The rand has strengthened significantly against major currencies over the past year, even when taking the weakening after the recent cabinet reshuffling into account.
With a stronger currency, many consumers would expect a drastic reduction in the price of TVs in South Africa.
However, the local pricing structure within the TV industry is influenced by several external factors – of which the exchange rate is only one.
Many manufacturers purchase forward cover to minimise the risk of the volatile rand, and the result is that they pay a higher exchange rate than the spot price.
Luna Nortje, Hisense SA’s Sales Executive, said the price of panels also has an influence on the price of TVs.
Panel pricing is determined by supply and demand, and in recent months there were major increases in the price of panels.
Esquire CEO Mahomed Cassim said this was caused by a supply shortage, thanks to one of the major manufacturers in Taiwan changing its business plan.
The company is part of the Foxconn panel business, and decided it would stop selling LCD panels to multiple TV manufacturers.
The decision follows the company’s acquisition of Sharp’s TV business from Sharp Japan – with the panels to be used to grow the Sharp Aquos brand.
This change in the supply side has put enormous pressure on other panel manufacturers to satisfy demand.
The shortage, which Cassim said is estimated to be around 10 million panels, has pushed prices up.
Nortje said they only foresee a small decrease in panel pricing in the third quarter of 2017.
Apart from the exchange rate and panel pricing, the market response to products is another factor which influences TV prices.
“We have seen a trend whereby consumers either buy down in size or down in brand,” said Nortje.
“Entry-level brands seem to have gained traction in the market, meaning that consumers will either sacrifice quality for size or else settle for a smaller size for quality.”
The good news for consumers is that even with the difficult market conditions, TV prices have remained stable or have decreased.
“Manufacturers have been forced by the market conditions to lower prices, which results in severe margin pressure,” said Nortje.
This trend may change if the rand weakens further, which is a likely scenario with continued political uncertainty in South Africa and the recent downgrade by ratings agencies.