With the anticipated hike in import duty, excise duty, and value-added tax (VAT), telecommunications giant Safaricom has ruled out the idea of assembling Sh5,000 smartphones.
This will pump the brakes on President William Ruto’s idea for Kenya to produce the cheapest phones in the continent.
The planned tariffs, according to the telco, will result in a Sh11,500 price increase for locally-made devices.
The telco on Tuesday asked MPs to review downwards the import duty, excise duty, and VAT rates on mobile phones through the Finance Bill, 2023 so as to lower the price of locally produced phones.
“If we were to work with the President’s vision of a $50ollar phone, we need to address the question of import, excise and output Vat for me to save Sh4,000 and bring down the cost from Sh11, 500 to Sh7,500,” Safaricom Head of Venture Karanja Gachiri told the National Assembly’s Finance and Planning committee.
Mr Gachiri told the Molo MP Kuria Kimani-led committee to adjust the taxes to around Sh3,000.
He said: “We can scale the taxes down to Sh3,000 where it will give the final price of locally assembled smart phone to between Sh6,500 to Sh7,000.”
Safaricom told the legislators that it was getting ready to launch a factory that will assemble at least 1.4 million smartphones every year.
“Today we have one local assembly line that recently started. It is estimated we import 4 million phones each year and it is a constraint on foreign currency requirements,” Mr Gachiri said.
He said when Dr Ruto announced the production of the Sh5,000 smartphone, the exchange rate was about Sh118 to the dollar but it has since gone up to Sh135.