What goes into local graphics card pricing?

If there’s one thing on everybody’s lips this year (besides Overwatch….sigh) it’s that the prices of things are seemingly increasing with every muttering of “listen properly” from our President’s mouth.

As South Africans we are in the unenviable position of being part of the most technologically developed economy in Africa (although not the most earning according to GDP) whilst being the farthest away from most of the high technology producing areas in the world, namely Asia, America and Europe. In all of Africa we seem to have the highest propensity to buy high-tech devices, yet we are very isolated from the tech world. Although the internet has annihilated space and time through instantaneous communication, the devices needed to do that still has to travel across that space and time; time and space equal money, and as consumers we often have to pay for that. Indeed, in a post-Nenegate world, that means we have to pay a lot more for it. In doing this article I’ll explore exchange rates, location and market size affecting the price of our pixel pushing components. To clarify certain points I went to ground and dug up the incredibly helpful and insightful perspective from Rune Ravnsborg, owner of local PC retailer Rebeltech.

After the announcement and local launch of the GTX 1080 on the 27th May, pricing has once again reared its head. Most often the question is asked “how can something that costs $699 cost over R14500 here?”. The common rationale most people flock to is the ZAR/Dollar exchange rate conversion (the “Caveman Rate” as Rune puts it), which at the time of writing (R15.82/1$) means $699 equates to R11 058. So, where does the rest actually go? Sure, a lot of it goes into maintaining local profitability for the suppliers (business is not charity), but there are also other costs that make it more expensive and puts the actual “PC Component Exchange Rate” at around R20/$—that’s an extra ~R4 above spot.

The first thing to note is that South African suppliers don’t get the same $ prices as their overseas counterparts. There are two reasons for this; firstly, we don’t get them through US distribution channels, and secondly, we also pay different levels of tax—our local prices include our 14% VAT, while US prices are listed excluding local sales tax, which differs from state to state. Regarding tax and customs, I’m not even going to delve into them since it seems like they change on a regular basis between 10-15% depending on whether the customs official had their breakfast that morning.

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