Mkopa Kenya General Manager Martin Kingori / Jacktone Lawi
Local smartphone
manufacturer M-Kopa has raised concerns over the absence of clear and
predictable tax guidelines governing mobile phone imports and locally assembled
devices.
The local assembler
is now warning that the gap is exposing Kenyan phone makers to unfair trade
practices and threatening recent investments in domestic manufacturing.
M-Kopa Kenya general manager Martin Kingori says lack of harmonised taxation rules has
allowed grey market imports to flourish, undermining firms that comply with
local tax and duty requirements.
Beginning January
1, 2025, Kenya Revenue Authority (KRA) and Communications Authority announced they had started tracking all imported and locally assembled phones via
their IMEI numbers to ensure tax compliance.
However, Kingori
holds that there are majority of imported phones in the market that are passing
through customs without paying their fair share of taxes.
“About 90 per cent
of devices coming into the country do not pay taxes. That is lost revenue for
the government, but more importantly, it creates an uneven playing field for
local assemblers who are paying all the required duties and levies,” Kingori
said.
Kenya imported more than about 2.3 million smartphones from China in
2024, according to official Chinese export data, a sharp increase from roughly 1.3
million units in 2023.
The demand
outweighs the local supply with the phone maker (M-Kopa) estimating that about 666,667
devices are produced annually.
M-Kopa operates a
smartphone assembly plant in Nairobi, established in 2023, which has so far
produced more than two million devices.
Kingori warned
that without firm action against grey market imports and clear guidelines on
how phones should be taxed, such investments risk becoming unviable.
“The benefit of
local assembly is being diluted. We pay import duty, excise duty and VAT, but
devices coming in through informal channels don’t pay any of these. The price
gap between locally assembled phones and imported finished products becomes
very narrow, making it difficult to compete,” he said.
Over the past
three years, the government has introduced several tax measures affecting the
mobile phone market, including a 25 per cent import duty in July 2022, followed
by an additional levy of about 7.5 per cent, and later an increase in VAT from
16 per cent to 18 per cent in 2023.
While these
measures were intended to encourage local value addition, manufacturers say the
intended incentives are being eroded by lax enforcement.
M-Kopa says its
factory was primarily set up to produce entry-level smartphones for first-time
users, a segment that remains significant, with nearly half of its customers
using a smartphone for the first time.
Over time, the
company has expanded into assembling mid-range and higher-tier devices to cater
for customers upgrading their phones.
“We don’t struggle
with demand. Our devices match global brands in specifications and quality. The
challenge is not the market, it is the unfair competition created by untaxed
imports,” Kingori told the Star in an interview.
The company
currently serves about 2 million customers in Kenya out of its 4.8 million
regional customer base and exports roughly 10 per cent of its locally assembled
devices to Uganda, a figure it hopes to grow as regional demand rises.
“We welcome
regulation because it ensures everyone plays by the same rules. But some
proposals, such as requiring approval for every agent or vendor, could become
an operational nightmare if not refined,” he said.