Rising cost of smartphone poses barrier to post-COVID internet adoption

The COVID-19 pandemic has reinforced how important connectivity is in the modern world. However, the rising cost of smartphones – a key digital communication tool – could pose a threat to mobile internet adoption after the pandemic is contained.

Research in countries like Tanzania and India found that the extremely poor – those who earn less
than $2 per day – would have to spend 16 percent of their annual income just to purchase an average-
priced smartphone. For people who are struggling to eat on a daily basis, using this percentage of
their income is not a rational option.

However, device manufacturers cannot offer phones at a significantly more affordable rate because
they have costs of their own to manage. For this reason, it is necessary to develop business models that ensure that those in poverty can own smartphones.

Given the nature of the COVID-19 crisis, there is no better time to develop such business models and
get more people connected.

READ ALSO: Digital inclusion can scale on low-cost smartphones for entry-level market

One of the reasons smartphones are so expensive in  Africa as a whole is that they incur high taxes.
In fact, import taxes and duties can reach as high as 50 percent of the total device cost in some African
countries.

This is partially due to high costs for device transportation, particularly to emerging markets.
Additionally, storage, warehousing, and inventory management all provide significant additional
costs.

A simple way to reduce these tax costs could be by ceasing to class smartphones as luxury items.
Smartphones have become more than a luxury – they are now crucial sources of information and
connectivity and not having one is a significant barrier to economic prosperity.

If luxury tariffs were no longer due on smartphones, it would make it possible to slash smartphone
prices considerably – making them more accessible to more African citizens. This would be particularly beneficial to the development and distribution of locally-manufactured smartphones – offering significant opportunities for economic growth.

Another strategy could be to abolish the taxation and duties placed upon smartphones below a
certain value. This would result in citizens being able to purchase these cheap smartphones, while still boosting government revenue through airtime and data bundles, as well as income from other mobile income streams.

While reducing the taxation on smartphones is an obvious way to make smartphones more affordable, other strategies can also reduce the cost of smartphones for low-income citizens.

One such strategy includes government getting involved in parts of the value chain – including
marketing, distribution, and retail. This would reduce the costs directly incurred by smartphone makers by reducing the number of players within the supply chain.

The government can also assist through subsidies or donations to NGOs and other entities – meaning the government would be subsidising the cost of devices for those who need them most.

These and other strategies should be discussed by the government, and strategies should be undertaken
to facilitate the increase in citizens who have smartphones, and by extension, access to the digital
economy.

Some examples of how governments can assist through subsidies or other means include Argentina which provided asset financing to 8 million citizens to switch from 2G feature phones to 4G smartphones;  Columbia allocated $90 million over three years to a policy which included subsidies for low-income citizens for data and smartphones; Malaysia launched a national program to encourage youth to purchase 3G-enabled smartphones with a rebate on certain phones – reducing the cost by 40 percent.