In Uganda today, the smartphone has evolved far beyond a communication device. It is now a bank, a classroom, a marketplace, an office—and for many young people, a critical tool for economic survival.
As the country pushes forward with its digital transformation agenda, smartphones and mobile money services have become essential for participation in the modern economy. Yet millions of Ugandans remain excluded due to the high cost of internet-enabled devices and the taxes and charges applied to digital financial transactions.
For many small business owners, the shift to digital commerce has opened new opportunities—but also introduced new costs.
Breanda Namulindwa, who runs a boutique in Kisaasi, a suburb of Kampala, says foot traffic to her shop has steadily declined, pushing her further into online marketing.
“I take pictures and videos of my clothes and post them on TikTok, WhatsApp, Instagram and other social media platforms. I get to target a certain group of people who then come and support us,” she said.
At Nakasero Market in downtown Kampala, trader Richard Katongole says smartphones have transformed how he does business, allowing him to reach customers beyond the physical market.
“A smartphone has expanded my market beyond Nakasero. Many customers first contact me online before coming to buy,” Katongole said.
However, he says the benefits of digital commerce are being eroded by mobile money costs, especially withdrawal charges.
“When a customer pays using mobile money, I still have to withdraw the money to restock. The withdrawal charges and taxes reduce what I finally take home. For small traders like us, every shilling matters.”
Another trader, Janet Namuwaya, echoed similar concerns, saying mobile money charges are increasingly shaping how customers choose to pay.
“A smartphone is no longer a luxury. It helps me communicate with customers, market my products and receive payments. Without it, business becomes difficult,” she said.
She noted that some customers now prefer cash transactions to avoid deductions.
“Many customers complain about the charges. Some avoid mobile money completely because of the taxes involved. Others ask to pay in cash so they don’t lose money through deductions.”
The Uganda Communications Commission (UCC) says smartphone penetration continues to grow as more services shift online.
Uganda Communications Commission Head of Corporate Affairs Ibrahim Bbosa says digital access is central to Uganda’s transformation agenda.
“The future is digital. Access to smartphones enables citizens to participate in e-commerce, digital learning, e-government services and financial inclusion,” he said.
Despite this, affordability remains a major barrier.
Technology entrepreneur Michael Niyitegeka, Chief Executive Officer of Refactory, says both smartphone prices and mobile money charges are excluding many Ugandans from the digital economy.
He recalled sending Shs5,000 to a worker, who later said withdrawing it would cost nearly Shs2,000.
“To some people that amount may seem small, but for him it was significant. That is money that could have bought a meal or covered transport,” he said.
Niyitegeka argues that such costs discourage digital transactions and weaken efforts to build a technology-driven economy.
“We cannot talk about a digital economy while the tools needed to participate remain expensive. Smartphones and mobile money are the backbone of digital commerce.”
Business advocates say the impact is especially severe for micro, small and medium enterprises (MSMEs), which dominate Uganda’s economy.
Federation of Small and Medium Enterprises Uganda Executive Director John Walugembe says lowering transaction costs would significantly improve business performance.
“When you reduce the cost of connectivity and financial transactions, you improve business efficiency. MSMEs can reach more customers and reduce operating costs,” he said.
Civil society actors also argue that reforms could have wider economic benefits.
Civil Society Budget Advocacy Group Executive Director Julius Mukunda says reducing taxes on smartphones and reviewing mobile money charges should be seen as an investment in productivity.
“More people would participate in the digital economy, businesses would grow and government could eventually benefit from a broader tax base,” he said.
Uganda remains one of Africa’s leading mobile money markets, processing billions of shillings in transactions annually and extending financial services to millions of previously unbanked citizens.
However, economists warn that rising transaction costs risk pushing users back toward cash-based systems, slowing financial inclusion gains made over the past decade.
Tax experts also caution that while government revenue objectives are important, policymakers must strike a balance between revenue mobilisation and digital inclusion.
Government has acknowledged the concerns.
Outgoing ICT and National Guidance Minister Chris Baryomunsi says consultations on digital taxation remain ongoing.
“We are prepared to listen and engage stakeholders on these issues because digital transformation remains a priority,” he said.
He added, however, that reforms must consider fiscal realities.
“We have to strike a balance between encouraging digital adoption and ensuring domestic revenue mobilisation is not negatively affected.”
As Uganda moves toward a more digital economy, the debate over smartphone affordability and mobile money taxation continues to grow in urgency.
For traders like Breanda Namulindwa, Richard Katongole and Janet Namuwaya, the issue is practical rather than theoretical: cheaper connectivity means more customers, more sales and more opportunity.
The central question for policymakers remains whether current taxes on digital access are accelerating growth—or quietly slowing the country’s digital future.