African smartphone market saw a modest surge in the second quarter of this year recording a 6 per cent year-on-year increase to 17.8 million units. That’s according to Canalys, a technology market analyst firm. Senior Analyst, Manish Pravinkumar says In sub-Saharan Africa, device financing is emerging as a critical driver. However, he notes addressing broader challenges such as consumers’ willingness to pay, digital literacy, high taxation on devices and currency fluctuations are essential to unlock the full potential of smartphone adoption across the continent. He joins CNBC Africa for more.
Africa′s smartphone market saw a modest surge in the second quarter of this year recording a 6 per cent year-on-year increase to 17.8 million units. That′s according to Canalys, a technology market analyst firm. Senior Analyst, Manish Pravinkumar says In sub-Saharan Africa, device financing is emerging as a critical driver. However, he notes addressing broader challenges such as consumers′ willingness to pay, digital literacy, high taxation on devices and currency fluctuations are essential to unlock the full potential of smartphone adoption across the continent. He joins CNBC Africa for more. In sub-Saharan Africa, device financing is emerging as a critical driver. However, he notes addressing broader challenges such as consumers′ willingness to pay, digital literacy, high taxation on devices and currency fluctuations are essential to unlock the full potential of smartphone adoption across the continent. However, he joins CNBC Africa for more. In sub-Saharan Africa, device financing is emerging as a critical driver. However, he notes addressing broader challenges such as consumers′ willingness to pay, digital literacy, high taxation on devices and currency fluctuations are essential to unlock the full potential of smartphone adoption across the continent. However, he joins CNBC Africa for more. and Samsung as well. These markets, predominantly, we see prior to these issues were favourites for many of these Chinese vendors, especially the likes of OPPO, vivos. But we see a good comeback as the governments are encouraging the local manufacturing to ensure that there is a lower cost of smartphones being available to the consumers. Though there is a massive demand in these markets, it is not being fulfilled today to the top. And to do that, I think the local manufacturing is the answer. Though Algeria doesn′t have that kind of manufacturing at this point of the time, but we see Egypt is racing ahead in this market. And talking about how the market race is also going on at this point in time, sub-Saharan Africa is definitely facing its own different bucket of challenges. But talking about only South Africa now achieving a growth rate of about 13%, Nigeria about 5%, we have disposable income shrinking even further. Do you think there are still opportunities for economies like Nigeria? Yes, it′s been one of the leaders in terms of shipment volumes, but do you think there are opportunities that the country or players in this industry can cash in? So, there are massive opportunities in these markets as well. And as I mentioned earlier, the challenges are plenty, specifically the import taxes which have been implemented, where these economies have been dependent on the imports of phone. You take the example of Nigeria, say 99% of your smartphones are being imported. That puts a lot of pressure on the foreign currency. And hence, the volatile currency of Naira is also putting a lot of pressure. But we have seen vendors putting up a lot of investments. The best example is Xiaomi, which has been grabbing market share against the leader, Transion. Other than that, we see South Africa, which is predominantly an operator-driven market. Samsung is still a top vendor in this market. However, we see the likes of Honor also coming up very soon and climbing the ladder. And in the mix of all of these now, we are seeing the natural shift to budget-friendly options when we are talking about phones at this point in time. Walk us through how this is also shaping the new dynamics or how we are going to see adoption in terms of smartphones, the sort of evolution, and a whole lot more here on the continent. And in terms of this quarter also marking one of the lowest ASPs in the last 11 quarters. Walk us through what's going on here too. So, one of the key points we noted is the ASPs, which has... Now, this has been the reason because many of the consumers are opting for the sub-$100 phones. If you notice, David, a lot of consumers are still not able to move from the feature phones to smartphone vendors like the price segment. And with that push, I think a lot of consumers are opting for these budget-friendly options. And that is one other reason that we see these ASPs going down. And we foresee that this will further push down in coming quarters because of cost of living and consumers opting for these budget-friendly options. And also the vendors' offerings. Today, vendors are offering the best of the specs, powerful products at fantastic price points. And that's why you see consumers are shifting to these budget-friendly options. Okay. Now, let's talk about opportunities that are bound now for device financing, now finding the missing link into breaking through smartphone adoption, digital literacy. Walk us through the opportunities here, speaking to the specifics, and how can we also leverage regulation when we're talking about the boom in artificial intelligence and Internet of Things? So, one of the observations from our report has been that still 52% of the market is with the feature phones. And that migration has to happen with the governments under pressure on investing into the telecom infrastructure, moving to the 4G and 5G spectrum. Now, to capitalize on those, governments have to start moving the consumers to the smartphones, to the 4G. And there has been a leap from many of these markets where consumers have not moved on to the Internet. And this is where one of the points comes in, the device financing, because this works as a catalyst for growth. Well, we have seen the likes of M-KOPA, which is running device financing successfully in Kenya, and now it is replicating this into West Africa. If this moves on to the markets further down to South as well, where we don't see the device financing still operational because it's very much of an operator-driven market, we would see a lot of consumers moving to smartphones. And that will accelerate the transition as well from the feature phone to smartphone, and also consumers getting hands-on to the latest devices.
