Ghana E-Levy on electronic transactions starts from May 1st

The government said the levy will help raise 6.9bn cedis (£700m) this year, a small dent in the country’s £39bn public debt, but enough to avert the need for a loan from the International Monetary Fund, according to analysts. Yet the tax has been widely unpopular, coming at a trying time for millions of people and focusing growing criticism of President Nana Akufo-Addo’s government.

Ghana’s economy, often lauded by officials as one of the most thriving in Africa, has faced big challenges in recent years, in part caused by the impact of the pandemic. Inflation reached 15.7% in February, the highest since 2016, fuelling a cost of living crisis. Ghana’s currency has depreciated by 20% over the past year.

In a state of the nation address on Wednesday, the president acknowledged the challenges. “The Ghanaian people are anxious about the economy, the cost of living, income levels … We are aware that we are in difficult times, and we are addressing the situation.”

The government has said the policy will widen the tax base in Ghana to include the informal sector, where around 85% of Ghanaians are employed. But it has been roundly condemned by the opposition, trade groups and civil society, who say it will hit Ghanaians already struggling, and risks reversing the trend towards digital transfers.

Ghana’s government has heavily promoted mobile and digital payments, spurring a fast-growing industry. Financial technology firms and startups have attracted millions of dollars in funding. Some commentators have expressed concern the e-levy could dent the sector.

Mobile phone payments have become ubiquitous in a country where only 42% of people have a bank account. The Covid pandemic has only entrenched its importance. In 2020, the total value of transactions by mobile was more than 500bn cedis (£50bn), and more than doubled the following year.

Mavis Bampoe, 51, founded the Vision Montessori school in Accra 10 years ago. “Before coronavirus, I used to have parents queueing at the cashier’s cubicle to pay school fees,” she says. “Then parents transitioned to making mobile payments that were faster and more convenient”.

But they have already begun reverting to cash payments in recent months, she says, since it became clear that the e-levy was coming. “If a parent wants to pay fees, they must first transfer money from their bank account to their mobile money wallet. That attracts a charge from the telecoms companies, plus another 1.5% of the e-levy.

“After the money has been transferred into their wallet, that parent will now have to send it into my school’s wallet, and that is going to attract another telecoms charge, plus the 1.5% e-levy.”