The price of games, graphics cards, and other hardware in South Africa has skyrocketed in the past year.
Games are now roughly R100 more expensive than they were at the start of the year, and cost between R100 and R400 more than they did last year, with PlayStation 4 and Xbox One titles priced between R799 and R1,199.
When you look at hardware prices, you see a similar story.
I bought a EVGA GeForce GTX 970 (4GB) Superclocked Edition with The Witcher 3 included for R4,898 (R4,799 + R99 courier) on 24 March 2015.
Price cuts on older graphics cards have started to filter through to South Africa after Nvidia reduced its prices when it launched its new generation of GTX 10-series cards.
However, a new Nvidia GTX 1060 card will still cost you at least R5,000.
Weak rand and uncertain times
The reason the prices of video games and gaming hardware increased so dramatically in the space of a few months is evident when you look at a graph of the rand’s value against foreign currencies.
As the two graphs below show, when the rand weakened, video game prices increased.
Why a stronger rand won’t bring prices down immediately
While the rand has been strengthening over the past month and a half, unfortunately it may be some time before we start seeing price cuts as a result.
Firstly, it is worth noting that in terms of its value against the dollar, the rand has only recovered to the same level it was around this time last year.
Secondly, a closer inspection of the graphs will reveal that a weakening in the rand doesn’t usually translate to an immediate price hike.
This is thanks to forward exchange contracts, which are often referred to as “forward cover”.
Forward cover lets importers fix the exchange rate they receive from the bank for a period no longer than 12 months. It lets them manage the risk that the rand may suddenly weaken.
They can set their wholesale price on games and hardware without worrying that they might suddenly get hit with a higher exchange rate when their stock lands in South Africa.
Stock that was bought at higher spot exchange rates, and forward cover that was taken out when the rand was weaker sometimes cause prices to remain at relatively high levels even when our currency strengthens.
Provided the rand continues to strengthen, or at least stays stronger than it was at the start of the year, we should be able to look forward to better prices next year.
Prices could also improve sooner, depending on when a distributor’s forward cover contracts mature.