The Problem with Hardware in Africa

Recently I wrote about the making of the BRCK here in Nairobi, and I alluded to some of the issues around doing hardware in Africa.

“Making things is hard. It’s harder in Africa. I can’t overnight an order of processors, boards or 3d printing filament here. There aren’t an over abundance of local fabrication facilities or tools, and the milling machine you find might be in disrepair and take you two days to calibrate. We’ve got our work cut out to create the right spaces for prototyping and small-scale fabrication on the continent.”

I just had another experience that underscores the difficulties.

FedEx called me with the news that a package we were waiting for had arrived. The true value of the components was listed on the package at $230. These were new plastic cases for the BRCK, as well as a couple modem and router components. The Kenya Revenue Authority decided that it actually should be valued at $300, and then charged 100% duty. To clear the package, we have to pay $300 (26,000 Ksh).

Kenya Revenue Authority

Before I go any further, I’ll state that I think it’s imperative that you build hardware like the BRCK, or Kahenya‘s new Able Wireless device, where it will be used. You need to build it close to the ground, where the working conditions, and the real pain of the problem is part of the product team’s life. For both Kahenya and the BRCK team, that means here in Kenya.

It’s hard to get the components that you need. Kahenya and I did backflips trying to getting 5 Raspberry Pi’s and cases ordered and delivered to Kenya. Similarly, we have issues with anything we need for the BRCK. The ripple effects on your business for this delay in time can be a big issue, it carries a lot of friction. If you want an Arduino kit or simpler components that you can’t purchase in Kenya, then your two options are; a) someone is coming from that country and can bring them in for you in their luggage, or b) you’re willing to pay a lot of money for FedEx or DHL to ship it in, then pay even more on duty.

This is the very earliest prototype of the BRCK. It's made up of components that aren't all found easily in Kenya.

This is the very earliest prototype of the BRCK. It’s made up of components that aren’t all found easily in Kenya.

So, not only is it hard to get the parts you need, the government has set up its regulation in a way that discourages local prototyping and even local manufacturing. The revenue authorities would rather make quick money off of a component import than more money later off of a manufacturing industry. I’d rather set up an assembly factory here in Kenya than one in another country, but that isn’t possible if component import isn’t changed.

ICT Ministers of Africa should note that in this rapidly changing world of tech, that the regulatory system needs to keep pace. If it doesn’t, it can produce a tech ecosystem that strangles innovation at the expense of short-term tax and duty.

If Kenya wants to pretend it can get to Vision 2030 without some changes in regulation for local companies, there will be some surprises coming.

18 thoughts on “The Problem with Hardware in Africa

  1. Shared sentiments. Getting a device to prototype status from scratch, especially an embedded platform is a nightmare, not because of the task at hand but because of the cost of getting the actual bits in. The hardware business will not grow if we do not adjust ourselves to improving how we get stuff in to make the other stuff.

    Thanks for the mention.

  2. That tax nonsense doesn’t just affect prototypes, it’ll have an impact on After Sales Service / Repairs, by artificially jacking up the price of components like that. I see it happening right now with cellphone parts

  3. It’s always good to think aloud and imagine how things would have been easy if we had various manufacturing companies here locally, but rem there are possibly the presence of cartels who will always make sure that we depend on imports as that a way of making huge profits for them. If only the government would be serious and support start up companies by easing the policies…..

  4. Btw, is there any shop that sells components in Nbo? I used to buy mine from a shop on Moi Av, but last time I checked it was replaced by quick wins-stalls with clothing & the usual mobile equipment.

  5. Making “simple” T-shirts in Kenya has proven to be an arduous journey, so I can only imagine how difficult it would be for you to make highly specialized tech components. Government policy penalizes manufacturing, instead of encouraging it. Our government will talk about encouraging local manufacturing, yet in reality, hefty taxation and superfluous duties make trade and imports of basic raw materials and tools prohibitive (of which there are no local alternatives). If we’re penalized for importing a simple sewing machine, we surely can’t be expected to position competitively against economies that truly thrive on large-scale manufacturing. On the other hand, we’re encouraged to create local employment, be innovative, and compete at a global scale. Sigh.

    • @Bonk well said, I love this quote:

      “Our government will talk about encouraging local manufacturing, yet in reality, hefty taxation and superfluous duties make trade and imports of basic raw materials and tools prohibitive (of which there are no local alternatives).”

  6. Hi Erik. I feel your pain! You would imagine that high import duties on electronics, if they make sense at all, would apply to finished goods not parts. Worth trying to unpack where that legislation comes from and attack it at its source.

    In the mean time, it is worth making friends with a customs broker. How goods are classified and how taxes are assessed is complex enough that there is sometimes more than one way to skin a cat. Like tax law, having someone who really knows the ins and outs is a very handy thing.

    -S

    • @Steve – that’s what I’m thinking too. It doesn’t make sense that components/resources that can’t be created locally have a duty charged on them. Finished goods makes a lot more sense.

