In the Finance Act 2022, the government of Kenya imposed a 10% excise duty on the importation of cellular phones and 50 Kenyan shillings (US$0.42) excise duty on every imported ready-to-use SIM card.
While declaring its Half Year results earlier this month, Safaricom noted that increased taxes in the East African region has had an impact on its business. Besides the local taxes, the East African Community applied a 25% import duty on phones as part of the Common External Tariff effective 15th July 2022. This forced Safaricom to review its SIM card pricing to Ksh 50 plus Sh.50 airtime first top up, to include the excise tax and increased pricing on mobile phones. Safaricom and other telcos had to pass the excise duty directly to their customers.
The new levies were meant to increase revenue for the government, given that mobile phones are essential gadgets in modern lifestyle.
Safaricom reported an 18.4 per cent drop in profits in the half year to September, with the heavy costs incurred during its entry into the Ethiopian market eating into its earnings. The telco invested over $598 Million in the country.
During the release of the April to September financial results, Safaricom announced that its profits after tax dropped from Sh37 billion to Sh30.2 billion.
The result indicated an Sh6.8 billion drop from a similar period last year. It is the lowest that the telco has reported in a half-year period over the past four years.