Good news for smartphone prices in South Africa

Cell C CEO Jorge Mendes confirmed that the ad valorem duty on low-cost smartphone imports has been removed in South Africa.

This is part of a series of changes finance minister Enoch Godongwana was expected to announce during his postponed budget speech in March 2025.

While the minister’s undelivered speech said the change would take effect on 1 April 2025, that budget proposal was never passed due to a lack of political support for a VAT hike from 15% to 17%.

During a Cell C media event on Tuesday, 13 May 2025, Mendes revealed that the change had already been implemented.

This was despite Godongwana’s second budget proposal with a lower VAT increase being sent back to the drawing board through an out-of-court settlement with the DA and EFF.

Instead of a two-percentage-point tax hike, Godongwana had proposed a 1pp increase over two years, with the first 0.5pp set to kick in on 1 May and another next year.

South Africa’s ad valorem duty is a tax on goods deemed luxury items, including motor vehicles, electronic equipment, and cosmetics.

While the tax calculation varies per category, a flat rate of 9% is applied to technology products.

Now that the luxury tax has been removed for cheaper smartphones, the effective tax rate on devices below R2,500 will be 15%, given that the VAT hike has been reversed.

South Africa’s communications minister, Solly Malatsi, has advocated for removing ad valorem since he took office in 2024.

The government wants to switch off South Africa’s 2G and 3G networks, and removing the tax is an effort to make entry-level 4G and 5G devices more affordable.

Many South Africans still rely on these legacy networks. Once this changes, the government and industry can decide on a deadline for switching them off.

“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 an interview.

During a workshop hosted in partnership with the World Bank and GSMA, a non-profit organisation representing the interests of mobile network operators worldwide, the minister engaged with stakeholders about reducing smartphone prices.

“We need to get smart devices in the hands of South Africans that face the barrier of connection,” he said in his opening statement.

“We cannot discuss innovation, entrepreneurship and economic growth without addressing this fundamental issue.”

At the workshop, GSMA said removing import levies from smartphones would lower the final cost to customers, with which mobile networks MTN and Vodacom agreed.

The mobile operators also said encouraging local production could help combat the additional costs of imports resulting from other factors, such as exchange volatility.

Vodacom and MTN doing their part

As part of the drive to reduce the cost of phones with 4G and 5G capabilities, MTN and Vodacom have launched affordable devices to make the technologies more accessible.

MTN recently announced an initiative through which it plans to offer more than 1.2 million of its prepaid customers affordable smartphones with prices from R99.

“The initiative aligns with MTN’s work to provide affordable and accessible mobile services to all South Africans,” it said.

“By giving customers access to 4G smartphones, MTN is empowering them to fully engage in the digital economy, with a focus on education, work, healthcare and communication.”

It said the initiative will roll out in three phases from May 2025 to the end of 2026, the first of which will see 5,000 smartphones offered to “carefully selected” customers.

“Selection will be based on usage profiles, spending patterns and tenure, and will mainly be in Gauteng,” MTN said.

In the second phase, over 130,000 MTN prepaid customers will be offered the devices, followed by a further 1.1 million customers in phase three.

MTN said the devices will be preloaded with popular applications to help customers access a wide range of digital tools and services.

In November 2024, the mobile operator launched the Icon 5G priced at R2,499, an affordable entry price for a 5G smartphone.

It features a 6.6-inch display, 128GB of storage, a 50MP primary camera on the rear, and a 5,000mAh battery.

In September 2024, Vodacom launched the 4G-enabled cloud-based Mobicel S4, priced at R249.

It said the device provides a “smartphone lite” experience and provides access to platforms like YouTube, TikTok, and Facebook.