Boston, MA -- (SBWIRE) -- 03/13/2014 -- There is further moderation to our growth outlook for South Africa's consumer electronics market this quarter on the back of continued macroeconomic headwinds. The rand's continued depreciation is expected to have a significant impact on consumer spending, especially on imported products, in the short to medium term. Changing usage patterns reflected by rising demand for smartphones and tablets is cannibalising demand for other consumer electronics products, including PCs and digital cameras.

Furthermore, the increasing sales volume of smartphones is expected to have a limited impact on the market owing to the decline in the average unit price of devices following the arrival of low-cost brands.

Headline Expenditure Projections

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- PC Sales: US$3bn in 2013 to US$2.6bn in 2014. Forecast in US dollar terms downgraded to reflect the impact of currency weakness and decline in demand for PCs.
- AV sales: US$1.5bn in 2013 to US$1.7bn in 2014. Forecast in US dollar terms unchanged, with digital TV sets and set-top boxes expected to drive growth in 2014.
- Handset sales: US$1.6bn in 2013 to US$1.8bn in 2014. Forecast in US dollar terms unchanged, with smartphones the main revenue growth driver.

Risk/Reward Rating: South Africa's score was 51.1 out of 100, earning it 6th place in our RRR table. We expect rising penetration of consumer electronics devices such as smartphones and flat-screen TV sets. However, a large grey market and limited internet access outside major cities and towns pose downside risks to growth.

Key Trends And Developments

In December 2013, consumer electronics vendor Mustek announced the acquisition of an indirect 26% stake in Sizwe Africa IT Group, for a total cash consideration of ZAR15.2mn. Mustek will advance a loan of ZAR6.7mn to Zaloserve, the ultimate holding company of Sizwe, and a loan of ZAR8to Omni Capital. Sizwe Africa IT provides IT products, network products and solutions and IT maintenance and support services. According to a statement from Mustek, the transaction is part of the group's drive to broaden its service offering to enable it deliver services to a larger customer footprint and align it with a partner with a solid track record and critical mass in the enterprise segment.

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