Investors in smartphone or phone manufacturing in African countries are struggling to be competitive in the industry as their profitability is eaten away by higher costs of production compared to other countries, the ICT and Innovation Minister, Paula Ingabire, has said.
She was speaking on Thursday, June 1, at the Senate, during a consultative session on actions in line with developing ICT in Rwanda.
"We carried out a study last year which indicated that wherever we will try to make or assemble a phone in Africa, the cost will always be five percent higher than that of the phone made from China and Taiwan and imported into Africa, because the raw materials are still expensive, in addition to the labour needed," she told Senators.
While 78 percent of Rwandans own phones as of 2022, overall, only 25 percent have smartphones, Ingabire said.
She indicated that the country has been putting in effort including looking for investors to make or assemble smartphones in the country, in a bid to ease people's access to such digital devices which can enable people to access digital services. Rwanda's goal is to become a knowledge-based economy.
According to her, the issue of the cost of production does not only concern phone manufacturing only but computers as well.
The country, she said, started with Positivo company for producing computers in Rwanda, then came another company for making smartphones - Mara Phones - and all faced challenges.
"The study helped us to understand that if we want to enter a venture of looking for people to build phones and computers needed in our country and Africa [as a whole], we should consider together the incentives that can be provided so that the five percent [higher cost of production] goes down," she said.
She indicated that the profit margins of entities that build phones are between 1 and 4 percent. She suggested that there are cases where the cost of producing them was more than the profit one could get, which is the reason why many start but their operations are short-lived.
"We observed that in different countries such as South Africa, Ethiopia, and Kenya which also started assembly lines; seem to have stopped because of those economies of scale," she said.
Speaking to The New Times, the Managing Director of Rwanda Mara Phones, Eddy Sebera, said that the higher cost of production was a concern for phone production across the continent.
"This is a general issue across Africa because we are not the ones who produce the raw materials we talk about. They are imported. ... So, as long we import the raw materials abroad, we will still be affected," he said.
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He indicated that prices are influenced by the raw material producing countries in Asia, citing China, Singapore, and Korea.
"We finished the pilot phase, and now we are getting ready for carrying out what we call large-scale production," he said, adding that it requires getting raw materials to expand the production.
He did not reveal exactly when the firm will start large-scale smartphone production.
"We will inform you when we are ready for that," he said, adding that there is work still being done so as to meet global standards regarding smartphone production.
At least five million phone market guarantee, incentives
Also, Ingabire said, another factor the study revealed is that a person who wants to assemble smartphones needs a guarantee that he or she will get a market of at least five million phones per year.
"This means that one country cannot manage it alone. It requires that we come together as different countries, because for instance in the case of Rwanda, if those five million phones were produced and distributed, we would have concluded (covered all the population) within two years. You cannot venture into a business for only a two-year market, it has to be long-term," she said.
"So, that study helped us to consider, together, whether we will look for another person (investor) to come and assemble phones and computers, and which incentives we should set as the Government to help them get profit, but at the same time ensure that they are not more expensive than importing them from China," she said.
