Air Conditioning Market in South Africa – Overview
While Air Conditioners are not a priority appliance in South Africa,their popularity in high income households and office buildings has continued to grow in recent years, reaching a 40 % penetration rate in the most affluent homes. Split ACs are being increasingly used in offices and residences without a centralised HVAC system.
Although the air conditioning market was hit hard by the 2008 economic recession, sales have started to grow again and the market is expected to expand by a compound annual growth rate of 5 % until 2018, dominated by split AC sales.
The spread of Air Conditioners has also been aided by the increasing electrification of the country – As recently as the late 1980’s the country’s electrification rate for residential households was around 35%, whereby almost all white households had electricity and the electrification rate of non-white households was extremely low. An electrification programme was implemented in the early 1990’s and by 2001 the electrification rate had increased to 61% and by 2011 it was 83%. By the late 1990’s the country’s electrification programme expanded the market for electrical appliances by an estimated 50%.
South Africa has a respectable appliance manufacturing industry, and historically there was a limited number of locally manufactured mass produced appliances available to the middle to lower income groups; the high income groups were traditionally serviced by European imports. However, there has never been any local manufacture or assembly of AC. These appliances have always been imported due to historically low sales volumes in South Africa and the specialised components required for AC.
It is important to note that Air Conditioners are also viewed as a luxury item and targeted to the upper income families and commercial properties without a central AC system. All compressor-operated AC with a rated cooling capacity not exceeding 8.8 kW are subject to a 15% import duty.
The country’s significant income inequality means that the middle to lower end of the market chooses appliances almost exclusively based on price and brand. These appliances generally have less functionality and are often higher consumers of electricity. Conversely, upper income households choose their appliances based on functionality, design, brand, guarantees and after sales service, aesthetics and to a lesser extent and only more recently on their energy consumption.
Air Conditioner Market in South Africa – Market Characteristics
All Air Conditioners sold in South Africa must comply with the South African National Standard (SANS). This standard conforms to the International Electrotechnical Commission Standard (IEC). The market is characterised by two types of systems – split and packaged units. A split AC system is made up of two units – an outside unit including the compressor, and an inside air outlet unit, often also referred to as the “wall hung head unit”. The two units are connected by pipes that carry refrigerant. A packaged terminal AC (PTAC) is a self-contained heating and air conditioning system.
The AC market is unique in many respects in that it was originally dominated by a small set of specialist companies, who did not manufacture other household appliances such as refrigerators, ovens and washing machines. In recent years Korean appliance manufacturers added more and more AC to their appliance portfolios. This prompted also South Africa’s biggest manufacturers of appliances to introduce a range of residential AC units, but these are actually all imported units. In addition there are many small and no-name brands, which enter the South African market in the form of direct imports. According to interviews held with industry experts, the market in SA is clearly split between the established local companies and direct imports.
With the high electricity tariff increases experienced since 2007 and the uncertainty of electricity supply in South Africa, it has become important for consumers to become aware of the innovative functionality and features that AC products offer, with a major focus being energy efficiency. An example of this is ‘Inverter’ technology, which uses less energy than conventional models. This energy efficient technology is also often bundled with additional comfort features such as air purifier functionality. Split models dominate the market due to advantages concerning their size, noise levels and energy efficiency performance relative to the traditional models.
Air Conditioner Market in South Africa – Efficiency Range and User Savings on Air Conditioners
Market Research group Euromonitor International has tabulated the efficiency range and user savings on Air Conditioners for South Africa. The data has been classified under 4 categories: Typical Inefficient Appliance on the Market, Typical Appliance Purchased (BAU – Business As Usual), Best Available Technology (BAT) and Best Emerging Technology.
The data below gives a breakdown of these 4 categories in terms of Type, Qualitative Performance of the Service, Yearly Energy Cost in ZAR, Purchase Cost and Operation & Maintenance Cost in ZAR.
All data is based on the following assumptions: AC operated for 5 hours per day throughout the year, equalling 1,825 hours in total.
Air Conditioner Market in South Africa – Energy Efficient Classification for Air Conditioners in cooling mode
The Energy Efficiency Ratio (EER) of an Air Conditioner is determined by the amount of cooling generated by the system in relation to 1 kW of electricity it consumes. The EER value indicates the energy efficiency of the cooling performance of the air conditioner. The table below gives the South African Standards Rating for split air conditioners in the market.
