Fresh tax incentives for local mobile phone assemblers? The Finance Ministry is considering cutting a 5% development fee on imported mobile phone parts as the Madbouly government pushes to localize electronics assembly, a source at the ministry tells Enterprise.

The problem? The taxman rings twice (or more) on locally assembled phones. Fully assembled mobile phones, parts, and components alike are subject to a 5% development fee, part of a set of fees on imports that the government brought in to help plug the fiscal deficit amid the pandemic. That means that local handset assemblers pay 5% on imported parts in addition to another 5% once the handsets are put together — on top of VAT, customs duties, and other taxes. FinMin is now looking at scrapping the 5% fee on imported parts.

The local mobile manufacturing industry is still really young, but interest is rising: Egyptian electronics firm Sico Egypt is currently our only local smartphone assembler — but that’s now changing after firms including China’s Oppo and Vivo as well as HMD Global (which manufactures Nokia phones) have set plans in motion to enter the market. The government has been working to attract new players to the sector for several years under its Egypt Makes Electronics initiative, which is designed to cut down on Egypt’s imports of electronic products and increase our exports.

And import woes make now a good time to double down: The local smartphone market saw “severe disruption” last year on the back of a government move to double tariffs on imported phones to 10% as well as slowdown in imports thanks to the FX crunch, according to market intelligence firm International Data Corporation (IDC). Local smartphone sales dropped 73% y-o-y to 800k units in 3Q 2022, IDC writes. Sales are projected to rebound this year “as the local assembly initiative gains momentum and the government eases restrictions,” it adds.