Tag: consumers

Do female consumers pay ‘pink tax’?

Source: Supermarket & Retailer

Women pay more for cosmetics and clothing than men, says Use Your Voice (UYV), a non-profit organisation that distributes sanitary pads across South Africa.

In a Facebook post, since shared more than 6 600 times, UYV compared the prices of daily-use items such as razors, day cream and clothes to show how much more women pay for each item.

It is estimated that women pay as much as 13% more for personal care products.

“If you do feel the need to comment that this is fake, and that you do not agree, we highly recommend that you do the research yourself,” the organisation said about the price comparison.

Business Insider South Africa found differences in prices for similar products aimed at men and women:

  • Women are expected to pay R25 more for similar razor blades
  • Women pay R20 for the same t-shirt, on promotion
  • Similar vitamins by the same label costs R16 more for women
  • Women’s deodorant costs R2 more than for men at two different stores
  • The same brand of spray deodorant costs R10 more

Across our sample of products, women were expected to pay 18% more for what appears to be the same products for men.

Debit order disputes on the rise

By Carin Smith for Fin24

Debit order disputes have increased significantly over the last three years, according to the Payments Association of South Africa (PASA).

Yet, it said recent investigations have shown that in the majority of cases, proof that debit orders were indeed authorised by consumers could be provided.

According to PASA, the increase in debit order disputes could mean that companies have bad practices in obtaining such debit order mandates, or that consumers are asking their banks to reverse actual valid debit orders.

Consumers could be doing this, because the reversal of such legitimate debit orders creates temporary cash flow relief for them. PASA emphasises however, that this kind of behaviour by consumers is not acceptable and has become a huge concern for the financial services industry.

As part of a project to reduce debit order disputes, banks are investigating ways to enhance their current dispute and prosecution processes.

Over the last few years PASA has been working with banks to address debit order abuse. Initiatives include – statistically identifying potential problematic companies, refining the minimum criteria for mandates, and managing a debit order abuse list which can result in “rogue companies” being excluded from the system.

Initiatives also include a process to investigate and issue fines or initiating forensic investigations and prosecution when companies do not have mandates or have mandates that do not conform to minimum requirements.

DebiCheck

One of the most pertinent, but longer-term solutions to curb debit order abuse remains the Authenticated Collections project that was started in 2013.

Now close to implementation, the project will deliver a new type of debit order, called DebiCheck. Currently there are 11 banks participating in DebiCheck. Through this new debit order system, a debit order will only be processed to a consumer’s account if the mandate for such a debit order has been electronically confirmed by the consumer.

This means that consumers will be aware of which DebiCheck debit orders will be processed to their accounts – and these debit orders will not be processed by the bank if they are outside the agreed conditions the consumer initially confirmed.

As a result, PASA foresees that the number of invalid debit orders being processed as well as the number of consumer disputes where valid mandates are in place will rapidly decline.

Improving safety and efficiency

Additionally, an interbank committee has been established and mandated to improve the safety and efficiency of debit orders. This is through including new ways to better identify existing users abusing the system, enhanced measures and support to ensure offenders are adequately investigated and prosecuted, and processes that will assist in curtailing improper consumer behaviour.

PASA says consumers continue to have the right to dispute or instruct their bank to reverse debit orders they have not agreed to, or which are processed outside the mandate they have given.

They should continue to be watchful when entering into contracts – verbally, in writing or electronically. PASA also encourages consumers to check their bank statements on a regular basis. Also, not to provide or confirm account information if they are not certain what exactly it will be used for.

The industry is currently involved in the prosecution of certain rogue collectors. PASA believes the new measures it is working on will significantly assist the authorities and improve the success of prosecution.

By Linda Ensor for TimesLive

Treasury estimates that the total debt that could fall under the debt extinguishment proposals made in the National Credit Amendment Bill proposed by Parliament’s trade and industry committee could range between R13.2bn and R20.7bn.

