HIGH TAXES MENACE! The True Cost of Being Offline: How Pricey Smartphones Are Choking Uganda’s Digital Economy Hustlers
By Amos Tayebwa
Uganda may be riding a digital wave—with over 43 million mobile subscriptions and internet usage hitting record highs—but beneath the glossy numbers lies a harsh reality: millions of Ugandans are still locked out of the online economy, not by choice, but by cost.
A deep dive into the latest Uganda Communications Commission (UCC) 2025 quarter four report paints a picture of growth on the surface and struggle underneath. While smartphone numbers are now at 20 million and still going up, the country’s penetration still sits at just 33 percent—far below the regional average of 50 percent.
Even more telling is the dominance of basic devices. Over 32.2 million Ugandans are still stuck on feature phones, unable to tap into the full power of the internet.
For many, the problem is simple: smartphones—even the so-called “cheap” ones below Shs300,000—are still too expensive.
In the bustling streets of Central Business District (CBD)-Kampala, the struggle is real.
At Nakasero market, tomato vendor Sarah Nabirye says her business would be on another level if she owned a smartphone.
“Sometimes I walk long distances just to find customers. If I had a smartphone, I would just take pictures of my tomatoes and send them on WhatsApp. Customers would come to me,” she says.
She pauses, then adds with a sigh, “Even for my farm, I could just take photos and ask experts about diseases. But these phones are expensive. You first choose between food and a phone.”
For second-hand clothes dealer Moses Kato, it’s the frustration.
“Customers these days are online. They want to see what you have before coming. Without a smartphone, you are invisible,” he says. “I lose business every day because I can’t advertise on WhatsApp or TikTok.”
For electronics repairer Jamila Nansubuga in Kisekka market, the irony is painful—she fixes smartphones but cannot afford a good one herself.
“I repair phones worth Shs800,000, even Shs1 million. But me, I’m using a small kabiriti phone. It limits me. I can’t even promote my own work online,” she says.
Industry experts warn that this digital exclusion is not just a personal problem—it is a national economic issue.
And the impact goes far beyond individuals.
Dennis Kakonge, the General Manager Corporate Services and Company Secretary at MoMo from MTN Uganda, draws a direct line between smartphone access and economic growth.
“When smartphone penetration increases by 10 percent, GDP grows by about 0.6 percent. There is a clear correlation,” he says.
Kakonge argues that reducing or removing taxes on entry-level smartphones could unlock massive economic potential.
“Countries like Kenya, Rwanda and Tanzania have already removed import duties on smartphones. Uganda risks losing revenue through smuggling while also slowing its own digital growth,” he warns.
Indeed, smartphone dealers in Kampala say the tax burden is pushing business underground.
At a busy shop along Kampala Road, importer Brian Ssemanda says many traders are turning to informal routes to stay competitive.
“We import phones from China and Dubai, but taxes here push prices too high. Some people smuggle cheaper phones through neighbouring countries and undercut us,” he reveals.
Another dealer, Aisha Namutebi, who sources devices from the UK and Asia, says even entry-level smartphones are becoming a hard sell.
“A customer comes with Shs200,000 expecting a smartphone, but what they get is very basic. A decent one goes above Shs300,000. Many walk away,” she says.
“People want to join TikTok, mobile banking, online business—but the entry cost is still high.”
The government appears to have taken notice.
Speaking at the Mobile World Congress in Barcelona in 2025, UCC Executive Director Nyombi Thembo revealed plans to scrap taxes on low-cost smartphones to boost digital inclusion.
“The cost of internet is no longer the biggest issue—it has been dropping. But handset affordability remains a major barrier,” Thembo said.
The proposed tax relief is expected to make smartphones more accessible, especially for low-income earners, while accelerating uptake of digital services like e-commerce, mobile money and e-government platforms.
But even with cheaper devices, another challenge looms—stacked digital costs.
From data bundles to mobile money charges, many Ugandans say staying online is still expensive.
Kato, the clothes dealer, breaks it down bluntly: “You buy a smartphone, then you need data every day. Then transaction fees. It adds up. Sometimes you just switch off and go back to kubanga kubanga (hustling physically).”
Analysts warn that unless both device affordability and usage costs are addressed, Uganda risks widening its digital divide—leaving millions behind in an increasingly online world.
Back in Nakasero, Nabirye watches as a fellow trader snaps photos of produce and posts them online.
“I think that is the future,” she says quietly. “But for some of us, it is still too far.”
As Uganda pushes toward a digital economy, one truth is becoming impossible to ignore: being offline is no longer just inconvenient—it is costly.
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