Tanzania’s Ubongo Kids never operated in Mauritius and never repatriated any money to the tax haven, despite reports by ICJ and several digital media platforms, CEO Nisha Ligon told TechMoran.
“The idea that we would be “extracting profits” and trying to avoid taxes is a bit wild,” Ligon told TechMoran. “While we did receive advice from KPMG and others on how to structure the company to be able to receive impact investment, at the end of the day it became clear that if we wanted to continue to serve bottom of the pyramid customers, we would not be able to generate the revenue that investors would want to see. So we converted to non-profit.”
Ligon believes the move to being a non-profit was absolutely the right one to make to be able to scale Ubongo Kids’ impact and organization. Ligon was responding to allegations that the firm was operating in Mauritius to extract profits and evade taxes.
The problem started when Ubongo Kids reached out to KPMG to set up in Mauritius. The fact is that Ubongo sought advice from KPMG regarding how it could set up in Mauritius to receive impact investment, however, the firm did not follow through with the plan or their recommendations, and never raised the investment round or received funds for the investment.
“We instead restructured as a non-profit,” she told TechMoran. “As you probably know, we are a non-profit enterprise and we produce and provide free edutainment to over 11 million families across Africa each month, annual report (PDF) herein attached. We spend a lot of money to produce this content and generate very little revenue from it because we choose to make it free on TV, radio and YouTube.”
Ubongo reiterated to techMoran that it undergoes audits every year and also expenditure verifications from third parties who monitor the grants that it has, and is very transparent and was sorry that ICJ and TechMoran took the reports on face value and ran without fact-checking considering Tanzania’s current political situation where foreign-owned companies and startups are being targeted, and in some cases, employees arrested– and the basis or evidence for any of this is very unclear.
To Ubongo Kids, the issue is not about reputation, but the potential ramifications for its Tanzanian employees after such misleading or untrue accusations are published.
What ICJ found was Ubongo Kids first step of incorporation in Mauritius but it never operated it, nor transferred any funds, shares, IP or anything else to it except for a single bank deposit of $150.
Though the information from the article is accurate, the Pan-African social enterprise never really set up shop in Mauritius.
“In 2015, after initial success distributing our free educational cartoon Ubongo Kids to over a million families in Tanzania and Kenya, we attracted the interest of donors and impact investors who were keen to support our growth towards our mission and vision. They would fund us to expand our production, create more edutainment programs, and grow by broadcasting these programs in more countries and languages in Africa. In order to facilitate this investment and growth, we needed to explore options of how we could structure our organization for Pan-Africa growth. We engaged KPMG (along with other advisors) to provide advice on structures for this. Some potential investors wished for us to have a parent that could receive and hold investment, so KPMG provided advice on how Ubongo could set up a parent company in Mauritius. This parent would receive international investment and then fund subsidiaries in other African countries,” Ligoni told TechMoran.
“Though the investors wished to proceed with this option and we began to pursue it, we determined midway through the process that this would not be the ideal structure for Ubongo’s long term growth and impact. We concluded that we would be better able to pursue our mission as a non-profit organization, and decided to restructure as a non-profit,” she added.
Ubongo Kids instead fully restructured to a non-profit, and this has since allowed the firm to grow its impact by freely distributing its educational media across Africa.
“We are very happy with this decision, and have grown substantially as a non-profit, managing to bring free edutainment to millions of more kids in 9 countries across Sub-Saharan Africa,” she told TechMoran. “Over 11 millions kids across Africa learn with our free educational cartoons and radio programs each month. We are a mission-driven organization and aim to expand across the continent to transform learning for 60 million kids in Africa by 2025.”