Smartphones13.10.2024

Smartphone prices must be lowered in South Africa

Lowering the cost of smartphones is the key to bridging South Africa’s digital divide and improving Internet access on the African continent.

This is according to a column by Vodacom Group CEO Shameel Joosub, published by the Sunday Times.

Joosub points out that only 25% of the Sub-Saharan population has access to mobile Internet and that more than half of the group’s entire customer base doesn’t have a smartphone.

He says that this comes down to the cost of smartphones, as entry-level devices can consume 16% of monthly incomes in low- to middle-income countries, such as South Africa.

This can rise to 44% for the most financially vulnerable in the country.

Mobile network operators are, therefore, looking for affordable solutions to upgrade customers from older 2G and 3G technologies to allow for improved connectivity.

Joosub mentions ways to lower upfront payments of 4G handsets, such as device financing models, discounts, subsidies, and tailored payment solutions.

He also points to partnerships within the private and public sectors as impacting the price of smartphones.

“Developing local assembly and production plants can enhance 4G device affordability while creating jobs and boosting local manufacturing industries,” says Joosub.

The mobile operator recently launched a 4G-enabled cloud-based phone in partnership with local manufacturer MobiCel, which costs R249.

Despite not being a smartphone, the handset can access applications like YouTube, TikTok, and Facebook via the cloud.

Within the public sector, Joosub points to steep taxes as a major contributor to high smartphone prices.

In South Africa, smartphones are considered luxury items and, therefore, are taxed accordingly, receiving an ad valorem duty.

In the South African context, ad valorem is a tax on products deemed luxury items such as motor vehicles, electronic equipment, and cosmetics.

Conventionally, it’s just a tax based on the value of a transaction. The duty placed on smartphones is a flat 9%.

Shameel Joosub, Vodacom CEO

However, as Joosub points out, Internet access is a necessity, and smartphones provide the lowest barrier to accessing the World Wide Web, making it difficult for them to be considered luxury items.

Joosub is not alone in this view.

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.

According to Malatsi, the main incentive is to ensure South Africans have access to mobile networks in the future, let alone the Internet, given the country’s plans to migrate away from 2G and 3G technology.

“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.

“We’ve already had informal discussions with the Treasury about it. 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.

This happens in the case of TVs, as only those over R5,000 receive the luxury goods tax.

While Malatsi’s predecessor, Mondli Gungubele, said he wanted 2G and 3G completely decommissioned in South Africa by 31 December 2027, South Africa’s cellular network operators have lobbied for an industry-led switch-off.

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

Vodacom previously told MyBroadband that it supported the government’s more stringent control of imports and type approval of 2G and 3G devices.

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.

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