Financial technology firm M-Kopa plans to start exports of Kenyan-made smartphones to the Uganda market as a strategy to cut costs and reduce customer defaults.
The company last month sent a trial shipment of about 1,000 devices to test the Uganda market as part of preparations to formally enter the key regional outlet, M-Kopa’s general manager told Business Daily.
The plan is part of the company’s strategy to lower its operational costs in Uganda, where it is currently selling similar devices manufactured in China, which are subject to import duty and subsequently increasing the cost of the devices to the customers.
Kenyan-made devices are exempt from import duty in Uganda because of the East African Community’s common market protocol, which eliminates tariffs on goods manufactured within the region.
“Selling the Kenyan-made devices in Uganda will reduce the import duty that we pay for the phones and will cut the costs by five to 7 percent, which will eventually trickle down to customers,” Martin Kingori, M-Kopa Kenya General Manager told Business Daily in an interview.
“We already have all the certifications in place, we did a trial shipment at the end of Q3, which went very well, so now it’s just a question of when and we’re just trying to scale production before we can start shipping to Uganda.”
The company said that the projected cost cuts, in addition to new features currently accompanying its devices in Kenya, including device protection, free data, and medical insurance accompanying the phones, is expected to help cut defaults on the smartphones purchases, which it sells on a buy now pay later (BNPL) model.
M-Kopa started assembling smartphones locally in January 2023, after the government introduced an excise duty of 10 percent on imported phones, added to the already existing 25 percent import duty, which would significantly raise the cost of the devices.
Currently, M-Kopa is one of the two companies assembling phones in Kenya, a move that has the government’s backing in efforts to boost the country’s exports of information and communication technology equipment.
The other local phone manufacturer is East Africa Device Assembly Kenya (EADAK), which is mainly owned by telco Safaricom and a number of other partners and focuses on making affordable devices.
So far, M-Kopa has produced about 1.5 million devices locally, most of which have been sold on a hire-purchase basis on a pay-as-you-go (PAYG) model. Currently, it produces two models – X2 and X20.
Mr Kingori said even though M-Kopa is set and ready to begin exporting to the Ugandan market, it would scale up its production volumes to first meet the supply demand in Kenya.
“Right now, in the Kenya market, the demand is too high that we cannot meet using our current production capacity, so we can’t even extend to Uganda,” he told Business Daily.
The firm plans to increase the workforce in the Nairobi assembly plant by at least 66 percent, from 300 currently to 500 by January next year to help expand production and venture into Uganda.
M-Kopa currently produces about 5,000 devices per day, which translates to about 120,000 monthly. But this is still too low to meet the existing demand in Kenya, alone, Mr Kingori said.
