How big is the smartphone market in South Africa really?

Someone once told me that Samsung smartphones have higher market penetration in Angola than official sales statistics suggest. The reason for this disparity was found to be a thriving but unrecorded market for cellphones, awash with grey imports from China.

I never got to verify the anecdote above, but I could not help wondering about the size of grey and black markets for smartphones in South Africa, given the growing headache brought about by counterfeit imports that my beautiful country is battling with.

First, recorded facts

According to Gartner, there is a 16% smartphone penetration in South Africa. The last time I checked, the number of sim cards in circulation  exceeded the human population of 50 million (the ratio may have declined owing to deactivations as a result of RICA)

A journey to the heart of Johannesburg

I gave into my curiosity this past Friday and conducted a quick market research. I figured the best sample base will be in Johannesburg city centre. Why this location, you may ask? Well, this is where real life happens for the often-neglected section of the consumer market with lower disposable incomes. So, off I went on a walk, through busy streets and alleys, with a hive of trade activity bursting at the seams due to this being the last the Friday of August. Armed with my iPhone, and at a great risk of getting into trouble with the traders who looked to be of Indian and Pakistani origin, I made some interesting discoveries as shown by the attached photos below.

Grey Cellphone Market in JHB City Centre 26Aug11

Grey and black cellphone markets are thriving in Johannesburg city centre (click to enlarge photos)

My findings

I came across an alley (picture 3), which is part of what was famously called the Small Street in the late 80’s, without having to look too hard. Along this stretch of about 50 metres or so, there must have been 20 cellphone retailers (picture 5). I counted at least 8 brand names on display that were new or unfamiliar, including Nckia, Sumsnug, Halo, GoWin, Gild, JWD, Mobicel, and LC (pictures 1 and 2). Logos of the first 2 brands in this list could easily be mistaken for Nokia (picture 10) and Samsung (picture 7), and I suspect this was done deliberately to confuse consumers. Many of the observed cellphone models were carbon copies of mainly Nokia, Samsung, BlackBerry and even iPhone. There were also smartphones with well-known brand names, but some were obviously fake if price is anything to go by. As an example, I came across a retail store where a dual sim 32 gig iPhone was selling for R550! Another store was selling what looked like a dodgy BlackBerry Torch at R725 (picture 6).

What does this mean?

The 16% smartphone penetration is understated, mainly because of the unrecorded market that cannot be accounted for. However, the size of this market is anyone’s guess.

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4 thoughts on “How big is the smartphone market in South Africa really?

  1. Wow Will, I feel you passion right there in this spot research you did. South Africa is a free-market economy country and also a developing country with a lot of disparaties in per capita income, so as in any other product market that shows growth it is not surprising to see these type of developments. You can even see strange cars on the road, I’ve even considered buying a Geely.
    Why is this? First, customers have become sophisticated, it is not only price or brand that determines where they spend their money. They look at these products and functionality comes into the picture. Secondly, How are the big brands rewarding loyalty? Brand promise is a good thing, however do the customers feel appreciated?
    My humble suggestion to marketers; Brands should learn or device new ways of communicating and researching their customers wants and reward loyalty. For example, I’ve used Nokia all my life; because I feel it is user friendly and always communicate this to friends and family, however I’ve never gotten any anknowledgement from this brand marketers. Wouldn’t they be guaranteed of my next cellphone spend if they could entice me for example to buy their latest more pricier models if they were to say let me trade in my old phone for the new one? Just thinking! Thanks for the article, eye opener.

  2. Bra Willy, thanks for bringing out another way of looking at the mobile market as opposed to the traditional way of tracking the Mobile Operator business for smartphone penetration.

    I draw a few observations from this piece of work:
    1. Grey devices seem to be prevalant in the lower lsm markets (JHB CBD, and other small towns like Vereeniging, etc). Makes sense as this market is aspiring for brands like iPhone and pricing is an issue for original products
    2. Considering the cost of connectivity, I am not sure if these devices are used as smartphones. Do we continue to call them smartphones?
    3. Higher LSM market consumers will buy a Grey market product as long as it is close enough to the original product and – Not a Nckia
    4. Higher LSM consumers are mostly power users (broad statement) and the quality of these grey devices may not stand the level of usage by a power user
    5. Mobile Operator contract packages make it easy to access free devices with the right level of after sales support – appelas to the higher LSM market who consumes data on these devices

    Having said that, I am aware of the growing usage of social network services in the prepaid market and these are mostly used by brand conscious and highly aspiration youth – do they really want to be seen with a Nckia or a Samsnug?

    So I would argue that these grey devices should be can be classfied as smartphones.

    Thanks for stimulating my thoughts on this one!

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