South African smartphone price pain

Mobile operators MTN and Vodacom have said that local production of smartphones needs to be encouraged, amongst other things, to make these devices more accessible to South Africans.

The network operators previously argued that locally producing smartphones would eliminate factors such as import duties and currency fluctuations that make imports more expensive.

Following this, MyBroadband contacted Vodacom and MTN to determine the percentage of devices sold on prepaid and post-paid contracts that have been manufactured or assembled in South Africa.

Vodacom said that while there are no South African manufacturers, “locally assembled devices contribute 5% of Vodacom smartphone sales.”

MTN did not indicate what locally manufactured devices comprise its sales but said it can confirm that Mobicel devices, which are assembled in South Africa, are sold on its network.

Mobicel, founded by Ridhwan Khan in 2007, is South Africa’s only local smartphone brand.

South Africa did have another local manufacturing facility for Mara Phones. However, it failed in 2022 due to “the lack of uptake in the South African domestic market coupled with a shortfall in tender materialisation.”

Mobicel was started when Khan noticed that South Africa had a massive market for mobile connectivity, but many people could not afford the devices on offer.

Eighteen years on, Mobicel is achieving its goal of making affordable devices available to South Africans.

The company offers some of the most affordable smartphones the South African market has to offer, according to a recent MyBroadband comparison.

These devices include the Mobicel 8 for R499, the MX1 for R599, and the P5 for R799.

While they offer very limited specifications, such as 1GB RAM and between 8GB and 32GB of storage, they provide users with features such as a touchscreen and access to smartphone-specific apps.

Mobicel also sells smart feature phones, which offer functions found in smartphones, starting at R179 for the C2.1 device.

When asked about other ways that smartphone prices can be lowered in South Africa, the networks pointed to high import duties and taxes.

“Firstly, 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,” Vodacom said.

MTN SA echoed these views of lowering taxes. However, they added that logistical and distribution costs caused by ailing infrastructure and geographical issues add to the problem.

“To reduce these costs and make smartphones more accessible, measures such as reducing import taxes and encouraging local assembly or manufacturing should be encouraged,” MTN told MyBroadband.

“Moreover, greater competition in the market, supported by the entry of new brands and improved mobile operator offerings, could drive prices down.”

The import duties referred to by both networks is the luxury goods or ad valorem duty, which communications minister Solly Malatsi has been advocating to remove for some time.

In the South African context, ad valorem is a tax on products deemed luxury items such as motor vehicles, electronic equipment, and cosmetics. A flat rate of 9% is applied to technology products.

Both networks also argued for increased competition to lower prices in the smartphone market.

Samsung currently dominates the market, holding a 52.57% market share, according to StatCounter GlobalStats.

The South Korean manufacturer overtook Nokia in December 2014, when the brand that once dominated dropped from its lion’s share of 68% two years earlier to roughly 27%.

Apple currently holds second place with 16.6%, followed by Huawei at 10.71%, and Xiaomi at 3.49%.