Costly locally assembled phones dim digital access goals

Prices of locally assembled phones have gone up and could rise further.

Photo credit: Pool

Locally assembled smartphones, whose factory was launched by President William Ruto in October last year, are retailing at highs of up to Sh10,559 and could rise further to Sh11,500, a new study has shown.

During the launch of their production six months ago, the devices retailed at Sh7,499 (Neon Smart) and Sh8,999 (Neon Ultra). But the study by the Centre for International Private Enterprise (Cipe) and Kenya Private Sector Alliance (Kepsa) notes that taxes and a weak shilling have held their prices higher, limiting their reach to low-income earners — their ideal target.

The retail price is about 17 per cent more than their initial price when they were launched in the market at the end of October 2023, and substantially above the $40 (Sh5,390) price President Ruto promised.

The study notes that whereas the Finance Act of 2023, proposed to reduce excise taxes on telephone and internet data services from 20 per cent to 15 per cent, import duty and output Value Added Tax (VAT) have pushed the locally assembled devices price up.

“Currently Neo Ultra retails between Sh8,000 to Sh10,559 while Neon Smart retails between Sh7,499 to Sh7,600. Since the launch of the plant in October last year, over 194,000 units have been produced,” the study notes.

The study notes that the high phone prices are watering down the government’s efforts and are now hindering e-commerce access by small businesses in the country, urging that cutting import taxes will boost the market and connectivity.

It warns that the devices’ prices could rise further to Sh11,500. The phones are assembled at the East Africa Device Assembly Kenya Limited, located in Athi River, as a joint venture of local mobile network operators and international device manufacturers.

President Ruto had initially indicated that the smartphone would cost $40 (Sh5,305) at current exchange rates).

Assessing the government’s achievement on the implementation of its digital superhighway agenda, CIPE and Kepsa scored the government at 57 percent for its efforts to upskill MSMEs, 40 percent for addressing digitisation costs, and 51 percent for cybersecurity initiatives.

“Digital economic transformation plays a significant role in the global stage as a driver of innovation and competitiveness as well as determining the future global economic environment. The government’s efforts to address these challenges that are impeding MSME integration into the digital landscape are starting to bear fruits but challenges remain,” Cipe Programme Lead, Lim Hazel, said.

The study listed limited digital skills and awareness, high internet and associated equipment costs and cybersecurity concerns, as key barriers hindering the MSMEs integration in the digital economy.

“Empowering MSMEs in the digital economy requires a targeted approach that addresses their unique challenges and needs. Without a clear focus on MSMEs, the broader policy dialogue on the digital economy risks leaving behind the very businesses that are essential to economic growth and prosperity,” Kepsa Foundation Executive Director Gloria Ndekei said.

Strengthening of the Kenyan Shilling against the dollar is also expected to reduce overall price of goods, but the study notes that “the prices of phones have continued to rise.”

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Note: The results are not exact but very close to the actual.