World Air Conditioner Demand in 2017 revealed
A recent study conducted by a refrigeration and air conditioning industry association estimated that 2017 world AC demand reached to 102.31 million units, which is a 2.9% increase compared with the previous year.
Overall demand for Air Conditioners
China continued to be the largest market for air conditioners where their demand reached 40.59 million units, a 3.5% increase. Chinese demand now occupies 39.7% of the total world demand. Asia not including China, was the second largest market for air conditioners, where demand reached 16.41 million units, an 8.4% increase. North America came in third where air conditioner demand increased by 1.8% to 14.60 million units.
Room Air Conditioner (RAC) Demand
The 2016 world RAC demand is estimated to have reached 88.81 million units with a 2.9% increase compared with the previous year. The largest market was China, whose demand reached 38.41 million units with a 3.5% increase. The second largest market was Asia excluding Japan and China, whose demand reached to 14.93 million units with a 8.8% increase. Japan came in third where demand reached to 8.35 million units with a 3.1% increase. Air Conditioner demand also increased in Europe by 13.4% or 5.37 million units.
Decreases in demand were seen in North America and Latin America; North America reached to 8.04 million units, which is a slight decrease from the previous year, followed by Latin America where demand decreased by 12.2% to 5.78 million units.
Packaged Air Conditioner (PAC) Demand
In 2017, world PAC demand is estimated to have reached 13.50 million units which is a 3.0% increase compared with the previous year. The largest market was North America whose demand reached to 6.57 million units, a 5.2% increase. The second largest market was China whose demand reached 2.18 million units, a 2.8% increase. The third largest market was Asia excluding the countries of Japan and China, whose demand reached 1.49 million units, a 4.6% increase.
Decreases in demand were experienced in Japan, Europe and the Middle East. Japan reached to 0.79 million units, a 0.1% decrease, followed by Europe with 0.70 million units, a decrease of 3.5%, and Middle East which saw a decrease of a 4.1%, with 0.66 million units.
Africa sees 4% increase in Air Conditioner Demand in 2017
A recent study by a refrigeration and air conditioning industry association has concluded that Africa has seen a 4% increase in air conditioner demand in 2017 as compared to 2016. On the whole, demand for Room Air Conditioners and Package Air Conditioners rose up to 2.6 million units.
Egypt saw an increase of 24 thousand units from last year, to a total of 782 thousand units. South Africa witnessed an increase of 28 thousand units, to a total of 253 thousand units. Ghana’s air conditioner demand which has been experiencing a steady increase for the past 5 years, has increased a bit of a fall from a high of 95 thousand units in 2016 to 92 thousand units in 2017.
Other countries in Africa taken as a whole, saw a sharp increase in air conditioner demand from 329 thousand units in 2016 to 453 thousand units this year, an increase of almost 40%. Research indicates that most of this increase has been contributed by countries with small but rapidly growing economies such as Ivory Coast, Africa’s fastest growing economy, which grew at the rate of over 7.5% in 2017 and Mozambique, whose GDP grew at 7.3% this year.
In terms of Room Air Conditioner demand, Egypt declined slightly compared to last year, with 700 thousand units sold compared to 715 thousand units sold in 2016. South Africa witnessed an increase of nearly 40 thousand units, from 163 thousand in 2016 to 200 thousand in 2017. Ghana witnessed a modest fall, from 82 thousand units in 2016 to 79 thousand units this year. Other smaller countries such as Ivory Coast, Mozambique, Angola and Senegal accounted for 402 thousand units, an increase of over 42% from last year.
Statistics show that demand for split air conditioner units is much stronger than that for window air conditioner units in Africa. In South Africa, demand for window units stayed constant from last year, while that for split systems increased from 137 thousand units in 2016 to 174 thousand units this year. While Egypt saw a modest decline in demand for split systems, it is still the largest consumer of these products, with a demand of 615 thousand units in 2017. Similar to other results, the smaller economies of Africa taken as a whole saw a rise in demand for split systems of close to 40% to 279 thousand units, led by Ivory Coast and Mozambique.