Kenyan telcos to set up smartphone factory; devices to retail from Ksh.11,500

Kenyan telecommunications companies are planning to begin manufacturing and assembling mobile phones locally, with an expected annual output of between 1.2 to 1.8 million devices.

Safaricom’s Head of Ventures, Karanja Gichiri, appearing before the parliamentary Finance and Planning committee on Tuesday, said the cheapest device will retail at Ksh.11,500.

Gichiri blamed the prices on the new taxes on mobile phones proposed in the Finance Bill, 2023, saying despite their efforts to source for an affordable chip supplier, the levies push the price up 40 per cent.

“A 40% increase in cost will be driven by import duty and excise duty. We anticipate incurring a cost of only about Ksh.300 which also includes the profit margin… the output VAT for that device is Ksh.1,500,” he told legislators.

“I have moved my components from around Ksh.4,500 to a final price of Ksh.11,000 and I, as the manufacturer I'm only taking home about Ksh.300. The role of taxation in lowering the component cost is critical to ensure we have affordable phones.”

"The real last mile in technology is the gadget and already we are working with Telcos so that we can have a smartphone that is going to be less than Ksh.5,000 and that can do everything you want," President Ruto said on November 10.

"We want to see if we can get it to Ksh.3,654 ($30) or Ksh.4,872 ($40). I want to promise the country that in the next 8 to 12 months we will have the cheapest smartphone in Africa, manufactured in Kenya," he added then.

But according to Gichiri, it is impossible to achieve that target price because the proposed taxes will raise the cost of locally assembled smartphones by around Ksh.4,000.

“If we were to work towards the vision of a 50-dollar phone, we would need to address import duty, excise duty and output VAT. The final cost of a phone would be between 6,500 to 7,000 shillings at most,” he said.

Gichiri was appearing before MPs during public hearings on the contentious Finance Bill, which seeks to introduce a ten per cent excise duty on imported cellular phones.