East Africa Sees Record Double-Digit Decline in PC Shipments
05 May 2014
PC shipments to East Africa suffered a huge year-on-year decline of 31.6% in Q1 2014. According to a preliminary report released today by International Data Corporation (IDC) that covers Kenya, Uganda, Tanzania, and Ethiopia, the record quarterly decline saw shipments total 141,831 units for the period under review.
"Huge volumes of low-cost mini notebooks were shipped to East Africa during the corresponding period of 2013, and these devices are no longer in production," says James Mutua, a research analyst at IDC East Africa. "We expected the remaining vendors to take advantage of this gap by developing products specifically targeted at this market, but this has so far not materialized. The disappearance of mini notebooks from the market combined with the impact of VAT, inventory issues, shifts in vendor strategies, and channel realignment initiatives to negatively impact the buoyancy of East Africa's PC shipments in Q1 2014."
PC shipments to Ethiopia and Uganda were affected by some vendors opting to change their strategies due to poor sales executions. Uganda also experienced a lack of stock, as some partners complained that their orders were being delayed in Dubai while on transit to Uganda, either through the country's main Entebbe International Airport or sometimes via the Kenyan sea port of Mombasa.
In Tanzania, the market's vendors need to urgently realign their focus on consumer segment products in order to take advantage of the gap left by Samsung. This did not happen in time for Q1 2014, with most vendors simply shipping in enough stock to fulfill their normal run-rate business. However, IDC is optimistic about future PC growth in Ethiopia, Tanzania, and Uganda as the respective business environments are continually improving and expanding, while consumer spending is also on the rise.
The introduction of VAT in Kenya has had a significant negative impact on PC shipments into the country as certain unscrupulous market players are utilizing dubious means to pay less VAT or evade paying it altogether. This has resulted in increased corruption at Kenya's ports and a subsequent rise in gray market shipments.
"The huge decline seen in Kenya is alarming," says Mutua. "The government's intention to increase tax collection is unlikely to be fully realized as substantial shipments are now coming into the country that may not have taxes levied against them. The government needs to act urgently to ensure a level playing field for all market players, either by scrapping VAT altogether or by tightening the loopholes that are increasingly being exploited."
The positive news is that the Kenya ICT Authority is now fully operational with a board of directors in place. This means that government IT-related projects should start to gain momentum in the second half 2014, potentially giving a much-needed boost to the country's overall ICT market.
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