Kenya has opened its first smartphone assembly plant to produce low-cost 4G mobile phones and combat tax evasion.
Kenya has opened its first smartphone assembly plant to produce low-cost 4G mobile phones and combat tax evasion.
The Kenyan government announced this week that it was releasing its first batch of one million locally assembled smartphones, priced at 40 dollars (6,000 Kenyan shillings).
Most of the mobile phones imported into Kenya are not taxed. President William Ruto stressed on Monday that this situation represented a massive challenge for the government in terms of revenue collection.
“The importation of smartphones presents many difficulties. Most phones are imported and according to our statistics, nearly 50% of phones imported into Kenya do not go through the normal tax process,” said Mr Ruto. “The best way to solve the problem is to manufacture all the phones locally. The local factory will also help to create jobs for young people,” he added.
Since 2022, measures taken by the Kenya Revenue Authority (KRA) to curb tax evasion led to rising consumer prices and supply shortages. Smartphone imports fell by 13.5 percent in the three months to December 2022, compared to the same quarter in 2021, according to data released by International Data Corporation (IDC).
Many official and unofficial suppliers have expressed concerns about the shortage, with some saying they have been forced to close their operations or reduce their workforce. The low number of smartphones on store shelves has also forced retailers to increase the prices of their devices.
Importers of goods have been asked to pay taxes based on the value of the transaction, according to a new directive issued by the KRA. Previously, importers were used to declare goods in bulk and paid a fixed price of 1.5 dollar (200 Kenyan shillings) per kilogram. According to the KRA, the decision to adopt the new tariff, based on transaction value, follows an abuse of the initial government directive, which was aimed at easing costs for small importers.
Indeed, some importers of restricted items have circumvented import permits. According to the Kenyan government, some importers have shipped high-end mobile devices, calling them feature phones. In exchange, they had to pay a fraction of the tax on the real value of the devices.
The factory of East Africa Device Assembly Kenya Limited (EADAK), based in Athi River, Machakos County, is fulfilling the government’s promise to establish local smartphone assembly capacity. It has been set up as a joint venture between local mobile network operators and international handset manufacturers. The devices will be available nationwide at Faiba shops and resellers, as well as Safaricom shops and the Masoko online platform.
Through a payment installment plan, Kenyans will have the option to deposit 7 dollars (1000 Kenyan shillings) upon purchase and pay for the device as they use it. The payment plan for these devices will begin in January 2024. President William Ruto assured that the government will continue to work with their partners to reduce costs. Smartphones are expected to target more than 60% of phone users in the country.
“This assembly plant will support the government’s program to improve digital inclusion in the country,” said Joshua Chepkwony, Chairman of EADAK and CEO of Jamii Telecom, a local operator. Indeed, with an expected production volume of 21,000 phones per month, the project supports the government’s digital inclusion program, which has already made it possible to train 300,000 people in 2023. The government is also planning on extending fiber optic connectivity to previously inaccessible areas.
Other devices are also expected to launch in the coming months, including a locally assembled digital tablet.
