South Africa is set to remove luxury excise duties on smartphones priced below 2,500 rand (approximately $136) starting April 1, 2025, as part of a bold initiative to make digital technology more accessible to low-income citizens. The move, announced by the South African Treasury in its recent budget statement, aims to significantly reduce the cost of entry-level smartphones and accelerate digital inclusion across the nation.
Currently, South Africa imposes a 9% ad valorem excise duty on smartphones, a tax typically reserved for luxury items, which is charged in addition to standard Value Added Tax and import duties. This tax structure has contributed to higher device costs, placing smartphones beyond the reach of many lower-income South Africans despite their essential role in modern communication and economic participation.
“The government proposes that as of 1 April 2025, this duty rate be applied only to smartphones with a price paid greater than 2,500 rands at the time of export to South Africa,” the Treasury explained in its budget statement. The proposal explicitly aims to “enhance smartphone affordability at the lower end of the price spectrum and support efforts to promote digital inclusion for low-income households.”
Communications Minister Solly Malatsi has been a vocal advocate for the tax reduction, having engaged in preliminary discussions with the Treasury about making smart devices more affordable. “Our proposal is that the ad valorem tax contributes to the high cost of smart devices. When you eliminate that cost it will help drive down affordability and that’s my key interest,” Malatsi stated in November.
The tax reduction comes at a critical time as South Africa prepares for a major telecommunications transformation. The government has set December 31, 2027, as the deadline for the complete shutdown of 2G and 3G networks to free up radio spectrum for faster 4G LTE and 5G networks. This transition, outlined in the Next Generation Radio Frequency Spectrum Policy paper, represents a significant step toward modernizing the country’s digital infrastructure.
However, experts have expressed concerns that phasing out older network technologies could potentially widen the digital divide. Many lower-income consumers, particularly those in remote areas and underserved communities, rely on more affordable feature phones that operate on 2G and 3G networks. Without access to affordable smartphones capable of connecting to newer networks, these populations risk being left further behind in the digital economy.
Data from Statista shows that smartphone penetration in South Africa is expected to grow steadily between 2024 and 2029, with projections indicating an increase of 11.8 percentage points over this period. By 2029, smartphone penetration is forecast to reach 39.05% of the population, continuing an upward trend that began in 2020.
South Africa already demonstrates strong mobile connectivity overall. According to GSMA Intelligence, as of January 2025, there were approximately 124 million mobile connections in the country, equivalent to 193% of the total population of 64.4 million. This high percentage reflects the common practice of individuals using multiple mobile connections. Between early 2024 and 2025, mobile connections increased by 5.2 million, representing a 4.4% growth.
The GSMA report also indicates that 97.5% of mobile connections in South Africa now operate on “broadband” networks (3G, 4G, or 5G), though not all of these connections necessarily utilize cellular mobile data. Some subscription plans may be limited to voice and SMS services only.
The country’s leading telecom operators, MTN and Vodacom, have emphasized the need for collaboration between operators, regulators, and the government to ensure a smooth network transition. Industry groups, including the Association of Comms and Technology, have advocated for government assistance through tax reductions and flexibility regarding implementation deadlines.
The removal of excise duties on more affordable smartphones represents a concrete step toward addressing these concerns. By reducing the tax burden on lower-priced devices, the government hopes to accelerate the adoption of smartphones capable of operating on modern networks, thereby easing the eventual transition away from 2G and 3G technologies.
The tax reduction initiative reflects growing recognition that smartphone access has evolved from a luxury to a necessity in the digital age. As South Africa continues its digital transformation journey, measures that enhance affordability and accessibility of essential technologies will play a crucial role in ensuring that all citizens can participate in and benefit from the digital economy.
For many South Africans, this tax reduction could represent the difference between digital inclusion and being left on the wrong side of the digital divide.
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