Inside Business Africa INSIDE BUSINESS AFRICA APRIL 2019 - Page 6

Business and Economy I N S I D E B U S I N E S S A F R I C A Meeting the target Why FG couldn’t achieve 2018 revenue target –Udoma Sen. Udo Udoma, Minister of Budget and Planning T he Minister of Budget and National Planning, Senator Udo Udoma, explained why the Federal Government could not achieve its 2018 revenue target, stating that some one-off items listed for implementation in the fiscal year could not be actualised. He gave the one-off items to include the N710bn from Oil Joint Venture Asset Restructuring and N320bn from the revision of the Oil Production Sharing Contract Legislation. The minister said the one-off financing items had already been rolled over to the 2019 budget. The 2018 budget, signed by President Muhammadu Buhari on June 20 last year, had total spending of N9.1tn. The capital expenditure was to gulp 31.5 per cent of the total expenditure at N2.87tn, while recurrent non-debt spending was put at N3.51tn in 2018. There was also a provision of N2.01tn for debt servicing, which is 21 per cent of the total budget while a provision of N177bn to retire maturing bond to local contractors was made by the government. The N9.1tn budget was expected to be financed from N2.99tn to be generated from oil revenue, N31.25bn from Nigeria Liquefied Natural Gas dividend while N1.17bn was expected 6 u t APRIL1 4 - 28, 2019 Management THE MAGAZINE 0F THE CORPORATE WORLD to be realised through revenue from minerals and mining. To fund the budget, the Federal Government had planned to generate N658.55bn from Companies Income Tax and N207.51bn from Value Added Tax and N324.86bn from Customs while N57.87bn was expected to come from federation account levies. In the same vein, the government was expected to raise N847.95bn through independent revenue from its agencies, while tax amnesty income, signature bonus and unspent balance from previous years were to provide N87.84bn, N114.3bn and N250bn, respectively. Speaking during a meeting with the House of Representatives Joint Committee on Finance, Appropriation, Planning and Economic Development on the 2019 revenue and expenditure projections as contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper 2019-2021, the minister stated that the Federal Government was determined to improve its revenue generation this year. Details of the fiscal operations of the Federal Government as contained in the Central Bank of Nigeria’s economic report for the fourth quarter of 2018 showed that the government had not been able to generate adequate revenue to meet its expenditure. For example, in the first quarter of last year, the Federal Government’s retained revenue was put at N884.88bn while its expenditure was N2.01tn. This resulted in a fiscal deficit of about N1.13tn. In the second quarter of last year, the Federal Government earned N1.12tn while its expenditure was N1.63tn, resulting in a deficit of N504.8bn. For the third quarter, the revenue of the Federal Government was put at N1.03tn with the expenditure of N1.89tn, leading to a deficit of N855.09bn. For the fourth quarter, the fiscal deficit widened to N910.4bn as the government was only able to generate N916.44bn to take care of its total expenditure of N1.82tn developed-country standards. Little wonder that China is already the world's largest market for rides ordered from a smartphone. Both Alibaba and Tencent are investors in Didi Chuxing, the world's biggest ride- sharing company. It has over 550m registered users and provides 30m rides a day, dwarfing the 15m Uber provides worldwide. Didi has spread across South- East Asia and invested in India and Europe. In March the two big tech firms teamed up with faw, Dongfeng, Changan and other investors to sink $1.5bn into a competing ridesharing venture, spreading their bet. Ride-hailing on this scale may be bringing about a structural shift in the car market; people buy with an eye for others as well as themselves. According to Roland Berger, a consultancy, in 2017 around 10% of all cars in China were "shared"; that is, either taxis or used for ride-hailing, car- sharing and similar schemes. That is ten times the number in the West. If the world is making a decisive turn from the goal of everyone owning cars to the goal of everyone being able to access mobility when needed, China is well ahead (see chart 4). As well as investing in ride hailing, the tech giants are also ploughing money directly into carmaking. Baidu and Tencent are investors in nio, the most promising of the "Chinese Teslas". Xpeng, wm Motor, Byton and others all intend to produce cars which both epitomise and extend the smartphone way of life. The tech sector is not only interested in batteries. Its investors have made large investments in pedal power, with mixed success. A vast fleet of rentable bikes has sprung up over the past three years-as have mountains of their abandoned carcasses. Mobike, partly financed by Tencent, now has over 230m registered users, mostly in China. Ofo, its largest and Alibaba-backed rival, is teetering on the brink of bankr uptcy. Whether such businesses can persist when their rental incomes fall far short of the capital costs remains unclear. If they can, it will be because of the value that tech firms capture from the data they provide. Providing the best advice on when to get on a bike, when to wait a minute for a bus and when to hail a Didi would bring with it an impressive flow of cash. The tech giants are also making strides in autonomy. Baidu and Tencent have been testing self-driving cars on public roads since the start of last year. Like Lyft and Uber in America, Didi is aiming to build autonomous robotaxis. In partnership with King Long, a bus company, Baidu is also deploying driverless shuttles in several Chinese cities, including Beijing and Shenzhen. They hope to introduce them on Japanese roads in 2019. McKinsey, a consulting firm, reckons that China lags two or three years behind America in autonomous driving. Companies like Waymo, Google's self- driving unit, still have an edge. But Chinese artificial-intelligence research, the field that autonomy most relies on, is in general impressive. It is another of the ten "Made in China 2025" industries, and if that proves a help, rather than a loser-backing hindrance, it may well soon be second to none. Chinese companies are also working hard on the other technologies autonomy will require. Alibaba, Baidu and Tencent all own high-definition mapping companies. RoboSense, a startup in which Alibaba, saic and baic, another carmaker, have all invested, is taking on Western firms developing the lidar sensors that tell autonomous vehicles about their surroundings. Most crucially China is becoming the world leader in 5g mobile- communications technology, which is expected to be vital for the lightning-fast connectivity that autonomous cars will require. In this field, too, the weakness of Chinese carmakers may be a sort of strength. In the West co-operation between tech firms and carmakers is wary; neither wants to give too much away. But China's dominant tech firms are close collaborators with domestic vehicle- makers-and indeed foreign ones. Non- Chinese carmakers are starting to run tests in Chinese cities rather than in Europe and parts of America, where the rules are tighter. Roadstar, which is testing self- driving electric-vehicles in Shenzhen, and Pony, which is developing autonomous taxis in Guangzhou, are tapping into tech talent in Silicon Valley. Baidu has been developing Apollo, an open-source self- driving system which it hopes to establish as an industry standard, in California since 2015. Daimler, bmwand Ford have all agreed to sign on. China's plan is to create an ecosystem for mobility, one comprised of cars, apps, data, standards, communications and more, that can be deployed anywhere around the world. If the carmaking world were facing just one vast technological change, such ambition from a country with a short track record might seem hubristic. But the combined challenge of electrification and autonomy is stretching Western incumbents enough that some, maybe many, will snap. China's carmakers and tech giants will face stiff competition from those Western counterparts that are at the forefront of the race to create the future of mobility. But if Chinese firms do it faster and cheaper than their competitors, the evidence of their existence will not only stretch along Chinese roads but the highways of the rest of the world. SOURCE: ECONOMIST t 47 u APRIL1 4 - 28, 2019