Internet Cafes Phasing Out of Business

Investment in public internet has increasingly become risky and less viable in Kampala City as opposed to several years ago. This is due to low returns as a result of fewer customers accessing the internet from cafes, according to business people dealing in internet data.

Richard Semulu of Ntinda, Kampala - who has operated an internet café for the last nine years, says that there is a drastic fall in returns from internet cafes compared to the 2000s when they had a lot of clientele.

Semulu explains that the fall in their business is largely a result of Ugandans' access to the internet from their smartphones as opposed to several years ago when only a smaller fraction of the population had smartphones.

A report released by Uganda Communications Commission revealed that the country's monthly smartphone users had reached 7,091,860 in March 2020 and the total number of smartphones and feature phones with basic internet access had increased from 23.8 million in December 2019 to 24.4 million in March 2020.

Accordingly, by the end of December 2020, the number of active internet subscriptions had grown to 21.4 million, translating into an internet access reach of more than one (1) active connection for every two (2) Ugandans.

UCC attributed the increase in internet users to a 0.8% growth of smartphones in the market. It is with no doubt that the internet market is dominated by mobile internet. Meaning, that a majority of internet users are using their mobile phones to access the internet, the report adds.

Ibrahim Bbosa, the Spokesperson of UCC did not respond to our calls or text messages but former Executive Director UCC Godfrey Mutabazi warned the country does not need internet cafes because average Ugandans can afford smartphones.

However, our survey in Kampala found cafes centres in most business areas like Nakawa, Ntinda, Old Kampala, Kisasi among others.

According to Semulu, the increase in the number of people with smartphone connections has slowed down their business. He says from 2008 - around 2015, the internet cafe business was viable. However, he has expressed fears that the government proposal to repeal Over –top tax (OTT) while at the same time introducing excise duty on internet data at a rate of 12% is likely too severe the current business struggles by internet cafes. He also said the exercise duty will further discourage even mobile phones users from accessing the internet yet it’s an important source of research.

“Already we are struggling and some of us have closed internet cafes. Am afraid the plans by the government to increase taxation on the internet will negatively affect research. I disagree with the government that people use the internet for porn, no, said Semule.

Henry Kayongo of Kisasi also notes that the internet café business is on the slump.

“Currently, we offer other products that help us to earn something on top of data. We have secretarial services, web design, computer training, and research and advertising otherwise we cannot sustain business only selling data to customers,’ said Kayongo.  

Margaret Naluzze, who owns a café in Old Kampala, says that the business fluctuates with some days posting very little from internet usage. She however says that she has diversified her business by introducing other ideas. For example, she sells juice, toys and some cosmetics in the same café.

According to Emmanuel Obong of Posta Uganda – Moroto, the only internet café in the district, there is a reduction in numbers of customers who need internet access at the café although they enjoy a monopoly in Moroto. He believes, the sharp decline is due to improved access to smartphones by people who need the internet.

However, a section of internet providers in Nakawa painted a rosy kind of business atmosphere saying a lot of students from the institutions around Nakawa go to their Kidowa Chambers Café for services. He also said several business proprietors were rushing for assistance on Tax Identification Numbers - TIN registration seemingly following government proposal to license only business that has TINs.