East African countries moved closer to an elusive customs union by making similar provisions and tax exemptions in various sectors along with improved investment in the technology sector.
Kenya, Rwanda, Uganda and Tanzania read their annual budgets on the same day, with emphasis on investment in technology and commitment to greater East African cooperation.
The major winners are mobile-phone handset manufacturers in Kenya who have been lobbying for zero rating of the value-added tax to beat competition from counterfeit products. The VAT clause was removed.
Tanzania, Rwanda and Uganda followed Kenya by zero rating importation of computers, video cameras and other accessories. However, Uganda banned importation of used computers, although importers will have a three-month grace period to clear goods already ordered.
With the landing of the East Africa Marine Cable System and SEACOM, the region is expecting improved communication and trade relations because the cable will open up access to Uganda, Rwanda and Burundi, which are landlocked.
Kenya made the most significant allowances to operators in the fiber-optic cable as the wear-and-tear allowances on telecommunication equipment including the fiber-optic cable increased from 12.5 percent to 20 percent.
ISPs in Kenya will be able to offset against corporation tax the costs incurred in acquiring the right to use the fiber-optic cable over 20 years. A ban was imposed on the export of aluminum, copper and steel wires to curb vandalism. Telkom Kenya had previously blamed its poor performance on vandalism of copper wires.
Tanzania adjusted excise duty payment on mobile-phone services to be charged at the point of sale of airtime at full face value rather than at the point the actual use takes place. Previously, one would buy airtime of 100 Tanzania shillings and upon loading to the phone, it automatically reduced to 90 shillings because the tax is deducted. Now, when you buy airtime, you spend the actual amount.
The zero rating of handsets in Kenya was the most celebrated as distributors reduced their prices. The Kenya Revenue Authority ruled that the tax waiver was effective immediately and all retail prices had to be adjusted. For example: The Nokia E71, which was previously retailing at 34,000 Kenya shillings, was adjusted to 27,000 shillings.
"This demonstrates that the government is committed to improved access as envisioned in vision 2030, drawn by the government two years ago," said Dorothy Ooko, Nokia communications officer in charge of Eastern and Southern Africa.
Uganda, Rwanda and Tanzania have to zero rate the handsets to avoid parallel importations -- people were previously going for cheaper phones in Dubai; now they will be shopping in Kenya, which will hurt some businesses, Ooko added.
A report published by Juniper Research forecasts that between this year and 2014, annual sales of low-cost mobile handsets will rise by 22 percent to more than 700 million handsets.
In its research findings, Juniper predicted increased use of low-cost handsets, driven by operators and device manufacturers increasingly looking to emerging markets like Africa to fuel future growth.
According to the study, the Africa and Middle East region will account for the largest annual shipment volume by 2014, with its 166 million low-cost handsets representing 24 percent of all sales by 2014 and up by 54 percent over the term of the forecast period.
"With around 80 percent of new mobile users set to come from emerging markets over the next six years, it is essential that operators and vendors work together to dilute the price barriers associated with mobile technology and to provide ongoing support through the development of specific social and personal services," said Andrew Kitson, who authored the Low-Cost Handsets Report.
Reprinted with permission from Computerworld Kenya. Story copyright 2009 Computerworld Kenya Inc. All rights reserved.
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