Sources within the local gaming distribution industry have told htxt.africa that the prices of newly-released games are set to go up by R50 to R100 in the very near future. This isn’t because distributors are getting greedy, they say, it’s because the rand’s depreciation against other currencies is having a severe impact on all South African import businesses.
Megarom Interactive spokesperson Jason Borea shed further light on the situation. He said “The depreciation of the rand at the current rate will affect all import-based companies. Unfortunately… the rand has depreciated over 28% to the dollar, 33% to the Euro and 40% to the pound and companies just cannot absorb these kind of levels, which in turn means prices to the end consumer will rise.”
Everyone is affected
Those sentiments were echoed by our source at entertainment and gaming distributor Ster Kinekor. He pointed out that as a basic rule, the prices for all products imported into South Africa will be negatively affected by the rand’s depreciation, and as a result consumers can “most definitely expect price increases”. No word on by how much from Ster Kinekor’s side, however.
He went on to say that a weak rand doesn’t just undermine the buying power of local gaming distributors on an international market; it has knock-on effects elsewhere, too. He says a weak rand pushes up the petrol price which then adds to transportation costs, both in terms of getting the products here from overseas and distributing them by road to our local retail network. Lastly there are import duties to be paid, which are also tied to the rand’s value (or lack thereof).
Planning for prosperity
Businesses try to plan for currency fluctuations to keep prices as stable as possible for consumers, but fluctuations can be difficult to predict. Planning takes the form of buying “forward cover” which means buying a foreign currency at a fixed price at a future date. If a company secures dollars for R9 or so, for example, they won’t have to put their prices up as much when the rand hits R11/$, as long as their dollar reserves hold out. Obviously, the risk of buying forward cover is if the rand stabilises.
In this way, companies are able to absorb the increased cost of doing business, but only for a short time. Eventually, if the local currency remains weak, those increased costs will need to be passed on to consumers in order for those businesses to stay open, and that’s what we’re seeing in the local gaming industry at the moment.
Alexia Scotten, Apex Interactive’s marketing and product manager, confirmed this. She said “Unfortunately the weakening rand has hit everybody hard. In the last year, we at Apex have tried to avoid putting our prices up unnecessarily. Unfortunately the time has come where our prices need to be increased in order to ensure that we can proceed to bring gaming and accessories to the market. Obviously our prices need to be increased, but we will keep the amount to the bare minimum.”
In the face of rising prices, it follows logically that consumers will likely curtail their spending. We asked Alexia what would happen if gamers stopped buying physical games in sufficient quantities to keep distribution businesses going, and she said: “We have planned our products with this in mind, making sure that if anything drastic had to happen to the physical software market, we will still be bringing you tangible accessories like Gioteck, Turtle Beach, and Big Ben to name a few.”
No respite from digital
Even choosing to buy games through online distribution services like Steam, EA’s Origin store and Greenmangaming.com won’t save local gamers from higher prices. With the digital tax proposed by government last year going live on the 1st of April, 2014 (source: BDLive.co.za), the price local gamers will pay for digital-only games will be pretty much in line with physical goods prices, if not slightly more expensive.
In case you missed it, in 2013 finance minister Pravin Gordhan announced government’s intention to impose VAT on all digital goods bought in South Africa. So all movies, games, ebooks, music, TV shows, apps and software that can be bought online will cost an additional 14% from April Fool’s Day.
This gets government its slice of all the money flowing out of the country via digital storefronts like Steam, the Apple iTunes store and Google Play. BDLive predicts the move could net over R980 million in additional revenue. If, of course, South Africans keep on buying digital goods at the same rate as they did before the VAT-related increase.
Is there a silver lining?
You could be forgiven for thinking things aren’t looking very good for the cost of gaming in South Africa. The prices of games, gaming consoles, PC parts and everything related are going to go up in the very near future, with no end in sight as long as the rand stays at its current level. But there is a silver lining. Sort of.
What won’t change much is the price of second-hand games and older titles, as the increases the local distributors are talking about are set to only affect the pricing of brand-new games. So who knows, perhaps the squeezing of gamers’ wallets on new game prices will lead to an increase in sales in the second-hand market, or encourage people to play games they’ve already bought but which they just haven’t had time for yet.
Or, as is more likely, it’ll encourage more people to simply turn to piracy to get what they want, and that’s a situation where nobody wins.