East Africa PC Market Rallies As Introduction of Kenya's VAT Bill Begins to Bite
Published on: 27th Jan 2014
PC shipments to East Africa increased 3.0% year on year in the final quarter of 2013 to total 140 251 units according to the latest insights from IDC. Strong gains in the markets of Uganda Tanzania and Ethiopia helped offset the poor performance seen in Kenya where the introduction of new VAT legislation resulted in a significant downturn in PC shipments.
"As forecast by IDC, the new VAT law had a debilitating impact on the PC market in Kenya, with shipments contracting 10.7% year on year in Q4 2013," says James Mutua, a research analyst at IDC East Africa. "The bill's introduction, which sees a levy of 16% added to all ICT products, resulted in a huge loss of business due to logistical issues caused by the hasty implementation of the new regulations by the Kenya Revenue Authority. However, Ethiopia, Tanzania, and Uganda all performed much more strongly, recording impressive year-on-year PC shipment growth of 31.7%, 18.7%, and 20.1%, respectively, thanks to an improved and continually expanding business environment and increased consumer spending."
Shipments of desktop PCs to East Africa declined to 48,652 units, down 3.3% year on year, which is on par with the worldwide trend of consumers shifting to portable PCs due to their inherent mobility benefits. However, IDC expects the share of so-called 'all-in-one' (AIO) desktop PCs in the region's overall market to improve tremendously during 2014 as more vendors begin to compete in this category, thereby driving prices down to more affordable levels for the consumer segment.
According to IDC, portable PC shipments to the region were up 6.8% year on year in Q4 2013 to 91,599 units. However, this rate of growth was slower than expected as Samsung opted to reduce its shipments into East Africa amid a change in business model that will see the vendor increase its focus on high-margin PC products, smartphones, and tablets. This new approach has been heavily influenced by the cutthroat competition that exists in the consumer portable PC segment, where margins are very low and consumers are increasingly shifting to tablets.
Looking forward, IDC expects government sector spending on IT in Kenya to be hit hard in 2014 following a recent Treasury directive to all government departments to freeze all purchases of computer equipment, among other things, in an attempt to cut costs. However, this will not affect donor-funded government ICT initiatives or the laptop project for Class One pupils.