      Better than a customs broker, I think I need to make friends with a KRA official… as much as I hate to think about it. :)

  7. Gregg says:

    I know of a non-profit that is distributing recycled laptops around the world using “dootrips” where volunteers carry the laptops as checked baggage, effectively eliminating the distribution costs. I took laptops from the US to Thailand a couple of years ago. I wonder if that group might be a resource for getting parts to your group(s)? Take a look at http://www.labdoo.org/

  8. Afrowave says:

    Once upon a time, I tinkered with electronics and built a 5 year old business, building and repairing computing and consumer electronics. A lot of the guys who imported parts who were along Luthuli avenue closed down. Kenya Electronics moved to Westlands and resolved to expensively hold on.

    My business was successful in that kept me fed. Just. I consciously closed it and escaped into “software” solution provision. There is a part of me calling out to hardware…

    I say we storm the Ministry of Industrialization and put our asks on the table. With the BRCK, we can.

    Can’t we?

  9. Drop down thw value of anything you ship into the country. It’s not evasion of duty, but the assessment of tax is often arbitrary, by officers who don’t know what they are inspecting

  10. r says:

    A practical suggestion (long term): set up a lobby group and announce this example as part of a press release. Get local media to engage with government. Being naive and optimistic, this should cause a change in policy.

  11. At this point in time when GOK’s biggest nightmare is how to finance escalating OpEx, much thought needs to go into how to sell a ‘fringe’ good thing like tax concessions for importing raw manufacturing components for electronics. Seeing how we lobby, Its certainly not in the radar of industrialisation, planning and finance ministries if not in the radar of ICT ministry. Its about time to focus less attention on hapless ICT ministries and to direct noises towards the finance, industrialisation and other ministries that matter.

  12. PK says:

    Hi and thanks for your article.

    First, let me start by applauding you for your heroic efforts. I hope it pays out.

    A number of points are not clear from this piece. For example, you stated that, “… we have to pay $300 (26,000 Ksh)”, which implies that you haven’t paid the stated amount (at least, by the time of writing). If not, are you going to pay or will you seek redress?

    It’s also not clear to me whether or not you opposed the charges vigorously. Note that I’m not saying you are OK with them but that, if this is corruption, we have to be willing to stand up to it, especially if we’re on the right. Requesting to see a senior officer could help. I know of individuals who have had to pay customs duty and these were reasonably charged. Moreover, if I’m not mistaken (correct me if I’m wrong), customs duty should be paid at a bank in which case you would have evidence of being overcharged and can then seek redress. Your comment to one of the responses that “… Better than a customs broker, I think I need to make friends with a KRA official… as much as I hate to think about it.” is, to quote a great man, ‘building on sand’.

    The article paints a bleak picture for anyone who hopes to venture into some form of hardware design and I have no doubt this is largely true. But as pioneers in electronics manufacture you need to define a corruption-free path for others to follow. People are watching with bated breath and if you know Kenyans it’s bound to soon be a crowded industry. There is much to be done in local hardware but this hardly makes for a rosy start. Nevertheless, I’m quite certain that similar items have been previously imported. For example, I worked for a Kenyan Indian in Westlands, who owns an industrial electronics firm. He must have, at one point or another, needed such devices.

    Also note that foreigners are usually charged higher customs duty. Not that you’re a foreigner but the fact that you are a mzungu might have had something to do with it. Actually, the fact that you’re mzungu should be to your advantage…

    Finally, it appears that KRA collect information on new items so that in future they can apply similar custom charges (custom rulings? see here). Could it be that this will then be what you and everyone else will have to pay henceforth? I’m not sure…

    Despite all this, it’s great to see what you’re doing. I wish you well.

    PK

    • @PK – at the time of writing it we hadn’t cleared it yet. In these cases you have to go to the airport to clear it with the KRA officials who work with the FedEx / UPS / DHL companies there. We were able to negotiate a lower rate with them to get it cleared in this instance.

      You’re right in that you do pay the customs duty at the bank, but that’s done right there at the airport, then you bring that receipt with you back to the KRA desk and have it cleared. My quote about making friends with a KRA official is not a veiled suggestion that I’ll bribe anyone – I don’t. It’s instead a nod to the fact that in Kenya you need to build relationships in order to make things smoother.

      Another issue, that you raise here yourself, is the variance in rates. You note that an white person gets charged higher rates, this is true, it’s also true that different KRA officials will charge different rates themselves on the same things. The problem with the system is that it’s ripe for (any) interpretation, meaning there is added risk for everyone – not just white people. Just ask Wananchi Group about their pain in importing finished products like routers into the country – whole containers are charged at haphazard and crazy rates which vastly increase the cost of them doing business.

      As to what I’m doing, I’m starting by documenting my problems and I’ve already spoken to one government official. I’ll continue to do the same and lobby for the changes we need.

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