South Africans pay R6,700 more for iPhones than in the United States

South Africans are paying around R6,700 more for the iPhone 16 than their American counterparts. However, at least half of this extra cost can be explained by the 15% VAT and 9% ad valorem duty the taxman levies.

Apple’s latest addition to its smartphone catalogue was the iPhone 16, released on 20 September at a retail price of $829 or R14,872. At the time, the exchange rate was R17.94 to the dollar.

The $829 does not include taxes or the discount given if the phone is locked to a carrier.

However, when it launched in South Africa on the same day, the iStore had it listed for R20,999 or $1,173 — 46% higher than the price in the US.

According to Statistics South Africa’s latest Quarterly Employment Survey (QES), the average salary in the country was about R26,793 in the first quarter of 2024.

This means that the price of the iPhone 16 is roughly 78% of the average South African salary.

The iPhone 3G, released in 2008, was 67% of the average South African salary. This dropped to 51% with the launch of the 3GS the following year and has since fluctuated, reaching a high of 84% last year when the iPhone 15 launched.

On the other hand, the American Bureau of Labour Statistics notes that the average monthly salary for Americans is $4,952 (R87,288).

Thus, the latest iPhone is only 16.74% of the average American’s salary.

South Africa’s prices being this much higher than the US is not new.

South Africa’s iPhone prices have been at least R2,000 higher since the launch of the iPhone 4 in 2010 and R6,500 higher since the launch of the iPhone 14.

This is mainly due to a weakened rand and taxes and shipping costs that shoot the price up.

When the iPhone 3G launched in South Africa in 2008, a dollar cost R8.04, compared to roughly R18 at the time of the iPhone 16’s launch.

Were the rand still trading at its old level, the $799 price of the iPhone 16 in the US would convert to R6,424 instead of R14,382.

Even if the difference of R6,617 between the US and South African prices for the iPhone 16 was applied to account for taxes and shipping, the total landing price of the iPhone would have been R13,041.

That works out to about 49% of the current average salary.

The taxes include customs duties, such as the 9% luxury good tax applied to all smartphones, and 15% value-added tax (VAT).

South Africa’s smartphone prices must be lowered

Vodacom Group CEO Shameel Joosub has said that lowering the cost of smartphones is the key to bridging South Africa’s digital divide and improving Internet access on the African continent.

While making iPhones more affordable won’t help solve the issue, the price difference caused by taxes and a weak exchange rate illustrates South Africa’s problem.

Joosub points out that only 25% of the Sub-Saharan population has access to mobile Internet and that more than half of the group’s entire customer base doesn’t have a smartphone.

He says that this comes down to the cost of smartphones, as entry-level devices can consume 16% of monthly incomes in low- to middle-income countries, such as South Africa.

This can rise to 44% for the most financially vulnerable in the country.

Mobile network operators are, therefore, looking for affordable solutions to upgrade customers from older 2G and 3G technologies to allow for improved connectivity.

Joosub mentions ways to lower upfront payments of 4G handsets, such as device financing models, discounts, subsidies, and tailored payment solutions.

He also points to partnerships within the private and public sectors as impacting the price of smartphones.

“Developing local assembly and production plants can enhance 4G device affordability while creating jobs and boosting local manufacturing industries,” says Joosub.

The table below shows the launch prices of iPhones in South Africa, the launch price in the US, and the exchange rate at the time of launch.