zimbabwe is not the most stable country in the world. A lot of other factors work against Zimbabwe.
Strive Masiyiwa
There is no question that Strive Masiyiwa is an astute businessman. He has been unfairly targeted by our government and that did not stop him from touching the lives of many, Higherlife Foundation (Carpenaum Trust) being an example. We all are familiar with his story.
Should that story mean the man is never wrong, or that he should never be called out? No. The Kwesé is not Zimbabwean story was not even a calling out. It was supposed to stimulate conversation on corporate structures, tax havens and other such business matters.
Let us not be quick to defend him when he doesn’t even need defending. The man was not under attack. Nor was his legacy. Even when he is under attack, which he wasn’t in this case, he is not above being called out.
Do we need heroes in Zimbabwe? That’s for you to decide but if we do then in the words of Cold War Kids,
Don’t lift your heroes up so high that you can’t touch.
A small thing to note
So maybe corporate structures do not interest you then that’s you, do you dearly beloved. Some care about that stuff though. You say you do not care where Kwesé is registered and that you will support the company no matter what. Good. You do that.
Kwesé or Econet group for that matter not registering in Zimbabwe reflects poorly on our government and its policies more than anything else. No wonder that Foreign Direct Investment is not forthcoming if even mwana wevhu (son of the soil) Strive Masiyiwa is choosing to register his companies outside the country, depriving Zimbabwe of some much needed tax to buy luxury cars for ministers.
17 comments
Im sure we can also dig this info up for ourselves via respected online business sites/blogs etc, so why repeating it here? business must be slow for you guys, no ad revenue?
So what do you want them to write about. Some of us prefer to read that ‘repeated’ info from Techzim
well then techzim must keep rewriting old stuff , and readers that enjoy reading old news must keep reading it, birds of a feather i suppose!
I don’t have the time to surf around looking for this info. Techzim has summarised it for me and that’s something commendable. Tara nePHD syndrome yako
It’s shallow to draw out PhD-syndrome-card for any form of criticism that doesn’t sit well with you, Leonard.
If anything, it indicates failure to reason
I find this topic getting a bit boring. Sounding like it’s a conflicted person trying to justify one statement over the other…if anything, looks like you’re arguing with yourself.
The last paragraph was well said. It reflects poorly on our Government that Kwese decided to register in Mauritius. It also reflects worse that our beloved Government is making serious efforts to sabotage the operations.
Zimbabwe is a sad place to be
Thanx for the update we hve been wondering that why Masiyiwa is being blocked from bringing in Kwese TV in Zimbabwe yet he is our fellow Zimbabwean. But anywhere the truth of the matter has been revealed and certainly its not a problem. But the honest truth is for sure our beloved Zimbabwe should benefit something in terms of tax so its policies should be adhered to so that our country can move forward. The bottom line that binds us all for unity of purpose as Zimbabweans is developmental agenda and this can only be achieved through tax from various business entities. I’m not a politician or what but this is a fact. Thanx keep on updating us.
I think the writer did not clarify some issues properly because some people seem to have the impression that Econet is not paying taxes to Zimbabwe government. For the record Econet is one of the largest contributors to ZIMRA through VAT and other taxes..
We have better things to worry and be concerned about Leonard Sengere .Rather make efforts to mobilize people to go and register to vote .These articles do not change our economic environment and poverty in this country. Kwese as much as you might attack or bring the issue again and again – its there to ease the unemployment crisis we already have in the country .Mind you hundreds are able to go back home and feed their families since the launch of Kwese and its evident .Get a life Leonard Sengere…. To bad you see yourself shining and gaining popularity over such stupid ,lousy thinking .Do your evaluation well ,you are tarnishing your image Baba.
Its TechZim and would expect IT related stuff and not Company secretarial issues that are out of your realm.
Its a legal requirement that all companies operating in Zim be registered in Zim. The parent company yes can be registered elsewhere. It’s only profits that can be remitted to the parent company, subject to government’s rules and regulations.
So I dont see how Kwese registering in Mauritius reflects bad on Zim Gvt or even the owner. Its a known practice world over. The question is, is it morally good/bad???
But the key word is “Profits”, what is this Profit?? Its after a company has deducted expenses from Revenue. And part of those expenses is Salaries, which have a direct impact on the economy and some downstream effects.
The expenses or operations will require procurement and who will benefit? Zim companies. So please do not look at Tax only. There is a lot that businesses do to help countries and here i talk of profit making and loss making businesses.
No one said Strive is beyong reproach, Im yet to see an article from you about Some other Zim business people. If you do your research you will know so many local businesses have offshore parent companies. Can we get articles on that. Let’s apply the same rules to everyone, not to pick and choose.
When you say we are defending the man like he should not be called out, according to the Law of binary opposition, the opposite is true, you surmise he should be called out, and where, how and why? Your article : “Kwese is not Zimbabwean”
Lastly, as Zimbabweans lets learn to agree that we disagree and move on and not continue trying to shove down our throats yo interpretation of Kwese’s Business or Tax Strategy.
We all differ and writing two follow-up articles on the same subject is something else. Personally I would have given you credit if this latest article had done justice and researched and also gauged the mood. Your first article came in the aftermath during of Kwese fighting BAZ or BAZ fighting Kwese. We all know Zim is highly polarised and politicised, clearly an article with that headline and scant on details should not have gone past the editor.
