South Africa’s mobile operators, MTN and Vodacom, have highlighted the need for local smartphone production and reduced import duties to make devices more affordable for consumers. With high costs driven by import taxes, currency fluctuations, and logistical challenges, the call for change is growing louder.
The Case for Local Production
Currently, only a small fraction of smartphones sold in South Africa are locally assembled. Vodacom revealed that locally assembled devices account for just 5% of its smartphone sales, while MTN confirmed that it sells Mobicel devices, the only smartphones assembled in South Africa.
Mobicel, founded by Ridhwan Khan in 2007, has been a pioneer in providing affordable smartphones to the South African market. The company offers devices like the Mobicel 8 (R499), MX1 (R599), and P5 (R799), which, despite their limited specifications, provide essential smartphone features such as touchscreens and app access.
However, South Africa’s local manufacturing landscape remains limited. Mara Phones, another local manufacturer, shut down in 2022 due to low market uptake and unmet tender expectations. This leaves Mobicel as the sole player in the local assembly space.
The Impact of Import Duties and Taxes
Both MTN and Vodacom have pointed to high import duties and taxes as significant barriers to affordability. Vodacom stated, “Lowering import duties and taxes (e.g., luxury goods duties and VAT) on smartphones can significantly reduce retail prices, making them more affordable for consumers.”
MTN echoed this sentiment, adding that logistical and distribution costs, exacerbated by poor infrastructure and geographical challenges, further inflate prices. The company emphasized the need for measures such as reducing import taxes and encouraging local assembly to make smartphones more accessible.
The luxury goods tax, or ad valorem duty, is a particular pain point. Applied at a flat rate of 9% on technology products, this tax has been criticized for making smartphones unaffordable for many South Africans. Communications Minister Solly Malatsi has been advocating for its removal to ease the financial burden on consumers.
Market Dynamics and Competition
Samsung dominates South Africa’s smartphone market with a 52.57% share, followed by Apple (16.6%), Huawei (10.71%), and Xiaomi (3.49%). Increased competition, driven by the entry of new brands and improved offerings from mobile operators, could help drive prices down.
Both MTN and Vodacom believe that fostering greater competition and supporting local manufacturing are key to reducing smartphone costs. “Greater competition in the market, supported by the entry of new brands and improved mobile operator offerings, could drive prices down,” MTN said.
Mobicel’s Role in Affordable Connectivity
Mobicel has been instrumental in bridging the affordability gap. By offering budget-friendly devices, the company has made smartphones accessible to low-income consumers. Its smart feature phones, starting at just R179, provide essential smartphone functionalities at a fraction of the cost.
Ridhwan Khan, Mobicel’s founder and CEO, recognized the need for affordable connectivity in South Africa’s underserved markets. Eighteen years later, the company continues to fulfill its mission, proving that local assembly can play a vital role in addressing affordability challenges.
The Path Forward
To make smartphones more accessible, South Africa must address several key issues:
- Reduce Import Duties: Lowering or eliminating luxury goods taxes on smartphones can significantly reduce retail prices.
- Encourage Local Production: Supporting local assembly and manufacturing can create jobs and reduce reliance on imports.
- Improve Infrastructure: Addressing logistical challenges can lower distribution costs and make devices more affordable.
- Foster Competition: Encouraging new entrants and competitive pricing can drive down costs for consumers.
{Source : MYBROADBAND}
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