Data from Canalys’ latest research shows Africa's smartphone market grew by 3 percent year-on-year in third quarter of this year reaching 18.4 million units. The technology market analyst firm, however, projects a cautious one per cent growth in smartphone shipments for next year emphasizing the need for sustained efforts to unlock the market's potential. Manish Pravinkumar, Senior Analyst at Canalys joins CNBC Africa to unpack the report.
Data from Canalys’ latest research shows Africa's smartphone market grew by 3 percent year-on-year in third quarter of this year reaching 18.4 million units. The technology market analyst firm, however, projects a cautious one per cent growth in smartphone shipments for next year emphasizing the need for sustained efforts to unlock the market's potential. Manish Pravinkumar, Senior Analyst at Canalys joins me now to unpack the report. Thank you, Manish, for joining us today. Thank you, Esther, for having me. Well, let's start with Egypt's performance. Double digit growth for the first three quarters this year maintaining its lead on the continent. What are the drivers of the country's success in the region? Egypt has been leading the region in terms of localised production, which has drastically reduced their import reliance and slashing the smartphone import bill by 99 per cent to 1.65 million as of H1 from H1-2024, from H1-2021. And that is the driving factor while it is also helping them to stabilize the smartphone pricing locally, which had been dependent on the imports till now. And I assume that this should be replicated across the continent in Africa as Egypt leads the region. All right. Well, help us understand the weakness the report highlighted in the Nigerian and South African markets. So, Nigeria is one of the second largest markets after Egypt, and it recorded a modest 1 per cent growth as Naira depreciated almost 70 per cent from January to September, though the inflation improved in August by 32 per cent. It's still continuing to weigh on the consumer demand as well as the imports of the phones. As Nigeria still depends, 99 per cent of the imports of the mobile phones are imported from outside. They don't do any local production. And that impacts on the pricing of the smartphones and that also is passed on to the consumers, which are feeling the heat. Though there are a lot of options in the various price bands, our prices still remain out of reach for many consumers. Now, the report highlights the emergence and success of feature phones. Help us understand this trend and if it will continue to impact on smartphone expansion in the coming quarters or years. So, yes, what we have observed, the feature phone has taken a bite out of the smartphones growth as of quarter three, where 55 per cent of the total mobile phones market is now taken by feature phones, and the reasons being consumers still preferring to buy the feature phones because of the cost. To look at the cost on an average, a feature phone could be on $8 versus a smartphone could start from $75, almost $80, which still remains out of the reach of the many, many consumers. And that will continue to stay. However, having said that, our report also highlights that the 4G penetration will continue to be there in the next four to five years, with the entry-level smartphones still being 4G. So, 5G will still be far away and pushed across, as many governments are under dilemma. Finish your thoughts. Sorry. So, as many governments are under dilemma to see that, to have first the revenue via the higher import taxes, which pushes the smartphone prices up, and that way the consumers are also asking for more smartphones, which are much lower in cost. Right. Let's talk about the vendors now. Talk to us about how they're navigating the difficulties in the smartphone markets this year, and how their strategies are evolving to adapt to headwinds in the region. What are you forecasting for them in the coming quarters? So, smartphone market, as mentioned in the report, it had presented a mix of the opportunities and challenges for the vendors. While some of the vendors like Samsung has been seeing market decline, Transient is still maintaining its market share of 50% with 8% growth driven by ITIL, which had seen a remarkable surge, which caters to the lowest price band of as low as $80 and much below, followed by their affordable offerings of Infinix and Tecno. Xiaomi is racing ahead, which has achieved a 30% growth. It's been enticing a lot of the younger consumers with their offerings like the Redmi 14C in key markets like Nigeria, and Egypt as well, despite the ASP being dropped. The youngest contender is the Realme, which has been liked by many of the consumers, their strategy being more value for less money. And finally, what we see is Honor picking up the market with their various programs like YES program and Port of Honor in South Africa, and also potential manufacturing investments maybe in the select African countries. Such mixed strategies are helping vendors to tackle the various challenges they see in the continent. Right. Let's talk about 4G and 5G adoption. That's also gaining some momentum. The report also states that resources will shift towards expanding 4G and 5G adoption, paving the way for the next wave of connectivity. Briefly talk to us about this, and also tell us what will determine success in the long run. So 4G adoption will continue to see a growth, whereas a lot of the countries are moving towards 5G. We have the likes of Senegal, we have Egypt, which has