Vodacom and MTN plans to lower smartphone prices in South Africa

Mobile operators MTN and Vodacom have said that South Africa must lower taxes and import duties on smartphones and increase local production to make the devices more affordable to citizens.

This follows a collaborative workshop hosted by the Department of Communications and Digital Technologies (DCDT) in partnership with the World Bank and GSMA, a non-profit representing the interests of mobile network operators worldwide.

During the workshop, GSMA made several suggestions on how South African smartphone market stakeholders, both in the public and private sectors, can help decrease the price of smartphones.

Following this presentation, MyBroadband contacted South Africa’s mobile operators to learn what measures they think can be implemented to solve the issue.

A Vodacom spokesperson told MyBroadband that it believes high import duties and taxes, as well as currency fluctuations that make imports more expensive, are major contributors to the issue.

“Firstly, lowering import duties and taxes (e.g. luxury goods duties and VAT) on smartphones can significantly reduce retail prices, making them more affordable for consumers,” Vodacom said.

“Encouraging local manufacturing with specific benefits and regulation can also play a crucial role. In addition, implementing subsidies, such as the universal service fund and sector-specific policies, can help facilitate the flow of affordable smartphones, especially entry-level models.”

MTN SA echoed these views of lowering taxes and encouraging the local production of smartphones. However, they added that logistical and distribution costs caused by ailing infrastructure and geographical issues add to the problem.

“To reduce these costs and make smartphones more accessible, measures such as reducing import taxes and encouraging local assembly or manufacturing should be encouraged,” MTN told MyBroadband.

“Moreover, greater competition in the market, supported by the entry of new brands and improved mobile operator offerings, could drive prices down.”

The import duties referred to by both networks is the luxury goods or ad valorem duty, which communications minister Solly 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.

A leaked South African Revenue Service document revealed that finance minister Enoch Godongwana had intended to introduce a threshold for ad valorem duty, exempting cheaper smartphones from the tax.

However, his budget speech was delayed until 12 March 2025 following a dispute over whether South Africa’s VAT rate should be increased from 15% to 17%.

Increased smartphone competition

Vodacom and MTN also argued for increased competition in the smartphone market to lower prices.

Samsung currently dominates the market, holding a 52.57% market share, according to StatCounter GlobalStats.

The South Korean manufacturer overtook Nokia in December 2014, when the brand that once dominated dropped from its lion’s share of 68% two years earlier to roughly 27%.

Apple currently holds second place with 16.6%, followed by Huawei at 10.71%, and Xiaomi at 3.49%.

According to Oppo South Africa, a Chinese smartphone manufacturer with a 3.29% market share, this landscape can be particularly challenging for new entrants.

The manufacturer said South Africans attempt to get the best specs that fit within their budget, meaning that visible features are more influential to the buyer than how they perceive the brand.

“Consumers prioritise measurable technical specifications, such as battery life, camera resolutions, and storage capacity,” Oppo said.

Because of the strain on the average household purse, it noted that 85% of devices priced above R3,000 are sold through post-paid contracts, as consumers can’t afford to buy these devices in cash.

On the other hand, it added that 80% of all sales occur in the prepaid segment.

The graph below shows the change in smartphone market share from the beginning of 2010 until the end of 2024.