Ethiopian Mobile Assemblers Request Revision of Value Added Requirements

Ethiopian-Smartphone-AssemblersJune 11, 2017 - The Ministry of Industry is looking into a proposal submitted by by mobile assemblers, requesting revision of its value addition requirements, according to the reporter.

This proposal came a year after a similar amendment of a value addition directive by the Ministry of Finance and Economic Cooperation (MoFEC). This particular directive changed the old directive which gave import privileges with an exemption of 30 percent or more, according to the rate of value addition on raw materials by local manufacturers.

It has transformed the expected value addition from one that universally applied for each industry into a more flexible industry-focused approach, ranging from five to 41 percent. The value addition requirements vary for sector.

Accordingly, mobile assemblers of all ranges were required to fulfill a five percent value addition requirement to get a second schedule privilege, which basically grants manufacturers the right to import raw materials for their respective final products, either duty free or with minimum second-schedule tariffs.

This specific value addition requirement imposed on mobile assemblers has become a focus of contention.

The requirement has failed to appreciate the dynamism of the sector, industry sources told The Reporter.

With this in mind, mobile assemblers have called for a variable value addition requirement for Compete Knock down (CKD) and Semi Knock down Assemblers (SKD).

The assemblers proposed a two-percent value addition for CKDs, and a five-percent value addition requirement for SKDs.

The argument for the change has as its basis the defective rate of the two categories.

“CKDs and SKDs have different defective rates,” industry sources said.

In the case of CKDs, since all component parts are imported from abroad, if any problem arose, assemblers would be forced to remove the item. According to the proposal, the defective rate for CKDs is five percent whereas for SKD it is two percent.

This means the value addition requirement for CKDs has to be minimized, the same sources said.

Currently, there are around 14 companies engaged in assembling of mobile, power banks, chargers as well as television sets in Ethiopia.

Among these, Tecno, now called Transsion Manufacturing Plc, has a production capacity of one million devices a month. Hidase Mobile comes next with 300,000 monthly production capacity whereas Brillion, G-Tide, SMADL, O’King and Kinxinda have a monthly capacity of 200,000, 120,000, 80,000, 60,000 and 60,000, respectively. These companies, however, have been performing at less than 30 percent of their installed capacities.

Only few of these companies are CKD assemblers.

Sixty-one percent of Ethiopia’s market is dominated by mobile devices illegally smuggled to the country, according to a study conducted by ICT and Electronic Manufacturing. (Reporter)



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