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Smartphones in Kenya have become significantly more expensive over the past six years, and a new tax proposal before Parliament could push prices higher still. According to a Canalys report cited by Business Insider Africa, the average selling price of a smartphone in the country climbed from about KSh5,955 in 2019 to roughly KSh18,979 by the second quarter of 2025, a nearly threefold increase in six years.
For a market where mobile phones underpin everything from mobile money to online business, the shift has quietly pushed the classic "10K phone" segment out of reach for many buyers.
The pressures driving this trend are not new. The shilling has weakened against major currencies over the period, raising the landed cost of imported handsets. Global component prices, particularly for memory and display panels, have also risen. But two additional factors specific to Kenya's market have compounded the problem: a regulatory crackdown on unofficial phone imports and a tax regime that already places one of the heaviest cumulative burdens on mobile devices in the region.
A shrinking budget segment
Devices priced under $100, roughly KSh13,000, accounted for just 32 percent of Kenyan smartphone shipments by mid-2025, down from a much larger share in previous years, according to the Canalys data. Entry-level Tecno Spark and Infinix Hot and Smart models, once positioned as budget devices, now occupy price bands that used to belong to midrange phones. Meanwhile, buyers with more disposable income are increasingly drawn to the Samsung Galaxy A series, Xiaomi's Redmi Note line and iPhones, according to a JuaTech Africa analysis published in December 2025, as camera quality, storage and performance become more central to work and content creation.
This affordability squeeze has not stopped smartphone adoption from growing, largely because of financing. Companies such as M-KOPA, Watu Simu and Safaricom's Lipa Pole Pole programme have expanded access through buy-now-pay-later schemes that let buyers spread device costs over several months rather than paying upfront. These financing models have become one of the primary channels through which lower-income Kenyans access smartphones as outright cash purchases become harder to sustain.
The proposed tax shake-up
The most immediate threat to affordability now sits in the Finance Bill 2026, tabled in Parliament on May 13, 2026. The bill proposes replacing the current patchwork of import-stage levies on mobile phones with a single 25 percent excise duty. According to the National Treasury, phones currently attract five separate charges: 16 percent VAT, 10 percent excise duty, 25 percent import duty, a 2.5 percent Import Declaration Fee and a 2 percent Railway Development Levy, which the Treasury says stack up to a cumulative tax burden of approximately 55.5 percent.
Under the proposal championed by Treasury Cabinet Secretary John Mbadi, this burden would be replaced with one 25 percent excise duty, and critically, the tax would only be collected once a device is activated on a mobile network rather than at the point of importation. Mbadi has argued the change is a simplification rather than a new tax, telling reporters at Treasury Buildings in May that "phone prices will not go up because we have removed all the other taxes and replaced them with one single tax." He has also dismissed concerns that the activation-based collection mechanism could compromise user privacy, saying the Bill does not grant government access to personal mobile money data.
The Treasury's underlying argument is about cash flow as much as tax simplification. Under the current system, importers and wholesalers must pay the bulk of their tax obligation upfront at the port, tying up working capital in unsold inventory. Shifting collection to the point of activation, Treasury officials argue, frees up that capital and could allow retailers to stock more devices and price them more competitively.
Where the criticism comes in
Not everyone is convinced the reform will be neutral for consumers. Analysts cited by The Star have estimated that a basic smartphone currently retailing around KSh10,000 could cost more than KSh12,500 once VAT, import costs and dealer margins are layered on top of the new excise duty, undercutting Treasury's claim that prices will hold steady or fall. The Kenya Association of Manufacturers has separately warned that applying an identical 25 percent excise duty to both imported and locally assembled phones removes the competitive advantage that has supported local assembly, at a time when firms like Sun King have invested in Kenyan manufacturing capacity, including a Nairobi assembly plant opened in October 2025.
Retailers, telcos and market watchers have also flagged operational risk in collecting tax at the point of network activation rather than at the border, arguing it introduces new compliance complexity for mobile operators and could push some buyers toward grey-market devices that bypass official activation and registration entirely. That concern echoes a pattern Kenya has seen before. When the government removed VAT exemptions on mobile phones in 2013, retail prices spiked in the short term, and it took the arrival of cheaper Chinese Android brands to restore growth in smartphone adoption. Economists now warn that a repeat of that dynamic, a stronger grey market drawing sales away from official retail channels, could also undercut the government's own revenue targets. The Finance Bill 2026 currently projects an additional KSh120 billion in revenue for the 2026/27 fiscal year from the reform, part of a broader KSh2.985 trillion collection target.
The Bill remains before the National Assembly's Departmental Committee on Finance and National Planning, with public participation invited before a final vote. How lawmakers reconcile Treasury's cash-flow argument with warnings from manufacturers, retailers and consumer advocates will determine whether the reform delivers the price relief Mbadi has promised, or adds another layer of uncertainty to a market already reshaped by six years of rising costs.
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