On Wednesday this week, South Africa’s finance minister Malusi Gigaba delivered the 2018 budget speech in parliament. The budget focuses on cost savings in government, makes money available for the beginning of the National Health Insurance scheme as well as free tertiary education, and seeks to lower the amount of government bloat and the cost of supporting state-owned enterprises. If you already felt yourself falling asleep just reading that, don’t worry – the speech really was that boring. But there were two changes that Gigaba highlighted in his budget speech that affects gamers in the country – the VAT increase and changes to the luxury goods tax.
You can read up on the budget as a whole in this article on BusinessTech. The changes to the budget are wide-ranging, but we’re really only interested in what effects the changes have on our primary hobby – gaming. All of these changes will come into effect on 1 April 2018.
VAT increases from 14% to 15%
In the first change to VAT in the country for more than 20 years, government is committing themselves to increasing the VAT rate to 15%. This tax affects everyone and almost everything sold in stores across the country. And it affects our games bought online through Steam, EA Origin, Uplay, the PlayStation Store and the Microsoft Store. Games will see a 1% hike in their prices overall. It’s not a massive change considering how much our games cost these days (1% of R899.99 is only R8.99), but it’s definitely going to move the price brackets of games up a bit. Lets say you buy six games a year at R899 each – that’s an extra R54 you had to pay in.
This also hits software like Microsoft Windows 10. The average price for Windows 10 Home is R1900, and after 1 April it’ll be R19 more expensive. If you’re buying hardware, that Ryzen 7 1800X just got hiked up by R52 on average. It’s not a huge amount, but this adds up thanks to how many people are spending their hard-earned money buying stuff.
Given that there’s a bill going into effect on 1 October 2018 that applies VAT to every service rendered over the internet, tacking an extra 15% to the cost price of online services that previously didn’t charge VAT may be enough to affect the profitability of online services, as well as the likelihood of consumers using them. This could affect things like software subscriptions (Xbox Live Gold comes to mind), or cryptocurrency exchanges like Luno.
Ad Valorem tax increases from 7% to 9%
A change that was unexpected, government is planning to add smartphones to the luxury goods/ad valorem tax code as well as increasing the tax price by 2% for luxury imported goods. The ad valorem tax covers everything from cars, to electronics, cosmetics, perfumes, and other goods considered luxury items. Electronics and electronic equipment basically applies to all computer parts, so that Ryzen 7 1800X just tacked on another 2% to the final total. Smartphones just got 9% more expensive as well, so that’s going to affect prices of cellphone contracts as well as sales of phones through other retailers.
Ad valorem tax is applied to the value of the product as it enters the country, imported by an authorised distributor, and it increases the cost price of the product, not the final price. Still, consumers will bear the cost of that increase in the final price of the product. That Ryzen 7 1800X you’ve been eyeing will pick up another R103 to the price after the change takes place. Apple’s new iPhone X, already priced at a hefty R18,999 for the silver 64GB model, sees a 10% increase overall, moving up to R20,899.
Fuel levy increases by 52 cents
For physical goods that need to be transported, the fuel levy increase is going to affect the costs for suppliers and retailers, which will inevitably see a hike on the shelf price as well. Diesel per litre currently costs around R12.60, so a 52c increase is roughly a 4% increase in the fuel price. This affects many parts in the supply chain from importer to retailer. You’re going to see an increase in the price of the product you’re buying on the shelf or online, because delivery costs have increased. You’re also going to pay more for delivery from Raru, or Rebel Tech, or Wootware thanks to the increase. Whoop-de-doo.
The 4% increase won’t result in a 4% increase on the shelf price, though. It’s rarely a 1-to-1 gain because goods are transported in bulk, so the increase may be smaller than expected because of what goods are being transported, and by whom. But let’s say that it’ll increase the price of a Ryzen 7 1800X by 3%. Taking into account the VAT and ad valorem tax increase, we’re looking at a 6% increase in the final price, or about R300. My recommended R5,000 build in the System Builder’s Guide currently sits at R5,198. The parts in that list come from three different retailers, so there’s three separate delivery charges in addition to the 6% increase of the parts themselves.
All told, we might be looking at a total increase of about R350 once all charges are accounted for. And that’s just for the cheapest build. Thinking of spending R13,000? You might be facing a price increase of R780 after 1 April. Eish!
For those of you thinking of buying a new system, getting that game or DLC, or subscribing to Xbox Live Gold or PlayStation Plus, or Netflix, it might be worth your while to pick those up before the tax changes come into effect. You could save yourself a lot of money in the process.