Plan to cut smartphone prices in South Africa

Communications minister Solly Malatsi wants to see a threshold on the luxury goods tax charged on smartphones to make it more affordable for people to switch to 4G and 5G devices.

This will help migrate traffic off 2G and 3G, after which a deadline for switching off these legacy networks can be decided.

“One of my obsessions is looking at the declassification of smart devices as luxury items because they carry an additional tax,” Malatsi told MyBroadband during a recent interview.

The South African Revenue Service charges an additional ad valorem tax on smartphones, substantially increasing the price of devices relative to many overseas markets.

“We’ve already had informal discussions with the Treasury about it,” Malatsi said.

“We are not saying remove all the associated luxury goods taxes on smart devices, but have a threshold.”

A threshold would make devices over a set amount considered luxury items, attracting ad valorem, while cheaper devices would be exempt from the tax.

Malatsi’s comments regarding luxury goods taxes on smartphones were part of an answer about the deadlines for blocking 2G and 3G device imports and ultimately switching off these older networks in South Africa.

His predecessor and current deputy minister, Mondli Gungubele, set deadlines for banning new 2G and 3G devices from being brought into South Africa in its Next-Generation Radio Frequency Spectrum Policy.

First, Gungubele wanted type approvals on all new 2G and 3G devices halted by 30 September 2024.

This means the Independent Communications Authority of South Africa would no longer approve new 2G and 3G-only devices, effectively blocking them from being sold locally.

Devices already type-approved in South Africa can still be legally imported and sold.

After blocking type approvals, Gungubele wanted to ban networks from activating any new 2G and 3G devices on their networks on 31 December 2024.

The plan then makes provision for network operators to begin shutting down their legacy networks from 1 June 2025.

By 31 December 2027, he wanted 2G and 3G completely decommissioned in South Africa.

South Africa’s cellular network operators, through the Association of Communications and Technology (ACT), have lobbied for an industry-led switch-off of 2G and 3G.

While Vodacom and MTN have told MyBroadband that they support government intervention to help make 4G and 5G devices more accessible, they are not in favour of an arbitrary switch-off deadline.

Vodacom previously told MyBroadband that it supported government more tightly controlling imports and type approval of 2G and 3G devices.

“Government plays a key role in guiding this transition. The first step in the process involves managing the inflow of 2G and 3G devices into the country,” it stated.

South Africa’s two biggest network operators said they were already gradually migrating from legacy 2G and 3G technologies to modern 4G and 5G.

MTN has stated in a notice on its website that it aims to switch off its 3G network by 31 December 2026. It has not given a date for shutting down its 2G network.

Asked whether the DCDT’s deadlines were still being pursued, Malatsi said the traffic carried by 2G and 3G networks must decline first.

“For me, the key thing is that switch-off deadlines must be informed by evidence-based decisions,” he said.

“Because I come from a rural area, I know for a fact that in many rural parts of the country, 2G and 3G devices are still being used by millions of South Africans.”

This is because of two things: the affordability of 2G and 3G devices, and connectivity issues.

“So any movement towards a hard switch-off deadline, for me, will be risky while you still have that traffic.”

Malatsi said the conversation the industry should be having is enhancing universal access to 4G and 5G.

One of the necessary elements to achieve that is making smart devices that support newer technology more affordable.

“We need to make sure that we create the policy space for devices to be affordable so that we remove the first primary barrier to entry and then deal with the quality of infrastructure investment on broadband,” said Malatsi.

“So that once you have a device, you can have connectivity and that connectivity is reliable — and you can get almost the same quality of connectivity whether you are in affluent areas, or Diepsloot, or KwaMashu in KZN.”