Theme: Challenges and Opportunities in African Smartphone Market
The African smartphone market experienced a 6% year-on-year increase in the second quarter of this year, reaching 17.8 million units, according to a report by Canalys, a technology market analyst firm. Senior Analyst, Manish Pravinkumar, highlighted the emergence of device financing as a critical driver in sub-Saharan Africa. Despite this positive trend, challenges such as consumers' willingness to pay, digital literacy, high taxation on devices, and currency fluctuations are hindering the full potential of smartphone adoption across the continent. During an interview with CNBC Africa, Pravinkumar discussed the dynamics of the smartphone market in Africa, highlighting various factors affecting the industry. One of the key challenges facing the African smartphone market is consumers' willingness to pay. Many consumers are still using feature phones due to the price segment barrier, with a large number unable to upgrade to smartphones. However, there has been a shift towards budget-friendly options, with vendors offering powerful products at competitive prices. As a result, the average selling prices (ASPs) have decreased significantly, making smartphones more accessible to a wider consumer base. Pravinkumar noted that this trend is likely to continue in the coming quarters, driven by the cost of living and increased demand for budget-friendly devices. Another challenge highlighted in the interview is the impact of high taxation on devices in African markets. Import taxes play a significant role in the pricing of smartphones, with countries like Nigeria heavily reliant on imported devices. This dependence puts pressure on foreign currency reserves and leads to currency fluctuations, affecting the affordability of smartphones for consumers. Despite these challenges, Pravinkumar pointed out that vendors like Xiaomi are investing in the market and gaining market share against established players, demonstrating the potential for growth and competition in the industry. Moreover, the conversation touched on the role of device financing in driving smartphone adoption and digital literacy in Africa. With 52% of the market still dominated by feature phones, there is a significant opportunity to transition consumers to smartphones, particularly in the era of 4G and 5G networks. Pravinkumar cited the success of M-KOPA in Kenya, where device financing has facilitated the transition to smartphones. He emphasized the importance of governments investing in telecom infrastructure to enable this shift and highlighted the potential for device financing to accelerate the adoption of smartphones across the continent. In conclusion, the African smartphone market presents both challenges and opportunities for stakeholders in the industry. Addressing issues such as pricing, taxation, and digital literacy is crucial to unlocking the full potential of smartphone adoption in Africa. By leveraging innovations in device financing and government regulations, the industry can overcome barriers and drive growth in smartphone penetration. The evolution of the African smartphone market continues to be shaped by changing consumer preferences, competitive dynamics, and technological advancements, setting the stage for a dynamic and evolving industry landscape.
"Device financing works as a catalyst for growth in transitioning consumers from feature phones to smartphones, accelerating the adoption of the latest devices in the market."
['African smartphone market', 'Canalys report', 'smartphone adoption', 'digital literacy', 'device financing', 'challenges', 'opportunities', 'budget-friendly options', 'import taxes', 'currency fluctuations']