Safaricom CEO Peter Ndegwa has said that a new mobile phone factory needs subsidies like fertiliser if it is to compete with cheap Chinese imports.
‘Neon’ brand phones from the new East Africa Device Assembly factory are expected to cost around Sh7,500 although President Ruto promised last year that he would organise mobile phones for less than Sh5,000.
Safaricom is a major investor in the new factory which will create around 400 jobs.
It is a basic economic principle that the government should not invest in any business that the private sector can do better.
The rationale of the new factory is to bring down prices and increase digital penetration in the economy. But if it can only achieve this with subsidies, one has to question whether it is worth it.
If the subsidies are in cash, that means extra taxes. Even if the subsidies are as duty-free imports, that means less tax revenue and less government services.
And if the idea is just to make digital access more affordable to Kenyans, then let cheap Chinese phones enjoy the same duty-free access so they become even cheaper.
Quote of the day: “Youth is wasted on the young.”
George Bernard Shaw
The Irish author died on November 2, 1950
