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The South African government plans to make smartphones affordable for low-income earners by removing the luxury excise duty worth around $136.37 from April 1. The country’s national treasury aims to promote digital inclusion with the proposed plan.
The South African Revenue Service charges an ad valorem tax, or a luxury excise tax, on smartphones, over and above Value Added Tax and regular import duties, which increases the price of these devices.
South Africa’s Ad valorem excise duties on smartphones are currently charged at a rate of 9 per cent. An ad valorem excise duty is a type of tax whose amount is based on the value of a transaction or of a property which is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax.
“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 said in its budget statement.
It also noted that the proposal would enhance smartphone affordability at the lower end of the price spectrum and support efforts to promote digital inclusion for low-income households.
According to Statista, the smartphone penetration rate as a share of the population in South Africa was forecasted to continuously increase between 2024 and 2029 by 11.8 percentage points in total. After the ninth consecutive increasing year, the penetration is estimated to reach 39.05 per cent and therefore a new peak in 2029. Notably, the smartphone penetration forecast rate was continuously increasing from 2020 to 2029.
South Africa’s smartphone penetration projection (2020 – 2029)Another 2020 report by the State of the ICT Sector report, put together by the Independent Communications Authority of South Africa (ICASA), claimed that South Africa’s smartphone penetration reached 91.2 per cent in 2019 up from 81.7 per cent in 2018, representing a 9.5 per cent increase during the period under review.
With a total population of 64.4 million as of January 2025, there were 124 million cellular mobile connections in South Africa at the beginning of 2025. This is according to a025 data from GSMA Intelligence. As many people make use of more than one mobile connection, it’s not unusual for mobile connection figures to significantly exceed figures for the total population.
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Network type shift in South Africa
The development comes as South Africa plans a total shutdown of 2G and 3G networks by December 31, 2027, to free up radio waves for faster 4G LTE and 5G networks.
In its Next Generation Radio Frequency Spectrum Policy paper, the government has set the shutdown date as it prepares to fully benefit from rapid technological advancements. The South African government noted that the policy proposes the gradual phasing out and shutting down of older networks, such as 2G and 3G to free up radio waves for faster 4G LTE and 5G networks.
Experts have argued that phasing out 2G and 3G networks risked exacerbating the digital divide as many low-income consumers, particularly those in remote areas and underserved communities, may not afford newer smartphones designed for faster networks.
Communications Minister Solly Malatsi noted in November that the ad valorem excise duties contribute to the high cost of smart devices and that he was in talks with the treasury to cut the luxury levy.
“We’ve had preliminary engagements with the Treasury about the proposals we have around smart devices and making them 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,” the Minister said.
The county’s two biggest telecom operators, MTN and Vodacom, have also said that the network-type transition needs collaboration between operators, the regulator, and the government.
In the same light, telecom groups and the Association of Comms and Technology were of the notion that the government should also assist the transition by lowering the taxes and refraining from imposing a strict deadline.
Statistically, the GSMA Intelligence’s report indicates that mobile connections in South Africa were equivalent to 193 per cent of the total population in January 2025. In the trend, the number of mobile connections in South Africa increased by 5.2 million (4.4 per cent) between the start of 2024 and the beginning of 2025.
Moreover, the report suggests that 97.5 per cent of mobile connections in South Africa can now be considered “broadband”, which means that they connect via 3G, 4G, or 5G mobile networks.
Notably, devices that connect to “broadband” mobile networks do not necessarily use cellular mobile data. For instance, some subscription plans may only include access to voice and SMS services.
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