Smartphone plant roars to life as Safaricom asks for subsidy

The Safaricom-led consortium assembling smartphones in Kenya has asked President William Ruto’s administration for subsidies similar to the fertiliser programme after its first set of gadgets ended up being costlier than what is currently available in the market. 

Safaricom, which is one of four venture partners in the East Africa Device Assembly Kenya Limited (Eadak) that is assembling the gadgets at its factory located in Athi River, says it will be impossible to compete with the Chinese imports without subsidies. 

Despite Dr Ruto’s promise of having the cheapest smartphones made locally, the phones assembled by Eadak are still priced higher than many other imported gadgets in the market. A spot check showed smartphones such as Safaricom's NEON Ray 2 and SIMI 3G smartphones are selling at Sh5,349 and Sh5,525 respectively.

Read: Safaricom reveals plan to set up smartphone factory

This indicates that the locally-made phones could struggle to compete with cheaper imported smartphones.

“In terms of cost of the devices, we believe that subsidies are essential similar to ... the fertiliser subsidy programme in order to access cohorts such as women, students and other groups that cannot afford,” Safaricom CEO Peter Ndegwa said on Monday.

“We know countries like Rwanda are already doing about $20 dollars per phone in terms of subsidy. We will work with others, including development partners and private sector players, to support the subsidy agenda.”

The other firms in the venture are Jamii Telecom, Chinese phone manufacturer Tele1 and the Industrial Technology Training Company Limited (ITTCL).

Dr Ruto on Monday launched the Eadak factory, making it the first mobile phone assembly facility in Kenya. Locally assembled smartphones are expected to hit the market in the coming months and will be selling at $50.

The inaugural devices on show were the 4G-enabled Neon 5 Smarta and Neon 6 Ultra, which will be retailing at Sh7,499 and Sh8,999 respectively. Eadak is eyeing expansion of the product line and has planned launches of new products, including a locally assembled tablet, in the coming months.

Subsidising local assembly of mobile phones could, however, be a sticky issue for the President at a time when his administration is under immense pressure from the International Monetary Fund (IMF) to drop all subsidies except that on fertiliser.

Muted revenue growth, rapidly growing public spending needs and a ballooning debt burden have also piled pressure on the government.

Last year, the President moved to withdraw subsidies on essential products such as fuel and maize flour.

“The industry has collectively invested in modern infrastructure that is spread across the country. To support your agenda target of laying 100,000km of fibre optic across the country we seek your support in classifying telecommunications infrastructure as critical infrastructure,” said Mr Ndegwa.

During the launch, President Ruto was taken on a tour of the modern facility, which the company says has the capacity to produce up to three million mobile phones annually.

Eadak said it will introduce the pay-as-you-go model for the phones in January next year. Through the model, customers will pay an upfront fee of Sh1,000 and pay the rest in instalments.

The firm said the low-cost mobile phones will be available for sale countrywide at Safaricom shops and Faiba shops, dealers’ stores as well as the Masoko e-shopping platform.

The President said the assembly plant will create jobs for hundreds of youth and make it cheaper for Kenyans to buy smartphones. He said the venture is a fulfilment of his promise to enhance digital access for Kenyans.

“That is the power of the private sector. As government, we are going to play our role to make sure that we have a fiscal and business environment that supports investment,” said Dr Ruto.

He said that the government will support the local assembly of mobile phones by being a major buyer of the devices.

Health Cabinet Secretary Susan Nakhumicha said her ministry had already placed an order for 100,000 of the locally made phones which are currently being used by community health workers.

“The provision of affordable digital smart devices is no longer just about mobile telephony and fintech penetration, it is also about universal access to private and public sector goods and services as the driver to national transformation,” said Dr Ruto.

Kenya is a major importer of mobile phones, mainly from China, the US, Vietnam and South Korea. The cost of these devices largely relies on external factors, including the cost of chips and the currency exchange rate.

According to the Communications Authority of Kenya (CA), there were some 62.9 million mobile phones being used by Kenyans by June 2023, translating to a mobile penetration rate of 124 percent.

These include 32.1 million feature phones and 30.8 million smartphones.

Feature phones are cheaper compared to smartphones and have basic functionality such as making calls, SMS and mobile money transfer services but generally lack internet access.

It is projected that the Athi River factory will create between 300 and 500 direct jobs.

“This assembly plant will support the government’s agenda to enhance digital inclusion in the country. We have been able to achieve affordability through a collaborative approach that comprises industry partnership and favourable government policies,” said Eadak chairman Joshua Chepkwony.

Demand for mobile devices has, however, been hit by a sharp rise in prices which has been exacerbated by the depreciation of the Kenyan shilling against the US dollar.

Read: Kenya-made smartphones to hit market at end month

Kenya’s smartphone imports fell by 13.5 per cent in the three months to December last year compared to the same quarter in 2021, according to data released by International Data Corporation (IDC) in March.

It was the second consecutive quarterly drop in 2022, according to the firm.

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