Government has proposed that no ad valorem excise duty be applied on entry-level smartphones from 1 April.
The state’s move to propose that smartphones below R2 500 have no excise duty applied when exported to SA bodes well for the ICT ecosystem, but further action is needed to “maximise” impact for digital inclusion.
This is according to industry commentators, expressing their opinions on the required next steps towards creating a digitally-inclusive South African society.
National Treasury yesterday revealed government’s proposal for the removal of ad valorem excise duty on lower value (less than R2 500) smartphones from 1 April.
Ad valorem duties are taxes levied on commodities as a certain percentage of their value. Currently, for smartphones, these duties are charged at a flat rate of 9%, classifying them as luxury goods.
Government said its move aims to enhance smartphone affordability at the lower end of the price spectrum and support efforts to promote digital inclusion for low-income households.
Arnold Ponela, senior research analyst at IDC, says the move aims to enhance digital inclusion and make entry-level devices more affordable, which is a positive step.
He explains that smartphones in SA tend to be “significantly” pricier than in other African markets, as they have been historically taxed as luxury goods.
For example, the Samsung Galaxy A06’saverage selling price is $101 in Sub-Saharan Africa, but $114 in SA. With the tax removed, it could drop to $104, he states.
“Removing this tax lowers the cost of entry-level smartphones, driving adoption among lower-income consumers and advancing digital inclusion by bridging the divide and expanding internet access.”
Similarly, the Association of Comms and Technology (ACT) welcomes government’s decision, saying it marks a positive step towards advancing SA’s digital inclusion agenda.
“This policy shift is an acknowledgment that affordability is a major barrier to digital access and that government interventions can play a critical role in expanding connectivity,” comments ACT CEO Nomvuyiso Batyi.
“It aligns with SA’s broader ambition to close the digital divide and enable universal access to digital services.
“By reducing the cost of entry-level smartphones, this measure will support greater adoption of 4G and 5G devices, which is crucial as the country phases out 2G and 3G networks.”
Charles Molapisi, MTN SA CEO, says the mobile operator looks forward to seeing the “positive” impact such a decision will have on connecting and empowering consumers.
“MTN welcomes the announcement by the minister of finance regarding the cutting of ‘luxury tax’ on basic smartphones. This decision is a positive step towards bridging the digital divide and making essential technologies more accessible to a larger segment of South African society.
“By cutting the luxury tax, more customers who are still relying on older technologies, such as 2G and 3G, will now have the opportunity to afford basic 4G smartphones. This move will play a crucial role in empowering South Africans to benefit from a more connected and modern digital lifestyle, enabling greater access to the digital world.”
Widening the internet pool
Mobile devices are considered the primary means for people to access the internet.
Data from the GSM Association shows by the end of 2024, 58% of the world’s population used mobile internet, equating to 4.7 billion users – an increase of 2.2 billion since 2015.
However, 3.4 billion people remain unconnected to mobile internet, with almost 90% living in an area already covered by mobile broadband but not using mobile internet, says the mobile industry body.
In the Sub-Saharan Africa region, smartphone adoption was calculated at 54% at the end of 2024, projected to reach 81% by 2030.
The penetration rate of 4G and 5G technologies in the region stood at 38% and 3%, respectively, in 2024. However, this is projected to shift to 52% and 17% by 2030.
Meanwhile, the use of 2G and 3G was recorded at 11% and 49%, respectively, in 2024. It is projected that 2G connections in the region will be at 2% by 2030, while 3G will be at 28%.
Ofentse Dazela, director of pricing research at Africa Analysis, notes government’s move “implies that many consumers will now have a wider pool of low-priced 4G devices they can purchase, especially because in the foreseeable future, 2G and 3G smartphones will not be imported into the country”.
While the affordability aspect is crucial for digital inclusion, it remains just one component of the challenge, adds Batyi.
She believes more work remains to be done to ensure all citizens, particularly marginalised communities, can access and benefit from digital connectivity.
“While this is an important step, it is not a silver bullet for digital inclusion. Device affordability must be paired with widespread network coverage, digital literacy programmes and localised content that meets the needs of underserved communities.
“Additionally, efforts must be made to ensure affordable devices meet basic quality and durability standards, so users are not left with subpar options that limit their digital experience.”
According to Batyi, achieving true digital inclusion requires a multi-stakeholder approach, with mobile network operators driving affordability through innovative data solutions.
“Original equipment manufacturers must also play their part by increasing the availability of affordable, quality smartphones, while financial institutions should expand micro-financing options to make these devices even more accessible.
“Education and civil society must continue to drive digital literacy programmes, and regulators need to evolve policy frameworks to remove barriers, encourage infrastructure investment and foster competition that drives affordability.”
This is a good day for the ICT ecosystem, she states, adding that ACT sees the excise duty adjustment as a foundation for further reforms aimed at making connectivity more accessible to all South Africans.
Nomvuyiso Batyi, CEO of the Association of Comms and Technology.
Dazela also believes there is still much to be done by all stakeholders to innovate further and reduce communication and device costs.
Ponela points out that true digital inclusion for marginalised communities extends beyond affordability. Expanding network coverage, reducing data costs, enhancing digital literacy and ensuring access to essential online services are equally crucial.
“Without these complementary measures, the removal of the tax alone may have a limited impact on fully bridging the digital divide.
“Telcos have always played a crucial role in driving digital inclusion by subsidising entry-level smartphones, making them more accessible to low-income consumers. However, further action is needed to maximise impact.
“Telcos must focus on reducing data costs, expanding coverage in underserved areas and offering affordable data plans tailored to low-income users,” says Ponela.
“Financial institutions and fintech companies can further drive inclusion by providing flexible financing options, such as micro-loans or device leasing programmes, making smartphones more accessible. A multi-stakeholder approach is essential to creating a truly inclusive digital ecosystem.”
