The COVID-19 pandemic has reinforced how important connectivity is in the modern world. As it has become more challenging to communicate directly, the use of ICT has become even more critical for the dissemination of information by government, experts, and the media.
Key to digital communication is the phone – especially the smartphone. The smartphone allows people to stay in touch with their friends and families, receive important information, and educate themselves during these tough times.
Smartphones may become even more crucial when the outbreak is brought under control. However, the cost of handsets is a significant barrier to mobile Internet adoption and use – and this is not the fault of the COVID-19 pandemic.
Low-cost devices are often out of the reach of those in poverty, which is a problem considering that these devices can be key enablers for escaping poverty.
Research in countries like Tanzania and India found that the extremely poor – those who earn less than US$2 per day – would have to spend 16% 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 which 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 South Africans connected.
Smartphones are not a luxury
One of the reasons smartphones are so expensive in South Africa, and Africa as a whole, is that they incur high taxes. In fact, import taxes and duties can reach as high as 50% 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.