Taxation and other levies raise smartphone cost 30%, depress demand
By Jeph Ajobaju, Chief Copy Editor
Taxation and other duty levies are negatively impacting smartphone adoption in Nigeria and sub-Saharan Africa (SSA) as a whole, says Global System for Mobile Telecommunication Association (GSMA).
Taxation and duty fees add 10 to 30 per cent to the cost of smartphones depending on the country, across Africa, GSMA disclosed in its “The Mobile Economy Sub-Saharan Africa (2023)” report.
This affects the cost of devices, it stressed, putting them out of reach for most people in SSA.
But GSMA added this is not the only major contributor to high costs, with manufacturing costs remaining unsustainable for low price points across SSA countries.
Impact on final selling price
“The challenge for manufacturers in Sub-Saharan Africa is to produce devices at a low enough price point to gain market share, particularly in the 5G and 4G markets, where devices remain prohibitively expensive for most regional consumers,” GSMA said.
“Along with the manufacturing costs, other costs, such as fees and taxation directly impact the final selling price. As per GSMA Intelligence research, taxation and duty fees add 10-30 per cent to smartphone costs, depending on the country.”
Smartphone affordability continues to be a key barrier to mobile internet usage in the region and slow digital penetration, according to the report.
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Solutions targeting cost of devices
Per reporting by The Guardian, GSMA said
- About 60 per cent of the population in Africa does not use mobile internet despite living in areas with coverage.
- To help address the issue, operators and manufacturers have devised solutions targeting the cost of devices with the average selling price of smartphones having reduced significantly in recent years.
- This is especially due to an influx of devices priced under $100, mainly from Chinese brands such as Tecno, Itel, and Infinix.
“Alongside the availability of cheaper options, operators are increasingly partnering with device manufacturers to manage costs and offer financing plans to customers.
“To improve affordability, governments should reconsider these additional fees by offering tax exemptions on low-cost handsets, as is available in Rwanda.
“In addition to reducing the absolute cost of smartphones and supporting an individual’s capacity to pay, providers also need to ensure that devices meet user’s life needs and support users’ willingness to pay.”
GSMA said supply side factors that impact smartphone costs include manufacturing, inbound and outbound supply chains, business and manufacturer decisions about pricing, but the demand side will still determine people’s ability to buy these devices.
“On the demand side, drivers include people’s ability to pay and their value perception of the device to justify the expenditure, along with awareness levels, community norms, and understanding of the total cost.”
Only about 10 to 20 per cent of Nigerians own a smartphone, according to Statista.
Alliance for Affordable Internet estimates the number of Nigerians with access to smartphones at 44 per cent.
However, in its unaudited results for the first quarter of this year (Q1 2023), MTN disclosed “we added over 804k new smartphones to our network in Q1, bringing smartphone penetration to 52.7 per cent.”
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