Why is Apple so expensive in South Africa?

This sole distribution model, along with several other factors like shipping, taxes and exchange rates, means certain Apple products sold in South Africa are, at times, up to 50% more expensive than elsewhere in the world.1

There are big price differences between the iPhone and other recently-launched devices from Apple available from the iStore.

This was pointed out to MyBroadband by many readers following the launch of the iPhone 12 in South Africa.

The iStore listed the starting prices for the entry-level models of each smartphone as follows:

• iPhone 12 Mini 64GB – R15,999
• iPhone 12 64GB – R18,999
• iPhone 12 Pro 128GB – R23,499
• iPhone 12 Pro Max 128GB – R25,999

Interestingly, both the iPhone 12 Pro and new MacBook Air with M1 processor that was launched in November carry a price tag of $999 in the US.

However, the latter is substantially cheaper in South Africa at R19,999 compared to R23,499 for the iPhone 12 Pro.

Similarly, the iPhone 12 Mini and Mac Mini M1 compact computer both launched at $699 in the US.

Local pricing once again differed significantly, with the entry-level Mac Mini and iPhone 12 Mini priced at R13,999 and R15,999, respectively.

And while both the MacBook Pro and iPhone 12 Pro Max are priced at R25,999 in South Africa, the latter is actually $200 (R3,029) cheaper in the US.

To see if there were further examples of this, we compared the launch prices of the entry-level models of various new Apple devices launched over the last few months with that of the iPhone 12 range.

Using the US and South African pricing of the Apple products and iPhones, we calculated an average percentage difference in pricing for each category.

We added an average US sales tax of 7.2% when converting US prices to rand.

The table below shows what we found.

The table below shows what we found.

MyBroadband asked Core Group – which owns iStore – for an explanation on how it calculates its retail prices for iPhones and other Apple devices.

The company did not respond by the time of publication.

We also contacted Blake Levitan from Connected Devices – an online retailer which specialises in importing smartphones that are not commonly available in the country.

We asked Levitan what the reason could be for the price discrepancies between iPhones and other Apple devices from the iStore.

Levitan said that while it would be unfair to comment on the iStore’s pricing strategy, his own company does not import from the US, but instead gets its smartphones from the UK or Europe.

This is primarily due to the fact that there are compatibility issues on South African networks with the GSM/LTE bands on devices originating from the US.

“In our experience, the UK (or European) devices are the most similar in network spec to what our local networks are operating on,” Levitan explained.

“On that basis, a fair comparison in our opinion would be against UK retail rather than US retail,” Levitan noted.

“When it comes to major OEMs such as Apple and Google, the US-based pricing and UK based pricing, as an example, differ significantly,” he stated.

We compared the UK prices of the iPhone 12 models with the iStore’s prices to see what the difference came down to.

It was evident from this comparison that the iStore would stand to make far less from iPhones imported from the UK than from the US, with the average price difference dropping from 45% to 17%.

Luxury tax and other costs

Levitan said it was important to note that there were other factors involved which complicated a direct comparison between local retail and international retail prices.

These include additional warranty costs and administrative challenges, as well as disbursement fees levied on every import, which is typically a percentage of the shipment value or a fixed rate.

“These are typically fees charged by the freight forwarder (courier) and it’s where they’re able to recover some fee for their work in the clearance process,” Levitan said.

In addition, Levitation said that organisations typically would have forward contracts in place which may or may not be at a level on what the current exchange rate is.

“Typically, in our experience, one would have forward contract in place to cover three months purchasing, in the event, in this example, that the contract was taken out in November, the R/$ could have been 10% different, which naturally would impact on product imported and paid for, using that contract.”

One issue which MyBroadband had originally assumed could be a factor is the addition of a 15% luxury tax and 7% duty tax applicable on smartphone imports, but not on computers.

Levitan explained, however, that this is normally only applied to devices with an embedded SIM card.

“A mobile device with an embedded sim card does have the double tax (in addition to VAT) whereas and mobile computing device, without an embedded sim would simply have the VAT.”