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VAT Legislation Killing Kenya’s PC & Internet Market

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6413-pc-vendo_articleThis is a story we hate listening to. Device manufacturers and iHub Nairobi came out against the then proposed VAT Bill on PCs in Kenya but some tax-hungry government mouthpieces said tax wouldn’t affect anything, not even mobile phone and PC penetration nor Internet uptake.

However, according to a new forecast by International Data Corporation IDC, PC shipments to Kenya were the lowest compared to the rest of East Africa countries. The region’s PC shipments increased 3.0% year on year in the final quarter of 2013 to total 140,251 units but Uganda, Tanzania, and Ethiopia took the lead, as Kenya struggles with the new VAT legislation.

This is not just 2013, IDC sees a problematic 2014 due to the recent freeze of government freeze all purchases of computer equipment to cut costs among the public sector.

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“As forecast by IDC, the new VAT law had a debilitating impact on the PC market in Kenya, with shipments contracting 10.7% year on year in Q4 2013,” says James Mutua, a research analyst at IDC East Africa. “The bill’s introduction, which sees a levy of 16% added to all ICT products, resulted in a huge loss of business due to logistical issues caused by the hasty implementation of the new regulations by the Kenya Revenue Authority. However, Ethiopia, Tanzania, and Uganda all performed much more strongly, recording impressive year-on-year PC shipment growth of 31.7%, 18.7%, and 20.1%, respectively, thanks to an improved and continually expanding business environment and increased consumer spending.”

Out of the sum shipped, desktop PCs suffered the most in East Africa, falling to 48,652 units, down 3.3% year on year. However, IDC expects the shipment of the ‘all-in-one’ (AIO) desktop PCs in the region’s to increase in 2014.

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According to IDC, portable PC shipments to the region were up 6.8% year on year in Q4 2013 to 91,599 units. However, the growth is still low than expected due to Samsung’s change of tact  to reduce its shipments into East Africa and focus on high-margin PC products, smartphones, and tablets. IDC says the change of tact was due to cutthroat competition in the consumer portable PC segment, where margins are very low and consumers are increasingly shifting to tablets.

Kenya’s CCK also reported  a declining Internet subscriber base in the  country, down to 11.6 million in the quarter ending September 2013 up from 12.4 million in June 2013.  The body attributed the 6.1 per cent decline, the first-ever negative growth recorded in the local Internet market to the revision of the national population figure from 39.5 million to 40.7 million but in real sense, this would have meant more internet users, but all can see where the problem is; the less the hardware-phones, desktop PCs, Laptops, tablets etc the less access we have to internet.

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Sam Wakoba
Sam Wakobahttp://techmoran.com
Taking you on tour through Africa's tech and business ecosystem, one story at a time since 2010! Based out of Nairobi, Kenya, Sam is the founder and managing director of Moran Media, which runs  TechMoran.com, various other digital platforms and a startup incubation hub for Kenya's youthful entrepreneurs. Drop me a mail at [email protected]

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