Google’s recent announcement by Chief Executive Officer of Google and Alphabet, Sundar Pichai, to invest $1bn in Africa has been hailed as a transformative milestone for the continent’s digitalisation. The investment plans of the US technology giant over the next five years will focus on enhancing connectivity, supporting African tech start-ups and entrepreneurs, and reaffirming Google’s non-profit commitments on the continent. Pichai also disclosed that Google has partnered with Safaricom to support the launch of the first “Device Financing” plan in Kenya, and proposes to roll out this initiative across Africa with partners like Airtel, MTN, Orange, Transsion Holdings ,Vodacom etc
One of the celebrated initiatives is the Google subsea cable project Equiano, stretching to South Africa, Namibia and Nigeria and St Helena connecting the continent with Europe and bringing faster Internet to more Africans at lower costs. For instance, the internet in Nigeria is expected to gain speed by five times. Another major impact will on the job front. The Google investment has the potential to generate up to 1.7m jobs as the continent’s digital economy develops. The tech leader will also invest $50m in its Africa Investment Fund for growth stage start-ups and offer $10m in low-interest loans to help SMEs overcome the COVID impact on their businesses.
The announcement is a logical extension of Google’s on-going support for Africa’s digital transformation and entrepreneurship since 2017. Google’s Grow with Google initiative launched in 2017 has trained over six million young Africans and small businesses in digital skills across 25 African countries.
Facebook’s undersea cable project called 2Africa, connecting 26 countries over 23,000 miles and linking the continent to Europe is another game -changer that can strengthen the digital backbone. Facebook is working on the project alongside Chinese state-owned telecom company China Mobile and South Africa’s MTN Group. These two projects hopefully will integrate the continent digitally with the rest of the world.
Despite the euphoria about Google’s investment decision, there are questions raised. The debate on whether Google should pay more tax in the African countries in which it operates has been revived. There has been severe criticism about giant tech firms such as Google, Facebook and Microsoft for paying low taxes in developing countries while they should be paying more corporate tax in these nations. ActionAid estimated last year a $2.8bn loss in tax revenue for 20 developing countries including 12 countries in sub-Saharan Africa. The tax gap was calculated on the basis of the three tech giants’ global profits, relative to their number of users and adjusted for countries’ GDP per capita.
The historic tax deal by G-7 nations in June fixing a global minimum corporate tax rate of 15%, is expected to end a system under which large companies pay low taxes in the country in which they are headquartered. Under the G7 deal, companies have to pay tax in any country where they make more than 10% profit on sales. However, African tax experts are not enamoured with the new deal and feel that it may not accrue a significant benefit for Africa.
Higher tax collection from Google would mean more money flows into Africa’s digital transformation. According to official estimates, the continent needs around $86bn in infrastructure investment to support universal internet access. Africa needs to explore ways to plug the tax gap. Probably, more African nations may have to consider options like Kenya that has unilaterally introduced taxes on tech giants. It has imposed a 1.5% tax on all digital services, regardless of where a company is based.
