Vodacom and MTN Push for Lower Smartphone Prices in South Africa

South Africa’s leading mobile operators, Vodacom and MTN, are calling for significant changes to make smartphones more affordable for citizens. Their proposals include lowering taxes and import duties on smartphones and increasing local production to reduce costs.

This comes after a collaborative workshop hosted by the Department of Communications and Digital Technologies (DCDT), in partnership with the World Bank and GSMA, a global non-profit representing mobile network operators. The workshop explored ways to address the high cost of smartphones in South Africa, a barrier to digital inclusion for many citizens.

The High Cost of Smartphones: A Barrier to Digital Inclusion

Smartphones are essential tools for accessing the internet, education, healthcare, and economic opportunities. However, their high cost remains a significant hurdle for many South Africans.

Both Vodacom and MTN attribute the high prices to several factors:

• High import duties and taxes, including a 9% luxury goods tax on smartphones.
• Currency fluctuations, which make imports more expensive.
• Logistical and distribution costs, exacerbated by poor infrastructure and geographical challenges.

Proposed Solutions to Lower Smartphone Prices

1. Reduce Import Duties and Taxes

Vodacom and MTN argue that lowering import duties and taxes, such as the luxury goods tax and VAT, would significantly reduce retail prices.

“Lowering import duties and taxes on smartphones can significantly reduce retail prices, making them more affordable for consumers,” said a Vodacom spokesperson.

The GSMA supports this view, stating that while cutting these duties may reduce tax revenue in the short term, it would increase smartphone penetration and boost revenue in the mobile sector over time.

2. Encourage Local Manufacturing

Both operators emphasize the importance of local manufacturing to reduce costs and create jobs.

“Encouraging local manufacturing with specific benefits and regulation can play a crucial role in making smartphones more affordable,” Vodacom added.

MTN echoed this sentiment, suggesting that local assembly or manufacturing should be incentivized to lower production costs.

3. Increase Competition in the Market

Vodacom and MTN also believe that greater competition in the smartphone market could drive prices down. Currently, Samsung dominates the market with a 52.57% share, followed by Apple (16.6%), Huawei (10.71%), and Xiaomi (3.49%).

“Greater competition, supported by the entry of new brands and improved mobile operator offerings, could drive prices down,” MTN said.

The Impact of High Smartphone Prices

The high cost of smartphones has led to a reliance on post-paid contracts for devices priced above R3,000, as most consumers cannot afford to buy them outright. According to Oppo South Africa, 85% of high-end smartphone sales occur through post-paid contracts, while 80% of all sales are in the prepaid segment.

This affordability crisis is particularly pressing as South Africa plans to phase out 2G and 3G networks in the coming years, rendering older devices obsolete.

Government’s Role in Addressing the Issue

Communications Minister Solly Malatsi has long advocated for the removal of the luxury goods tax on smartphones. A leaked document from the South African Revenue Service (SARS) revealed that Finance Minister Enoch Godongwana had considered introducing a threshold to exempt cheaper smartphones from this tax.

However, the proposal was delayed due to debates over increasing South Africa’s VAT rate from 15% to 17%.

The Road Ahead

Vodacom and MTN’s proposals highlight the need for a collaborative effort between the public and private sectors to make smartphones more accessible. Key steps include:

• Reducing taxes and import duties on smartphones.
• Incentivizing local manufacturing to lower production costs.
• Encouraging competition to drive innovation and affordability.

By addressing these issues, South Africa can bridge the digital divide and ensure that more citizens have access to the tools they need to thrive in an increasingly connected world.

The high cost of smartphones remains a significant barrier to digital inclusion in South Africa. Vodacom and MTN’s calls for lower taxes, local production, and increased competition offer a roadmap to making these essential devices more affordable.

As the country prepares to phase out older mobile networks, addressing smartphone affordability is not just a matter of convenience—it’s a necessity for ensuring that all South Africans can participate in the digital economy.

Follow Joburg ETC on Facebook, Twitter , TikTok and Instagram

For more News in Johannesburg, visit joburgetc.com