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Kenya handset market records yearly significant growth

29 May 2014, 15:51

Nairobi - Kenya's mobile handset market recorded year-on-year volume growth of 21.5 percent in the first quarter of the year largely thanks to a vibrant gray market that was boosted by the September 2013 re-introduction of value-added tax on handsets and other electronic devices.

This is according to preliminary figures announced by International Data Corporation (IDC), which also attributed the growth to various economic and social factors.

"Gray market dealers have been the main beneficiaries of the government's decision to re-introduce VAT in late 2013, while official channel partners have been badly hit," said James Mutua, a research analyst with
IDC East Africa.

"Gray market dealers are known to source their handsets from unofficial/unauthorized channels, which makes their gadgets cheaper than the same products sourced through official partners."

The Kenyan government had exempted mobile handsets from VAT in June 2009.

This generated significant benefits for many Kenyans and led to an increase in the volume of shipments to the country, but this all changed with the return of the levy. "An unfair playing field has emerged since
these new taxes were implemented, and as a result gray market dealers now account for more than two-thirds of the mobile handset market's volume," said Mutua.

"Moreover, these estimates are conservative; the numbers may be significantly higher as some official channel partners are claiming to have lost more than half of their normal monthly run rate business."

IDC's latest figures show that smartphone shipments were up 104,6 percent year on year in Q1 2014, against a paltry rise of 3.6 percent for feature phones over the same period.

 - CAJ News

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