Banks and retailers would be the most heavily affected by the proposed scrapping of debt‚ Treasury said in a presentation to Parliament’s trade and industry committee on Tuesday during public hearings on the proposals.

The committee has proposed amendments to the National Credit Act‚ which include writing off the debt of those earning below R7‚500 month and who fall within the threshold of realisable assets.

According to research by consultancy firm Eighty20‚ about 56% of the credit active market of about 18-million has an income of R7‚500 a month or less.

“Based on the income estimates approximately 9-million borrowers could potentially meet the eligibility criteria for debt intervention as per the draft bill‚” the organisation said in a presentation to the committee.

“In total borrowers that could qualify for debt review hold over 16-million loans. 29% of these loans (4‚7-million) are three months or more in arrears belonging to borrowers who could qualify for debt intervention. The total outstanding balance on these loans is around R20‚7bn.”

The Black Sash said in its presentation that the debt relief proposals would provide much-needed assistance to social grant beneficiaries who are prey to loan sharks.

The Black Sash has been at the forefront of exposing the vulnerability of social grant beneficiaries to unlawful deductions and the predations of loan sharks. The organisation welcomed the R7‚500 income threshold as this would cover many social grant recipients.

Black Sash national advocacy manager Hoodah Abrahams-Fayker noted that the Easypay bank account – a joint operation between Grindrod Bank and Net1 subsidiary Moneyline – had fuelled indebtedness “as many loan sharks use this card to provide loans often with no affordability tests‚ no proper avenues of recourse‚ no administrative justice and no debt counselling.

“Grant beneficiaries are trapped in a vicious cycle using debt to pay for food and basic living needs. Overindebtedness is a social and economic challenge with far-reaching consequences for vulnerable social grant recipients (who) can become easy prey for moneylenders as they are receiving a guaranteed monthly income from the state.”

Treasury noted in its presentation that there were currently gaps in the protection of the overly indebted. For example‚ there were weaknesses in the insolvency framework as sequestration did not work for those with no income and no assets. The debt review system only worked for those earning more than R7‚500 per month.

Treasury proposed that the debt review system be improved for those with some income. This could be completed “relatively quickly”. However‚ a mechanism was needed for those with no income. A revision of the Insolvency Act was under way but could take some time to finalise.

The Department of Justice and Constitutional Development also made technical suggestions to improve the proposed National Credit Amendment Bill.

In today’s retail and shopping centre landscape, it is becoming increasingly difficult to compete for consumers’ attention, says Steven Burnstone, CEO and head of analytics for Eighty20 Consulting

Standing out and being attractive to consumers is not impossible-all it takes is an understanding of your customers.

Burnstone says that understanding one’s customer base is key. “The way businesses communicate to customers is one of the many areas that need to be focused upon. Businesses need to shift away from traditional, product-focused advertising models and focus on delivering advertising and promotional messages that are customer-focused and tailored to specific individuals.”

Burnstone shared invaluable insights at the eighth annual South African Council of Shopping Centres’ (SACSC) Research Conference on 9 May 2018.

South African customers are members of multiple programmes, receiving countless marketing messages across all channels. How can retailers set themselves apart and be heard in this competitive environment? Big data and artificial intelligence is enabling retailers to speak more accurately to customers and better understand what marketing strategies work best to drive feet in stores and grow customer satisfaction.

Customer behaviour changes achieved by promotional campaigns and loyalty programmes can be assessed.

“In highlighting the data required, methods used and the common problems encountered, we can uncover some of the nuances of customer behaviour change and what to look out for. We can look at some of the insights gained from these analyses and see how they can be used to systematically optimise these campaigns and programmes.

“These can improve the efficiency of marketing to customers, through personalised targeting of messaging and communication channel.”

Happier SA on a buying spree

Source: Supermarket & Retailer

Consumer confidence in South Africa surged to an all-time high in the first quarter of the year, indicating the willingness of consumers to spend more, following the election of Cyril Ramaphosa as head of state.