I feel your article is may be not well balanced though informative.You suggest that Kwese is looking for more favourable tax regime.Just looking at this though remember Mr Dish is responsible for the distribution which means for each sale they have to pay VAT and also correct me if i am wrong but Mr Dish the distributor at the end of the day also has to pay corporate tax.I could be wrong on this as i am not a fincance person but in a way i feel Kwese pricing for its products has already factored the above so indirectly they still paying tax in Zim at the same corporate tax rate.
We can look at the tax incentive but i do not think it was the main reason i think there were a host of other reasons as you have rightfully mentioned in your article.
I think your article would have been more balanced had you mentioned them,as mentioning and expanding on the favourable tax regime alone makes it sound as if that was the main reason.
Here is my own personal views on why i think Kwese registered in Mauritius (I say Kwese as i do not think this is Strives’s idea alone.I believe Kwese the brand is bigger than Strive the individual).
Nway here are my reasons:
1.Open up for local startups – some have always complained of the monolpoly of econet and thus maybe in this case they have decided to “subcontract some of their business to independent players”.This in a way builds up a strong ecosystem reducing marketing and distribution cost significantly and at the same time allows locals to have a fair share in the business revenue.
2.Access to markets – with the battered Zimbabwe image and political instability it is difficult for companies to raise cash for growth etc and thus it makes business sense to register in a market were there is stability and easy access to markets for raising funds.
3.Transactional efficiency – In this i am mainly looking at the banking and financial sector.Its important to note that Kwese has to pay content producers (the likes of ESPN) etc.If they had registered in Zim it would have been virtually imposiible to do so,to be fair they would have not expanded at the rate at which they have as all their cash would be stuck in Zim.They probably would have failed in the first year.
4.Corruption – we all know (deny it as much as they want) that zimbabwean ministers ask for kickbacks for a deal or licence to be approved.Maybe registering in Mauritius was more convenient because of the low levels of corruption in that country.
5.trade embargoes – we cannot overlook this as some companies eg in the US may be restricted from doing business directly with Zim companies (i could be wrong its just my view) and thus to expand through Africa including zim it would make sense to register a business in a country like Mauritius that is currently immune from conflicts and that everyone wants to do business with.
6. – Infrastructure – we could also look at this and probably consider why it makes better business sense to register such a company in a location were there is better infrastructure and all.
I think I said it last time. Please do proper research when writing some of these articles. Last time u were talking of kwesé buying some production studio in S.A.. I mean really? come on. U clearly don’t hv a strong financial background which is understandable but do research proper. InnsCo even has a registered company in Mauritius. A lot of companies in Africa that are regional companies do it. AfriAsia is registered in Mauritius too. Companies do it to access capital. Economists say Mauritius is the only place in Africa where ESAP actually worked. Research on Mauritius more please. And stop defending yo self when u erred on your first article. And stop saying it’s not a Zimbabwean company I told u. It’s registered in every country it does business in making it a multinational corporation. The parent company might be registered in Mauritius but they do business from south Africa. And they are registered there too. Across sub-Saharan where they do business they are registered there too. I’ll give an extract from their own website so that you don’t just take my word for it.
(About Econet
Econet is a privately held diversified telecommunications group with operations and investments in Africa, Europe, South America, North America and the East Asia Pacific Rim, offering products and services in the core areas of mobile and fixed telephony services, broadband, internet, satellite and fibre optic networks. The company also has investments beyond the traditional telecoms sector, which include financial services, insurance, e-commerce, renewable energy, education, Coca-Cola bottling, hospitality and payment gateway solutions.
Econet was founded in 1993 by Strive Masiyiwa, who first came to international prominence when he fought a five-year constitutional legal battle leading to the removal of the state monopoly in Zimbabwe’s telecommunications sector. The landmark ruling is regarded as one of the milestones in the opening up of African telecommunications to private capital.
Econet subsidiaries include Econet Global, Econet Wireless International, Econet Wireless Africa, Econet Enterprises, Econet Media and the Liquid Telecom Group. Our focus is on the positive transformation of our customer’s lives and the communities in which we operate – “Inspired To Change Your World”.)
Team dziri kunyora macomposition mumacomment mapindwa nei ko?
kkkkk data interchange baba!!
I think Tech Zim should stick to Tech, that’s why I even subscribe to the blog, to get relevant tech news. Tech issues are not divisive. In the previous article the author almost (if he didn’t actually) ‘attack’ Zimbabweans for wanting heroes, that was very unnecessary, ok so what if we want heroes – is it wrong to want heroes, do we not have a whole acre for burying national heroes? Nevertheless, such issues are divisive, but tell me about Kwese TV and the ‘tech’ issues surrounding it, then I will be happy, that is not divisive. Yes Kwese TV is not a ‘Zimbabwean Company’ due to its corporate structure, but that is something I would not expect to be the main focus of a story, you can include it somewhere in the body, but let the main idea be technology and not the corporate structure – this is an article I would be happy to read in the Financial Gazette or the Business section of the Independent, and not on a technology blog.
Just a friendly FYI, Techzim officially expanded their range beyond strictly tech a while ago. Maybe if they see this they can post a link to the announcement, but from now on just take it for granted that the tech news you like will be punctuated with other content.
There is Econet Media Zimbabwe. You are getting it wrong altogether.