It all started with the image above by Visual Capitalist that trended on social media towards the beginning of July. Malawians came to believe that they pay the highest rates for internet services in the world. Since then, Airtel Malawi and TNM have come under the spotlight. Not only have people come out to talk about how costly data bundles are, but also others have complained about how sometimes data bundles disappears, once bought, before they even use them.
Of the two issues, what caught my attention was the issue of the cost of data bundles. As a matter of fact, when he visited MACRA offices on Monday, July 20th, Minister of Information Gospel Kazako directed the communications regulatory body in the nation to ensure that internet service providers and mobile operators reduce data charges. While service providers have complained about high taxes, the Minister said despite those taxes, these companies still make exorbitant profits. In the past few days, some customers of Airtel have gone as far as to write the company, telling it that its charges are astronomical and unjustifiable.
All of this got me thinking: Is the cost of data bundles in Malawi really the highest in the world? If so, what could explain this outcome? Are services providers right to attribute the lofty prices they charge to the high taxes they face in the country?
In my attempt to answer these questions, I decided to focus on Airtel Malawi, a subsidiary of Bharti Airtel which has branches in 14 other African countries. My focus was simply to compare costs of data bundles.
However, before I get into that, let me dispel two misconceptions. The first one has to do with what pushed the discussion of the costs of data bundles into the limelight. In the image above, it is said that Malawians pay $27.41 for a 1 GB data bundle. This is just flat out wrong. The exchange from dollar to kwacha is about K735.00. This means if we go by what is written in the image, Malawians pay K 13,359.65 for 1 GB! To say that this is a gross exaggeration is an understatement.
The second misconception has to do with what Mr. Kazako said when he visited MACRA offices. According to MBC, in comparing the costs of a 1 GB bundle between Tanzania and Malawi, the Minister said, “In Tanzania people pay 4 US cents while in Malawi people pay 80 cents.” The costs the Minister gave are wrong. After looking through the websites of Airtel Tanzania and Airtel Malawi and converting the local costs to dollars using an estimate of today’s exchange rates, the cost of 1GB in Tanzania is US$ 0.66 whereas in Malawi it is US$ 3.40. Now if you are a math person, you will look at the costs the Minister gave and my calculations and conclude that the ratios of the two are basically the same. However, the point is, if we are to truly analyze the costs Malawians are paying for internet bundles, we have to get the numbers right. Just for the sake of comparison, in Zambia Airtel customers pay US$ 1.37 for 1GB.
It is clear from the discussion in the preceding paragraph that Malawians are paying more for internet in relation to residents in neighboring countries. However, does this mean Malawians pay the most in the entire world? Not quite. For example, in Chad, 1 GB costs about US$ 3.49, which is higher than it costs in Malawi. In fact, this pours more cold water on that popular image that claims Malawians pay the highest rates, because in that image, Malawians are said to pay more than Chadians. So no, Malawians do not pay the highest rates in the world when it comes to data bundles.
But of course the rates in Malawi are second highest among the countries mentioned so far. In a special interview with TTV on July 9th, TNM Plc. CEO, Michiel Buitelaar mentioned low numbers of subscribers and high taxes, among others, as reasons why internet bundles in Malawi cost higher than in other countries. Let us look at each of these points in detail.
On low numbers of subscribers, Mr. Buitelaar was correct. According to data from the World Bank’s World Development Indicators database, as of 2018, Malawi had the lowest proportion of mobile cellular subscription at 39 per 100 persons, among all 15 African countries where Airtel operates. The proportion of people who regularly use the internet is even lower. For context, in neighboring Tanzania and Zambia the proportions of mobile subscriptions stand at 77.2 and 89.2, respectively. The low rate of subscribers poses a challenge to service providers in Malawi as they have to rely on a small proportion of the population to generate revenue. So companies have to charge higher prices to cover investment costs. In that vein, it should not be surprising to see Malawians pay higher for internet bundles in relation to people in neighboring countries.
On taxes, however, getting reliable information on just what the tax rates the MRA levies on corporations was a bit of a challenge; the MRA does not publish such information on its website. That said, according to Trading Economics (https://tradingeconomics.com/) corporate and sales tax rates in Malawi, Tanzania, and Zambia are respectively as follows: 30% and 16.5%, 30% and 18%, and 35% and 16%. This suggests Malawi’s tax rates are in the ballpark of those of its neighboring countries.
So what can we take from this analysis? One thing is that it is true that Malawians do face higher rates for internet bundles compared to their counterparts in neighboring countries. That said, the difference can partly be justified considering the low rate of mobile services users the country has, which implies service providers face higher average costs. On the impact of taxes, however, the jury is still out. Also keep in mind that the analysis conducted here is not exhaustive. The exploration did not take into account things like cross-country tariff rates and wage differences, transport costs, and other costs of doing business that could further explain the differences in the costs of internet bundles across countries.