South Africa’s plan to lower smartphone prices

South African communications minister Solly Malatsi says the country must partner with the private sector to lower the price of smartphones.

This was announced at a collaborative workshop on Monday morning conducted by the Department of Communications and Digital Technologies (DCDT) in conjunction with the World Bank and GSMA, a non-profit representing the interests of mobile network operators worldwide.

While a contributor at the workshop suggested it, Malatsi did not mention his goal of removing the luxury goods tax from smartphones.

Instead, his focus was on his overarching goals.

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

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

The Minister pointed out that the digital economy contributes up to 19% of South Africa’s GDP, and to participate in the economy, South Africans need access to smart mobile devices.

He also said that those who have access to the Internet need to expand their use thereof.

“From having basic digital literacy to advanced ICT expertise, we want to promote the productive use of the internet by encouraging internet usage beyond social media so that it can support education, government services, e-commerce, and entrepreneurship.”

“But we also recognise that the government cannot achieve this on its own. Real progress will come from partnerships between industry, civil society and also international stakeholders.”

The GSMA echoed Malatsi’s view that the private and public sectors must collaborate to further digital inclusion.

The non-profit noted that although South Africa enjoyed close to 99% mobile broadband population coverage, 47% of South Africans do not make use of it. Roughly two-thirds of those who don’t use mobile broadband reported that they do not have a suitable device.

It said there were numerous reasons for this, including affordability, lack of perceived relevance, lack of network access, concerns about device security, and a lack of understanding of mobile Internet.

However, GSMA honed in on device affordability when discussing South Africa’s issue of digital inclusion.

To solve this, the organisation made numerous suggestions to both the public and private sectors to increase access to affordable devices in the country.

One of the suggestions directed to the government was to reduce import taxes and device duties, referring to the country’s ad valorem tax.

This is something 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.

The GSMA argued that while cutting this duty may decrease tax revenue in the short term, it will allow for increased penetration in the long run, increasing the revenue earned in the entire mobile sector.

This is a particularly salient issue given South Africa’s plan to phase out 2G and 3G networks over the next few years, eventually rendering cell phones using these technologies useless.

Another suggestion to the DCDT was to subsidise devices for the most underserved, who cannot afford them.

The GSMA also made several suggestions to the private sector, which included local assembly of smart devices, partnering to reduce procurement, distribution and marketing costs, and reducing device costs by prioritising essential features.