It's not entirely true as stated in one of these posts that a tablet has to cost R8,000. See the separate forum thread under Hardware on a tablet device being punted as an eReader in South Africa for around R1,200 by the CNA. Overseas there are several such super-cheap tablets, so we're not only talking iPads here.
That said I still think the eReader and Tablet markets are largely separate -- if you want a dedicated eReader there is no argument that the Kindle or Sony or Nook-type eInk display is far easier on the eyes for extended reading than the traditional backlit LCD found in tablets, and eReaders will run weeks on a charge, unlike a Tablet which is used to the same extent. Amazon is currently struggling to keep up with orders, even though it's shifting a million Kindles a month now, so I don't think there's (yet) much of a threat....