While the number of smartphone connections in sub-Saharan Africa is expected to grow by nearly 50 percent, it is unlikely to surpass the global average by 2025 if it does not double the current growth rate, according to a new report by GSMA.
The impact of the COVID-19 pandemic on the economies of many countries in the region – some of which were in bad shape pre-COVID – means that consumers are holding on to their smartphones longer than the average replacement period of 2.25 years. But as the countries start to recover their economic losses, smartphone connections are therefore expected to grow from the current 48 percent to 64 percent by 2025.
The current global average is 64 percent and is projected to grow by 81 percent in 2025. In other words, smartphone connections in sub-Saharan Africa would only be growing to the current global average of 64 percent by 2025. It also means that the region would need to grow to double its current rate of 48 percent to meet up with the global average by 2025.
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The low buying power is mostly driven by high inflation in countries like Nigeria and also means that millions of potential consumers are unable to purchase smartphones despite the drop in prices of the devices.
Major smartphone markets in Africa like Egypt and Nigeria performed better than peers in the first three months of 2021, according to data from the International Data Corporation (IDC). For Nigeria, the growth was attributed to the release of pent-up demand and increasing shipments of Transsion and Samsung devices into the market. However, most of the growth in shipment is still dominated by ultra-low-end and low-end price devices.
In that quarter, phones sold below $100 accounted for 42 percent of the market’s shipments, down from 49.6 percent in the first quarter of 2020. Meanwhile, phones sold for between the price band of $100 to $200 saw a rise from 35.2 percent to 43.3 percent over the same period.
“The increased specs and attributes in smartphones are driving prices upwards, as evidenced by the growth of the low-end price band,” Taher Abdel-Hammed, a senior research analyst at IDC, said. “The main vendors, like Transsion, Samsung, Oppo, and Xiaomi, all launched new feature-rich models in this price band. These models were well received by channels and customers alike, feeding the growth of the low-end price band.”
It is a strategy shift that even companies like Apple are embracing. In 2020, the ultra-premium smartphone manufacturer said it plans to expand the share of its market on the continent with affordable Apple phones meant for the market. The iPhone SE launched on 24 April 2020 was Apple’s first solution. The phone had a starting price of $399 for a version with 64GB of storage, while the 128GB opened for $449 and the 256GB was on offer for $549.
At those price rates, many consumers in Nigeria would rather hold on to their old devices longer than they would want to replace them due to a weak currency and multiple devaluations. The exchange rate increases mean that the value of the naira is depreciating and impacting the income of millions of consumers. Hence, the price of $399 means the average Nigerian has to cough out N164,000 to buy an iPhone.
The GSMA report projects that the time of replacement would rise to 3 three years or more, potentially dragging down overall sales in the short-to-medium term.
About 35 to 40 percent of handset sales for operators still go through retail outlets as pandemic-related social restrictions have had a detrimental impact on upgrade volumes and handset revenues.
