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Traders counting losses as mobile phone shortage bites

Business operators dealing with mobile phones in Nyeri have decried declining sales owing to a serious shortage of the products.

So grave is the situation that some dealers have been forced to lay down staff to cut down on costs due to declining sales.

A spot check by KNA at leading mobile phone outlets within Nyeri town laid bare the gravity of the matter with most of the operators being forced to revert to selling second-generation of mobile networks (2G) sets.

A number of traders who spoke to KNA also complained that most of the handsets they had ordered are arriving with faulty batteries while the functioning ones are very expensive.

This has forced sellers to hike prices, a decision that has not gone well with the buyers.

“We are currently doing very badly as far as mobile phone sales are concerned. I used to make up to Sh40, 000 in sales by midday on a working day when there was a seamless supply of mobile sets. But these days selling a single unit has become practically impossible due to increased cost. The challenge has forced some shops to reduce their workforce to cut down on overhead costs until such a time things will look up again,” says Caroline Njeri, a mobile phone dealer.

Njeri says the most affected brands include Real Me, Tecno Spark, Samsung, and Itel. She also disclosed that the few handsets they are receiving are coming at hiked prices forcing them to charge an additional fee of between Sh1,000 and Sh1,500 per set.

The trader is now urging the government to address the issue as a matter of priority to avert a potential collapse of their businesses. “Every time we make an order for new sets, it takes quite some time for delivery to be made and they also come with hiked prices. This has now forced us to increase our prices to cushion our business against running into losses.

Unfortunately, this has only deteriorated the situation since most buyers are reluctant to dig deeper into their pockets just to purchase a mobile phone, especially during these tough economic times,” she added.

Her sentiments are echoed by Muthoni Mwangi who says they are yet to receive an order they placed due to challenges in supply.

She says the problem began sometime in May this year and has adversely impacted on her business since customers can no longer get their favourite mobile phone sets.

The shortage has also forced her to increase the prices of almost all smartphone brands in order to ensure her business stays afloat.

Ms Mwangi is now appealing to the Government to come to their aid and address taxation rules on imported mobile sets which she says is to blame for the current crisis. “This shortage (of smartphones) actually began in May this year and has affected our businesses negatively. For instance, we did place orders for Real Me smartphones some time ago but we are yet to receive any. And even when the stocks arrive, they are always at a higher price meaning we have to adjust the same for our clients. In the end, we are forced to choose between losing our clients and making no profit at all,” she stated.

Another dealer who requested anonymity said the government should now come to the aid of business operators by reducing the amount of taxes being levied on goods.

She said the amount of money being charged on imported goods including electronics is way too high and needs review to protect local entrepreneurs.

“What we are witnessing as far as the current shortage is concerned is directly linked to excessive taxation being imposed on imported electronic goods. The shortage on the other hand has forced us to increase our prices on mobile phones since we are also paying more to our suppliers. Currently, I have been forced to charge between Sh500 and Sh1,000 more on all smartphones and Sh100 and Sh200 more for a 2G set due to changes in their prices. The government should therefore review its taxation on imported electronics including cell phones in a manner that will cushion traders to enable them to make some profit,” she insisted.

There has been a shortage of electronic goods of late in the country with smartphones being the most affected. This comes after importers of consolidated cargo were ordered to pay taxes based on the transaction value, per a new directive issued by the Kenya Revenue Authority (KRA).

The directive is a departure from the previous arrangement, where importers declared loose cargo and paid a fixed duty of Sh200 for every kilogram.

According to the taxman, the decision to adopt the new tariff, based on transaction value, followed abuse of the initial government directive whose objective was to ease costs for small importers.

For instance, some importers had reportedly been shipping high-end mobile devices, declaring them feature phones and in the process denying KRA millions of shillings in unremitted revenue.

Official data from the Communications Authority of Kenya (CAK) show that penetration of feature phones or non-smartphones was at 68.1 percent towards the end of December 2022.

“The number of mobile subscriptions increased from 65.5 million reported last quarter to 65.7 million during the reference period, representing a penetration rate of 133.1 percent,” said CAK in its latest quarterly report.

Kenya had registered approximately 63.9 million mobile connections as of January.

The number corresponded to 117.2 percent of the country’s population, indicating the individual use of multiple connections.

Since January 2021, Kenya has registered an increase in mobile connections.

In May this year, Kenya announced plans to roll out the first consignment of one million locally assembled smartphones within two months at a unit retail price of Sh5,484 in a bid to foster digital access and inclusion.

While making the announcement, ICT Cabinet Secretary Eliud Owalo said the affordability of smart devices had been a major hindrance to digital inclusion, hence the need to produce the gadgets locally.

Owalo disclosed that the low-cost smartphones were being assembled at the Konza Technopolis in Malili, Machakos County.

“Based on feasibility studies undertaken, we can locally assemble smartphones at a unit cost of about $40. We’ve partnered with the private sector to ensure in the next two months, we can roll out our first consignment of low-cost smartphones,” Owalo said during the official launch of the Information Communication and Technology (ICT) week at the Nairobi Safari Park on May 18 this year.

“We are aware of the crisis of affordability of smart devices as a potential hindrance to the ability of citizens to tap the full potential that this sector presents and we have actively engaged stakeholders in private and manufacturing to produce low-cost smartphones,” he added.

By Samuel Maina

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