The tax pushing up tech prices in South Africa

Apart from PCs and computer components, nearly all electronics imported to South Africa are subject to a 9% ad valorem or “luxury” tax.
That is despite certain technology products — including smartphones — becoming essential to the daily lives of people earning low incomes.
The ad valorem tax’s impact on smartphone affordability has caught the attention of communications minister Solly Malatsi.
In November 2024, Malatsi told MyBroadand he had discussions with the National Treasury about scrapping the tax — at least on some lower-value smartphones.
“We are not saying remove all the associated luxury goods taxes on smart devices, but have a threshold,” Malatsi said.
Malatsi’s stance was supported by Shameel Joosub, the CEO of South Africa’s biggest mobile network, Vodacom.
Joosub contends that cutting smartphone prices could help improve Internet access and bridge the digital divide.
The introduction of a minimum threshold value for the ad valorem tax on smartphones could help accelerate the adoption of 4G devices, which is key to the goal of shutting down 2G and 3G connectivity in South Africa.
The sunsetting of these legacy cellular technologies could open up scarce radio frequency spectrum for use by 4G and 5G, which not only offer faster connectivity but greater capacity.
With more network capacity, providers will be able to further reduce mobile data prices and enable more of the country’s population to use the Internet through their smartphones more frequently.
While most attention has been on reducing the import costs associated with smartphones, the ad valorem tax applies to nearly all categories of tech products.
It has also proven controversial for its application in the importing of cars valued at R250,000.
Of particular concern is that this amount was set as the minimum threshold for the vehicle ad valorem tax three decades ago and has not been adjusted for inflation.
Therefore, many cars that cannot be considered luxury vehicles by modern standards cost substantially more to import.
The rare exceptions
The only exceptions to the ad valorem tax in the tech sector are PCs and computing components — like RAM, storage drives, and graphics cards — which are both duty-free and exempt from luxury taxes.
They are only subject to VAT at a slightly higher effective rate than that which is imposed on locally-produced goods.
For imports from countries other than those in the SADC region, the VAT is calculated on the value of an imported item with a mark-up — referred to as the added tax value (ATV).
The ATV is equal to the declared value of the imported goods plus 10%. To calculate this, you must multiply the product’s declared value by 1.1.
For example, a laptop valued at $399 will have an ATV of $438.90. 15% VAT on that amount should be $65.84, which is roughly 17% of the value of the product before its mark-up.
The VAT formula used in this instance also applies to smartphones. Combined with the 9% ad valorem tax, the effective tax rate on imported smartphones is about 26%.
Fortunately, most tech imports — including smartphones — otherwise free of duties.
The only categories of tech products that do have duties are fully-assembled monitors and TVs, for which a hefty 25% duty applies.
When combined with the 9% ad valorem tax and 15% VAT, applied on the value of the product plus duty and a 10% mark-up, the total effective tax rate on imports of these items works out to 54%.
This tax was introduced in 2011 as a way to protect local monitor and TV manufacturers, who are still able to import parts for their devices at lower tax rates.
The table below summarises the duties and other taxes that apply to the main categories of tech products imported to South Africa.
Category | General duty | Ad valorem tax | VAT | Effective tax rate |
---|---|---|---|---|
Computer parts and peripherals | 0% | 0% | 15% on [product value plus 10%] | 16.5% |
Desktops | 0% | 0% | 16.5% | |
Digital and video cameras | 0% | 9% | 25.5% | |
Headphones | 0% | 9% | 25.5% | |
Laptops | 0% | 0% | 16.5% | |
Gaming consoles | 0% | 9% | 25.5% | |
Monitors | 25% | 9% | 54.6% | |
Smartphones | 0% | 9% | 25.5% | |
Speakers and microphones | 0% | 9% | 25.5% | |
TVs | 25% | Value under R5,000: 0% Value over R5,000: 9% | Value under R5,000: 45.6% Value over R5,000: 54.6% |