Hardware prices in SA: Why so high?

Rudolph Muller

Rudolph Muller is the editor at MyBroadband and covers telecoms and broadband news. Rudolph comes from an academic background, but left the University of...

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South African consumers have long complained about the high cost of certain computing products in the country.  While some lines of computing products are competitively priced, other product ranges are often far more expensive than overseas standards.

Greedy importers, wholesalers and retailers are often blamed for the large price discrepancies, and while it is true in some cases there are other factors influencing the retail pricing of products in South Africa.

Riaan Leuschner, MD of Nology, explains that there are three main factors influencing retail prices of hardware in South Africa:

1. The exchange rate and its fluctuations impact the price of hardware in South Africa.
2. The life cycle stage of the product/technology has an effect on the price. New technologies and their products understandably are launched at a premium as they have not reached their economies of scale in production. As products move towards maturity and the technologies are no longer regarded as ‘the latest’, the price point lowers.
3. The classic supply and demand curves and increased competition should also see hardware prices reduced this year. 

Leuschner further explains that the stronger demand of IT products in the developed world typically means lower prices due to larger numbers.

“The biggest factor is that IT hardware is still perceived as a luxury item. First world countries feature more consumers with disposable income and therefore this creates a ‘demand’ in these countries where supply and demand is met.  Greater quantities of product translate to a lower price,” says Leuschner.

“Economies of scale often dictate pricing and with South Africa being fairly small in comparison to other countries such as the United States, we cannot compete with their volumes, consequently paying higher prices.  The price of shipping also plays a big role in the cost of hardware in South Africa – South Africa is quite a distance from all the major manufacturing countries and shipping costs charged in dollars further exacerbates this problem.”

Good news is that demand is growing in South Africa, and Leuschner expects 2010 to be a boom year for tech products. 
 
“What a year 2010 will be,” says Leuschner. “In the face of the expected broadband boom this year (as result of the recently linked SEACOM cable and increased competition), 2010 is going to be very exciting. Consumers will start using their broadband for much more than just Internet and email and at the heart of all of all of this will be hardware (gadgets).”

Leuschner adds that convergence will finally start to filter down to the general public. 

“Products that we have been supplying for some time already, but which were not very successful or popular, will now suddenly start to make sense and deliver real benefits to users. Internet Protocol (IP) cameras  for example will be much easier to install with Homeplugs (power line communication that reduces the requirement for hard cabling) and the possibility to be able to view these cameras from anywhere in the world over broadband will make these types of  products and technology more appealing to the consumer,” says Leuschner.
 
“Multimedia players as a stepping stone to Set-Top Boxes/IPTV will be just as exciting. Consumers will begin to increasingly use their broadband for content since hardware will provide them with the means and solutions to do so. Rather than purchasing a DVD or Blu-ray disc movie, consumers will now be able to download the content at a more affordable price.”

Hardware prices in South Africa << discussion