Currency Concerns and the GITEX Factor Cause Decline in East Africa's PC Market

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The East Africa PC market – comprising Kenya, Uganda, Tanzania, and Ethiopia – suffered a year-on-year decline of 24.8% in Q3 2015, with shipments slipping to 108,088 units, according to the latest figures released by global research and consulting firm International Data Corporation (IDC). Given the region's reliance on imports, the ongoing depreciation of local currencies is driving greater inflationary risks and subsequently depressing consumer sentiment and purchasing power.

Each of the four countries monitored by IDC recorded double-digit declines year on year in Q3 2015, with Ethiopia suffering the steepest drop at 36.7%. Uganda saw its shipments fall 23.2%, while Tanzania and Kenya posted year-on-year declines of 22.3% and 19.7%, respectively.

"The monetary tightening policies undertaken by the region's governments have been a partial success," says James Mutua, a senior research analyst at IDC East Africa. "However, these measures have not been able to reverse the ongoing currency declines, largely because this weakness is being driven by external factors such as the strong U.S. dollar, expectations of U.S. monetary tightening, uncertainties in the euro zone, and slower growth in China."

Commercial shipments in the region fell 4.6% year on year in Q3 2015 as some ICT projects were delayed due to various financial, technical, and political obstacles. But it was the consumer market that was hardest hit during the quarter, with shipments to that segment falling 18.8% year on year. This was largely due to the flood of gray imports coming from the UAE ahead of the annual GITEX technology trade show in Dubai. As GITEX approaches, UAE distributors and partners try to clear as much of their older, less-appealing stock as possible, dumping much of it into Africa, even if it means incurring losses.

"The inevitable result," says Mutua, "is that local, official channel players are unable to sell their inventories as off-channel stocks from the UAE are being sold at much cheaper prices due to the lack of VAT and other taxes. This is particularly prevalent in Kenya's vast consumer market, and it's high time the government there revised its taxation policy for PCs or at least sealed the loopholes that exist at the various points of entry. Rather than bringing in the much-touted additional revenues, the taxes on PCs appear to be promoting off-channel business and strangling the revenue-generating potential of official channels."

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