Samsung sells half of all smartphones in Africa -- at least for now. They hope to keep growing, but are facing local challenges with infrastructure and taxation. The mobile industry is one of the fastest growing in Africa, but it will depend on cheaper handsets and Samsung is not the only company competing.
Though only 20 million of about 100 million phones sold in the region are smartphones, Samsung is looking to corner the market.
“Next year we are looking at doubling this number, and the year after probably doing a substantial increase” said Thabiet Allie, head of content and services for Samsung Electronics Africa, at the annual AfricaCom conference in Cape Town on November 12, according to Reuters.
Telecommunications is one of the fastest-growing industries in Africa, and by 2017 smartphones will represent a fifth of the mobile market, according to a report from industry analysts GSMA.
There are currently 253 million mobile subscribers as of June 2013, up 18 percent since 2007. Last year the mobile ecosystem supported 3.3 million jobs and contributed $21 billion to public funding in the region, according to the report. These rates should double by 2020.
The mobile industry contributes six percent of the regions gross domestic product, compared to four percent in Latin America and just 1.4 percent of the Asia Pacific region, according to the report.
“Despite the significant impact of the mobile industry in Sub-Saharan Africa in recent years, even greater opportunities are ahead,” said Tom Phillips, Chief Regulator Officer of GSMA in a press release.
But this development won’t be easy as country policies get in the way.
“A short-term focus by some countries on generating high spectrum fees and maximizing tax revenue risks is constraining the potential of the mobile market,” Phillips said.
There are several spectrum usages licenses coming up for renewal across the region. GSMA advises that these be regulated to ensure that only the companies most able to use the spectrum efficiently will be allowed to progress. Meanwhile, there are many prohibitive taxes imposed on smartphone imports that are another barrier to growth.
“Governments are just unable to look beyond the tax revenue, it’s a self-inflicted wound, it can impair job creation and economic growth down the road.” Said Peter Lyons, GSMA Director of Public Policy for Africa and the Middle East, according to Reuters.
About half of countries impose customs duties on mobile handsets, some charging up to 30 percent. In February, the National Treasury of Kenya imposed a 10 percent tax on money transferred using mobile phones which has caused usage to fall.
Taxation as a proportion of total cost is higher than the global average in Sub-Saharan Africa, which adds to the cost and can inhibit growth.
“Duties should be relieved on smartphones, as we’ve seen in Ghana where there are very minimal duties on devices and we’ve seen that market has really taken off,” said George Ferreira, Samsung vice-president and chief operating officer of Samsung Africa to The Africa Report.
Though this could be averted by manufacturing facilities in African countries, the reality of this may be far off. “In the next three, four or five years assembling, not manufacturing some mobile handsets and some tablets could become a reality in Africa,” Ferreira said.
By 2016, nearly half of all handset subscriptions will be smartphones according to a report from Ericsson. Worldwide, smartphones will far outnumber traditional handsets with 5.6 billion total subscriptions.
Growth in Africa also depends on low-cost smartphones. Though the average cost of a smartphone worldwide is $372, handsets need to be cheaper to appeal in Africa.
One of Samsung’s cheapest phones is the Galaxy Pocket, which retails in South Africa for $100, and up to $120 in other African countries.
But the South Korean company faces competition from even cheaper phones from China.
For example, Tecno, a Chinese manufacturer sees Africa as their main market.
“Our vision is to build on our brand image in order to become the best brand in the African market,” said Boukali Mounir, director of brands and marketing at Tecno Telecoms in a recent Q&A.
“Our technology that has simplified the use of smartphones is what stands us out even in the midst of competition,” he said, “our selling point is really affordable.”