a known and matured markets like South Africa. However, it's the prices of the smartphone itself which is having the challenge to the adoption of 5G. And that is one of the reasons that 4G will continue to be the primary driver in many of these markets. On the other hand, we have seen a lot of investments by the operators and the governments on the 4G infrastructure. Now, there's a reason for the governments to put in those money. They want as many consumers to get online and leapfrog the internet and get to the smartphone adoption, as well as a lot of other factors are dependent on this. So financial, education, health, and as more and more consumers get online, I think so there'll be a lot of digital transformation, thus laying the groundwork for connected, inclusive, and economically dynamic future for the continent. All right, we have less than 60 seconds left. You're projecting a very cautious 1% growth for 2025 smartphone shipments for 2025. Why the significant drop from what we have right now? So there have been various reasons as we have studied the market and a lot of feedback which comes in from various vendors and partners. The key reasons being the import taxes, which have drastically grown up. So take an example of markets like Kenya, which has gone all the way to 50% implementing higher import taxes. Similarly, in Egypt, that is one key impact. The other is the fluctuating currencies, which actually passes on the cost to the vendors and then which passes on to the consumers. And we can count on inflation, which is also adding to this, thus putting the consumers on the back burner, saying that we want to push back on buying the devices. First of all, we want to focus on our general needs. All right, Manish, we're going to have to leave it there. But thank you so much for talking to us today. We appreciate your time on the show. Manish Pravin Kumar, Senior Analyst at Canalyst, looking at Africa's smartphone market.
Theme: Challenges and Opportunities in Africa's Smartphone Market
Africa's smartphone market is facing challenges as growth rates slow down, with Canalys projecting a cautious 1% growth in smartphone shipments for the year 2025. The latest research data from Canalys shows that the African smartphone market grew by 3 percent year-on-year in the third quarter of this year, reaching 18.4 million units. Despite this growth, there are concerns about the sustainability and future expansion of the market, prompting a need for sustained efforts to unlock its potential. Egypt emerges as a success story in the region, leading in local production that has reduced import reliance significantly. The country has managed to slash its smartphone import bill by 99% to 1.65 million, stabilizing smartphone pricing locally. This trend sets an example for other African countries to follow in localizing production and stabilizing prices. However, the report highlights weaknesses in the Nigerian and South African markets. Nigeria, the second-largest market after Egypt, recorded a modest 1% growth due to currency depreciation and high import dependence. The Naira's depreciation of almost 70% and high inflation rates have impacted consumer demand and smartphone imports. With 99% of mobile phones being imported, Nigeria struggles with high smartphone prices, making them inaccessible to many consumers. The emergence and success of feature phones have also impacted smartphone expansion. Feature phones account for 55% of the total mobile phone market, with consumers preferring them for their affordability. While smartphones remain out of reach for many due to higher prices starting at around $75, feature phones priced as low as $8 continue to attract buyers. The report predicts that 4G penetration will continue in the next few years, with entry-level smartphones supporting 4G connectivity and 5G adoption lagging due to pricing challenges. Vendors in the African smartphone market have faced a mix of opportunities and challenges. Samsung has experienced market decline, while Transsion maintains its market share with 8% growth, driven by ITel offerings catering to the low-price segment. Xiaomi and Realme have seen growth by offering value-for-money smartphones appealing to younger consumers. Honor's market presence is growing, supported by programs like YES Program and Port of Honor in South Africa. The focus on 4G and 5G adoption is gaining momentum in Africa, with resources shifting towards expanding connectivity. While some countries are moving towards 5G, the high cost of smartphones remains a challenge for widespread adoption. Governments and operators are investing in 4G infrastructure to drive digital transformation and enable more consumers to access online services. Despite the potential for growth, Canalys projects a cautious 1% growth in smartphone shipments for 2025. Factors such as high import taxes, fluctuating currencies, and inflation contribute to this slowdown. Consumers are prioritizing essential needs over smartphone purchases, impacting demand. Addressing these challenges and fostering a favorable environment for smartphone adoption will be crucial for the sustained growth of the African smartphone market.
"Despite the potential for growth, Canalys projects a cautious 1% growth in smartphone shipments for 2025. Factors such as high import taxes, fluctuating currencies, and inflation contribute to this slowdown."
['Canalys', 'Africa smartphone market', 'smartphone shipments', '4G adoption', '5G adoption', 'mobile phone market', 'vendor strategies', 'feature phones']