Malatsi's smartphone tax break gets a mixed reception

Communications Minister Solly Malatsi's flagship initiative to waive the 9% ad valorem excise duty on smartphones costing less than R2,500 has industry players divided on whether it's a good idea

- By Lindsey Schutters

Affordability remains one of the biggest barriers to digital access, especially for low-income households," Minister of Communications and Digital Technologies Solly Malatsi declared at the 45th Southern Africa Telecommunications Association annual conference. He also proudly proclaimed, once again, that “the South African government has removed the 9% ad valorem excise duty on smartphones priced below R2,500”.

The policy targets entry-level smartphones that predominantly offer 4G connectivity — a critical step in South Africa’s transition away from 2G and 3G networks. With 87% 4G coverage in the country, the government has identified affordability, not infrastructure, as the primary obstacle to universal connectivity.

The digital economy's contribution has reached 10% to 15% of South Africa's GDP, resulting in Malatsi framing smartphone access as “a gateway to economic opportunity” that could expand participation in education, e-commerce and government services.

Enthusiasm, meet scepticism

The initiative has exposed a stark divide among industry stakeholders. Samsung, the biggest smartphone vendor in the country by value (and mostly volume, depending on how the market is sliced), can see the vision, but doesn't agree with the method.

Justin Hume, Samsung South Africa vice-president of mobile, sees particular potential in mid-tier devices such as the Galaxy A16, which the company will now reduce from about R4,000 to R3,499.

“We're forecasting a nearly 200% increase in sales on that product when we move it to that price point because suddenly it moves into the realm of affordability,” Hume said during an interview at the recent Samsung Galaxy A56 launch event in Johannesburg. “You're getting a great camera, great memory and processing capability that customers have never experienced before — and it’s now affordable.”