When government ordered a total internet shutdown on January 13, the aim was to lock-out the “vibrant” social media users and have absolute control of the flow of electoral information before and after the January 14 general election.
But the government sanctioned total internet lockdown had a severe an unintended consequence: It inflicted much pain on all government agencies and departments. A cautionary letter dated January 18, from the ministry of Finance to Prime Minister Ruhakana Rugunda detailed the depth and breadth of the damage the shutdown had inflicted.
Interestingly, that may have informed the government decision to partially restore the internet on the same day, January 18. Social media remains locked down to those without VPN services.
Mr Patrick Ocailap on behalf of the permanent secretary/secretary to the treasury (Keith Muhakanizi), wrote to Rugunda explaining in detail the “crippling effects of the internet lockdown on treasury operations, financial sector and businesses generally.
“I write to make reference to our telephone discussion this morning on the above matter. I did consult my minister about the same and he guided that I draw your attention in writing to the crippling effects of the internet lockdown on treasury operations, financial sector and businesses generally,” Ocailap wrote.
In the letter titled, Effects of internet lockdown on treasury operation, financial sector and economy, Patrick Ocailap said, “All government payments including statutory obligations e.g. debt and interest payments for both domestic and external borrowing, processing of pensions, salaries and wages, etc. cannot be paid.”
Ocailap said he consulted Bank of Uganda and Uganda Revenue Authority.
“And I can confirm that; the banks cannot carry out normal banking transactions e.g international settlements, forex transactions etc. thereby impairing their normal banking and payment activities.”
Bank of Uganda, the letter says, “cannot carry out any payment settlements and statutory obligations because most of their systems are equally shutdown.”
“Uganda Revenue Authority cannot collect and transmit revenue to the Consolidated Fund through the normal commercial banks operations,” Ocailap said. He said, businesses cannot file VAT returns and/or remit tax payments as appropriate and the web-based e-receipt system is non-functional.
“The above, among others, will definitely lead to substantial revenue and business losses in the economy; besides government defaulting on its statutory obligations.”
According to BBC, the Democratic Republic of the Congo lost an estimated US$ 3 million per day in 2018 when it shut down the internet. Uganda is projected to lose about US$ 6.5 million per day during this extended lockdown.
This is the third time Uganda is shutting down the internet. The first one was in February 18-21 2016. Government shut down social media and mobile money for four days. Another was on May 11-12, 2016.
Cipesa.org in a report titled; A frame-work for Calculating the economic impact of internet disruptions in Sub-Saharan Africa,” says Internet—especially social media—disruptions have become common in Sub-Saharan Africa (SSA). Since 2015, there have been confirmed disruptions in 12 countries in the region, with some disrupt-ing communications on more than one occasion.
Shutdowns are becoming more frequent, mostly initiated around election times (e.g. Chad, Gabon, Gambia, Republic of the Congo, Uganda), public protests (Burundi, CAR, Cameroon, DR Congo, Ethiopia, Mali, Niger, and Togo) and during national exams (Ethiopia).
The longest shutdown was recorded in Cameroon, lasting 93 days beginning, January 16, 2017. In a number of cases, security agencies work with national communications regulators to order the disruption, mostly citing national security or public order considerations, and referencing the regulator's powers to order service providers to interrupt services.
In Uganda, MTN and Airtel were ordered by the Uganda Communications Commission to shut down the internet. They issued statements to that effect. The Cipesa.org report says internet disruptions have taken many forms and are effected through orders to service providers to block access to selected services such as Facebook, WhatsApp, Twitter, and mobile money services, or to disrupt all online communication.
The report says most shutdowns affect the entire country, but Ethiopia and Cameroon in 2016 and 2017 respectively ordered disruptions that targeted regions affected by citizens’ protests. In Gabon last year, following a total shutdown, the government subsequently instituted a 12-hour-a-day curfew on internet access.
Shutting down internet and social media access—an increasingly popular choice for governments on the continent in response to protests and dissent—came at a cost of $2.1 billion last year (2019). Deliberate internet and social media blackouts lasted nearly 8,000 hours across Sub-Saharan Africa, according to an analysis in The Global Cost of Internet Shutdowns in 2019 report.
The report’s analysis excluded internet outages due to natural disasters or infrastructural failure. With losses of US$8 billion attributed to internet and social media shutdowns around the world, Africa accounted for around 25% of global economic impact.
It calculated the economic cost of blackouts using the Cost of Shutdown Tool (COST) developed by internet access advocacy groups, The Internet Society and Net-blocks.
In the private sector, the shutdown left telecom companies counting billions of shillings in lost revenue from data services (the internet) while a number of web-based businesses such as Uber and Safe Boda, saw their revenues tumble during the five-day blockade.
According to MTN’s annual financials for 2019, the telecom company made at least Shs 687 million ($190,000) in revenue from its data services per day. This kind of revenue was wiped away by the shutdown. “
Mobile data and MoMo (Mobile Money) both delivered double-digit revenue growth of 39.7 per cent and 13.9 per cent respectively. The phenomenal growth in data can be attributed to a 52.1 per cent increase in active users and a 2.2 per cent improvement in smartphone penetration to 21.4 per cent,” MTN’s group financial results note of Uganda’s performance.
There is no public information about Airtel Uganda’s financial figures as the company does not provide a country break-down. The growth of online internet services has been welcomed by the banks. A bank such as Standard Chartered has in the recent past closed a number of its branches in preference for its Straight2Bank online platform.
“Over 86 per cent of our client interactions with the bank now happen outside the branch,” Standard Chartered bank Uganda said in its 2019 financial annual report, pointing to the growth of its online platform. With the internet system off, many of these customers struggled to transact.
The shutting down of the internet also saw social media platforms go quiet. From a personal perspective, many customers have lost money due to internet bundles running out, or even their social media tax payments expiring. There appears to be no legal redress for this loss. Also, a number of small businesses market their products using social media platforms.
Many of these businesses, such as bakers of cakes, get their orders through social media platforms like Facebook and WhatsApp. However, the shutdown of the internet is likely to have briefly spurred the tax that URA charges on phone airtime. URA has in the past complained that many Ugandans prefer to use social medial applications to communicate, thereby hurting the tax revenue collections on phone talk time.
“Phone talk time was affected by the changes in user tastes. There is preference for data for communication through WhatsApp, Viber and Facebook as opposed to direct calls using airtime,” the URA noted in its annual revenue performance report for 2019/2020, decrying the 22.7 per cent year-on-year drop in tax revenue from phone talk time.
Uganda continues to promote the use of online services, such as banking and tax filings. Businesses are required to have filed their tax returns by the 15th of every month. With the internet shutdown, many businesses failed to beat this deadline. There was an interruption in the mobile money system in hours after the voting.
Like in 2016, during the election period, many people in Uganda could not send and receive money through mobile money. According to Bank of Uganda’s latest figures, at least Shs 284 billion ($76.8 million) is transacted across the mobile money platforms per day.
Like the URA annual report says, the interruption meant that some utility companies might have missed out on getting revenues. For example, supermarkets that allow mobile money payments missed out on revenues.