Ghana's import tax removal on smartphones expected to boost local Africa production

Ghana’s plan to remove import duties on smartphones, a move other African nations have contemplated, will help indigenous companies that are “playing by the rules,” according to a top executive for RLG, which makes laptops, desktops and mobile phones.

RLG, which has its global headquarters in Dubai, runs phone assembly operations for West Africa from Ghana.

“We believe it is a very positive move for the industry in general as it would make smartphones more affordable to all and help increase the smartphone penetration level in the country,” Prakash Somasundaram, RLG’s global CFO, told IDG via email. “This is also expected to discourage grey market imports of devices—a move that will benefit players like RLG who have been playing by the rules. With our recent launches of new smart devices, we expect higher volumes and higher capacity utilization at our assembly plant in Ghana.”

Ghana’s government stated in its 2015 budget plan that it will remove import duties on smartphones to increase its penetration and boost policy to bridge the digital divide gap.

“Communication is shifting from voice to data and mobile data is projected to grow 6.3 times between 2013 and 2018,”

the budget statement says, adding that mobile phone penetration is high in Ghana but smartphones form only 15 percent of the total number. “In order to increase smart phone penetration and in-line with Government’s policy of bridging the digital divide within the country, import duties on smartphones will be removed. It is expected that the increase in smartphone penetration will increase revenue from Communication Service Tax, VAT and corporate taxes.”

The move could increase the use of smartphones in the country and cause a multiplier effect, as other countries may make pass similar legislation if Ghana’s plan achieves its expected outcome.

Apart from making life easier for users, smartphones can also help local app designers reach more users and generate business.

In the last few years, RLG has been spreading its reach to other West African countries like Nigeria and Gambia through the training it offers in computer and phone repairs. Somasundaram maintained that the company is bent on moving beyond West Africa.

“Our expansion plans for 2015 and beyond are on course,” he said. “We have an exciting and affordable range of feature and smartphones, tablets and laptops. While we continue to focus on growing our market share in our current markets like Ghana, Nigeria, Kenya, Gambia etc., we would be striving to enter into new markets in Africa. We at RLG are very excited about the opportunities and potential that Africa provides.”

However, a Ghanaian commentator/blogger, Edward Tagoe, has claimed the removal of import duties will not increase smartphone penetration due to the fact that the 20 percent price reduction will not make a difference, especially for first-time smartphone users. Other hurdles to smartphone penetration, he says, include the high rate of illiteracy, lack of locally relevant apps and utilities, and the high cost of Internet access.