South Africa is actively pursuing strategies to enhance digital inclusion and improve smartphone affordability for its low-income population. A significant step in this direction is the government's proposal to remove the luxury excise duty, estimated at around $136.37, on certain smartphones, effective from April 1, 2025. This move, spearheaded by the country’s national treasury, aims to make smart devices more accessible to a broader segment of the population.

Currently, the South African Revenue Service imposes an ad valorem tax, or luxury excise tax, on smartphones. This tax, levied at a rate of 9 per cent, is applied over and above the standard Value Added Tax (VAT) and regular import duties, consequently increasing the final price of these devices. An ad valorem excise duty is a tax whose amount is directly proportional to the value of a transaction or property. The proposed amendment specifies that as of April 1, 2025, this duty rate will only be applied to smartphones with a price greater than 2,500 rands at the time of export to South Africa. The Treasury stated that this adjustment would significantly enhance smartphone affordability at the lower end of the price spectrum, directly supporting efforts to promote digital inclusion, particularly for low-income households.

The emphasis on smartphone affordability comes amidst varying reports on the country's smartphone penetration. According to Statista, South Africa's smartphone penetration rate is forecasted to continuously increase by 11.8 percentage points between 2024 and 2029, reaching an estimated peak of 39.05 per cent by 2029. This trend reflects a consistent increase observed from 2020 to 2029. In contrast, a 2020 report by the Independent Communications Authority of South Africa (ICASA) indicated a much higher penetration, claiming it reached 91.2 per cent in 2019, up from 81.7 per cent in 2018, representing a 9.5 per cent increase. Regardless of the exact figures, the market for mobile connectivity remains robust. GSMA Intelligence data from January 2025 reported 124 million cellular mobile connections in South Africa, for a total population of 64.4 million. This indicates that mobile connection figures significantly exceed the total population, as many individuals utilize more than one mobile connection. The number of mobile connections also saw a 4.4 per cent increase (5.2 million) between early 2024 and early 2025, reaching an equivalent of 193 per cent of the total population.

This drive for affordability and digital inclusion coincides with South Africa's ambitious plan to shut down 2G and 3G networks by December 31, 2027. This transition, outlined in the Next Generation Radio Frequency Spectrum Policy paper, aims to free up crucial radio waves for the deployment of faster 4G LTE and 5G networks, allowing the country to fully capitalize on rapid technological advancements. However, experts have voiced concerns that phasing out older networks could exacerbate the existing digital divide, as many low-income consumers, particularly those in remote and underserved areas, may not possess or afford newer smartphones compatible with 4G or 5G networks.

Recognizing this potential challenge, Communications Minister Solly Malatsi highlighted in November that ad valorem excise duties contribute significantly to the high cost of smart devices. He confirmed preliminary engagements with the Treasury to cut this luxury levy, stating that its elimination would help drive down affordability, which is his key interest. Telecommunication operators, including the country’s two biggest players, MTN and Vodacom, have also stressed the importance of collaboration between operators, the regulator, and the government for a smooth network-type transition. Telecom groups and the Association of Comms and Technology have urged the government to further assist this transition by lowering taxes and refraining from imposing overly strict deadlines for the shutdown.

The overall mobile landscape in South Africa is evolving rapidly towards more advanced technologies. The GSMA Intelligence report further indicates that 97.5 per cent of mobile connections in South Africa can now be classified as “broadband,” meaning they connect via 3G, 4G, or 5G mobile networks. It's important to note that while these connections utilize broadband networks, not all necessarily involve cellular mobile data, as some subscription plans may only include access to voice and SMS services. The government’s integrated approach, combining tax relief with network modernization, aims to ensure that no citizen is left behind in the digital transformation.