A topic that I hear a lot of South Africans talking about is that of the prices we pay for Apple products. For example, an iPhone here might cost right up at R8000, whereas in the United States it’s just a couple hundred dollars, or look at the iPad, in the States it’s roughly 500 or 600 dollars, whereas here it’s going to be a small fortune.

Let’s look at a specific example: An entry level 13.3” Macbook Pro is 46.8% more expensive than its equivalent in the USA. Using information correct as of the 2nd of January 2010, the customer converted the South
African recommend retail price of R12,999 and arrived at a US$ price of $1760.79 by applying the spot exchange rate on that day. There are however, a number of factors that distort this perception.

1. It is incorrect to compare RSA pricing directly to that of the US Online store as prices are quoted without any sales tax or VAT ( which is applicable, but varies from State to State). Prices in South Africa are quoted including a VAT rate of 14%.
2. The customer used a spot rate of approximately 7.38 ZAR/USD, whereas our forward cover contract rate at this time was 8.10 ZAR/USD.

It is these 2 factors that lead South Africans to believe that they are being overcharged. Take a look at the table below to see that the actual premium over the US online store price is only 17.41%

From this, there are 4 points that must be raised:

1. Price differences are to be expected between South Africa and the United States due to the high cost of inbound logistics into South Africa and substantially different supply chain costs. As a result, we expect to see price levels that are higher in South Africa.
2. Prices are often perceived to be much higher in South Africa because one does not take RSA VAT, or USA sales taxes into account (which is not shown on price lists in the US).
3. A further effect that can distort price perceptions is the difference between forward cover rates and spot exchange rates. When the exchange rate slowly but steadily improves ( as is the case during 2009), the forward cover rates will be higher than spot rates, making products look artificially more expensive in South Africa. Equally, when the exchange ratio deteriorates, prices will look more favorable in South Africa because of better forward cover rates (although we have not seen this scenario in South Africa for over a year).
4. A final point to be observed (but not applicable to the aforementioned example) is the negative effect of South African ad valorum and import duties.

I hope that paints a good picture for everyone; I know it sounds like a fail deal and all, but it’s how things work and there isn’t really anything we can do about it.