Safaricom to set up a factory to produce Africa’s cheapest smartphone
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Safaricom reveals a plan to set up a smartphone factory in Kenya to implement Ruto's agenda of cheap phones
Safaricom reveals a plan to set up a smartphone factory in Kenya to implement Ruto’s agenda of cheap phones.
In order to implement President William Ruto’s aim to produce the cheapest electronics in Africa, Safaricom has announced that it is opening a plant in Kenya that would manufacture between 1.2 million and 1.4 million smartphones annually. This makes it one of the main players in the race.
The telco made an impassioned argument against new mobile phone taxes before members of the National Assembly’s Finance and Planning committee on Tuesday.
Safaricom claimed that the proposed taxes would make it impossible to reach the target price of a $ 50 smartphone (Sh6,850), as the cost of locally made smartphones would rise to Sh11,500.
“If we were to work with the President’s vision of a 50-dollar phone, we need to address the question of import, excise, and output VAT (Value Added Tax) for me to save Sh4,000 and bring down the cost from Sh11, 500 to Sh7,500,” Mr. Karanja Gichiri, Safaricom Head of Venture, told MPs during public hearings on the Finance Bill.
He said the telco, which imports four million phones every year, is working on an assembly line, but the taxes would make the project unviable.
“Today we have one local assembly line that recently started. The most expensive part of the phone is the microchip that runs the 4G network within the phone. We have sourced and the appropriate base for a good phone is $40 driven by the chip and components.”
“After that, the assembly of the phone will cost Sh300 including factory profit margins. We want to pass the cost-benefit to the consumer,” he said.
The Safaricom executive said on top of these costs, after the assembly, the firm will have to deal with last-mile connectivity, where it will be required to part with another Sh1,400 while the output VAT for the device is Sh1,500.
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“This brings the final price to Sh11,500 with the manufacturer taking only Sh300,” said Mr Gachiri.
He said other drivers of cost are taxes on transporting the phones to the port of Mombasa. He said Safaricom spends an additional Sh2,300 for a Sh5,000 phone largely driven by import duty and excise duty.
He said when Dr Ruto announced the production of the Sh5,000 locally assembled smartphones, the exchange rate was about Sh118 to the dollar but this is now at Sh135.
“We estimate 120 million new subscribers in Africa will need phones and taking advantage of Africa Continental Free Trade Agreement (AfCFTA), we will be leaders in Africa and the world in mobile telephony,” said Mr Gachiri.
President Ruto last December announced that Kenya will manufacture the cheapest smartphone in Africa this year whose cost will be less than Sh5,000.
Ruto promised to deliver the cheap smartphone within eight to 12 months of this year to ensure all Kenyans can access digital platforms for business and access to government services.
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