Air Conditioning Market in South Africa – Overview

February 21, 2018

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.

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