FacebookFB has confirmed its commitment to Uganda as a row rumbles on over a recently imposed tax on social media use in the East African country.
“Facebook is committed to Africa and our current connectivity work in Uganda,” a spokesperson for the social media giant told CNBC via email Wednesday. “We continue to maintain open and active lines of communication with the Ugandan government, the private sector and members of civil society.”
It was reported this week that Facebook was withholding intended investment in Uganda after a user levy on social media was introduced in the country earlier this year. The state-run Ugandan Communications Commission later tweeted that the news was fake. But, the body did acknowledge that it had met with Facebook and that “issues of taxation were discussed at some point.”
Facebook told CNBC that the comment from one of its officials that led to the original story was taken out of context.
The Ugandan government imposed a user tax on social media access on July 1. Citizens pay 200 Ugandan shillings per day (5 cents) to access Facebook, SnapchatSNAP, TwitterTWTR, WhatsApp and YouTube — among others — that are classified as over the top (OTT) services.
Payment is made via telecommunications firms’ mobile payment services. Some Ugandan users have been using Virtual Private Networks (VPNs) to get around the tax.
Uganda’s government has said that it has implemented the tax to fund public services, although critics consider the move oppressive and aims to stifle political dissent. Violent protests ensued following the tax’s introduction, and the government has said that the tax is being reviewed.
Social media for the ‘malicious’
Ugandan President Yoweri Museveni has repeatedly employed biting rhetoric against social media use. He is reported to have initially described the tax as one aimed at curbing “olugambo,” a local word for “gossip.”
“Social media chatting is a luxury by those who are enjoying themselves or those who are malicious,” he wrote in a statement dated July 4.
Social media use is depriving Uganda of U.S. dollars, he added. Users are “endlessly donating money to foreign telephone companies through chatting or even lying” and are “allergic to even a modest contribution to their country whose collective wealth they are misusing,” he said.
Uganda’s two biggest telecom firms are owned by South Africa’s MTN Group and India’s Bharti Airtel, Reuters reported.
The country “struggles with domestic revenue collection as a result of a combination of generous tax incentives for foreign companies, high levels of tax evasion, and a large informal and untaxed sector,” Patricia Rodrigues, East Africa analyst at consultancy Control Risks, told CNBC via email.
According to the World Bank in May, the shortcomings of Uganda’s tax system result in up to 40 percent of revenue being lost.
Facebook in Africa
Facebook, working with local partners, has recently completed a 770 kilometer fiber build in northwest Uganda to provide more than 3 million Ugandans with connectivity infrastructure. The social network says that this could also lead to cross-border connectivity to neighboring countries.
The social network operates its Free Basics program in 26 African countries including the continent’s two major economies, Nigeria and South Africa. Free Basics offers a skeleton of popular internet services to users in less economically developed countries.
Facebook owns social media platforms Instagram and WhatsApp, among others.
Uganda has about 23.6 million mobile phone subscribers, 17 million of whom use the internet, Reuters reported, citing the Uganda Communications Commission.
“Facebook may well be reconsidering its investment plans, and will probably weigh the cost of additional taxes on its investment decisions,” Trupti Agrawal, Uganda analyst at Economist Intelligence Unit, told CNBC via email.
“For companies in the technology and telecommunications sectors, working with a government that is perceived to be unfairly targeting lower-income individuals or opposition and civil society groups also raises reputational risks. These concerns could prompt other companies in to re-evaluate their planned investments in the country.” Rodrigues said.
She added that the social media tax could limit innovation in Uganda’s e-commerce sector.
Museveni, 73, has been in power in Uganda since 1986. Ultimately for Agrawal, the social media tax is linked to the president’s ability to maintain his hold over the country.