The First National Bank (FNB)/Bureau for Economic Research (BER) consumer confidence sentiment index (CCI) raced to 26 points in the first quarter of 2018 from -8 points in last year’s fourth quarter.

The increase is the largest single quarter improvement since BER started publishing a composite index in 1982. It also dwarfed the previous record high of 23 index points reached in the first quarter of 2007.

FNB chief economist Mamello MatikincaCRT said the index indicated that most consumers were more optimistic about the outlook for the South African economy and their household finances.

“While the VAT hike to 15 percent would have weighed on consumer sentiment, the zero rating of basic food items such as maize meal‚ brown bread‚ dried beans and rice will mitigate the impact of this tax increase on low-income households,” Matikinca said.

“The extraordinary improvement in consumer sentiment during the first quarter of 2018 can largely be ascribed to the change in the country’s leadership, which triggered many positive economic developments.”

The BER said consumer confidence surged across all income and population groups during the first quarter of the year.

It said sentiment among those who take home R14 000-plus a month reached new record highs of 31 points while those who earn R3 000 a month improved their confidence to levels last seen in 1995.

FNB and BER said index among white consumers reached a level last seen in 1988, while confidence among their black counterparts also hit 34 index points, the second highest level since the all-time high of 38 points after the 1994-election.

Statistics South Africa said this month that retail sales, which best indicate consumer sentiment, increased 4.9 percent year-on-year in February and above market expectations of a 2.8 percent gain.

New car sales have also soared in the first three months of the year.

Citadel chief economist Maarten Ackerman said the buoyant mood among consumers bodes well for the future outlook for the economy.

“As consumer confidence acts as a leading indicator to the economy, the recent surge in consumer confidence in South Africa supports the idea that our economic growth in 2018 will likely be better than initially expected,” Ackerman said.

The BER, however, cautioned of a risk that the CCI overshot of the positive sentiment, charging that there could be a negative correction during the second quarter. All three sub-indices of the CCI saw substantial improvements.

The index, which gauges consumers’ perception of the economy in the next 12 months outlook, jumped from -2 points in the last quarter of last year to 34 points in the quarter under review.

The consumers’ assessment of their own financial position surged to 31 points from 2 points previously.

The number of individuals deeming it appropriate to purchase durable goods presently improved to 14 points from -24 points in the prior quarter.Lara Hodes, an economist at Investec said: “The waning of policy and political uncertainty following Ramaphosa’s election as president of the ANC and subsequently the Republic, together with the avoidance of a sovereign rating downgrade by Moody’s rating agency and a budget more orientated towards fiscal consolidation, boosted the outcome.”

Original article by Kabelo Khumalo for IOL

PnP consumers use R1bn in food debt

Source: Supermarket & Retailer

Pick n Pay says it has granted R1-billion for its credit cards facility which was launched last year, in a scheme that allows customers to purchase food on credit.

“The figure refers to the total credit facility that has been granted. In fact, customers using our store card have taken up a small fraction of their total credit facility, well below R200m,” said David North, Group Executive, Strategy and Corporate Affairs.

The supermarket group on Thursday announced that 56 000 customers had taken up the store credit card since the product was launched in September 2017.

Debt counselling firm, Debt Rescue, described the staggering figure as “bad news” for consumers.

“What for many was clearly a last resort, the Pick n Pay credit line was clearly a last-ditch effort to feed their families,” said Debt Rescue CEO Neil Roets.

Pick n Pay came under criticism last year when it launched the product, with concerns that the facility would sink cash-strapped consumers further into debt.

The retailer has maintained that the card “offers the most affordable form of credit in the market, with a 55-days free credit payment option”.

Announcing the company’s annual financial results on Thursday, the firm stated that the creditwas accessed through the customer’s Smart Shopper card, “with the credit provider carrying all associated funding costs and credit risk”.

The card is operated in partnership with RCS.

Roets said the VAT increase which came into effect at the beginning of April, together with fuel price hikes had placed consumers in an “exceptionally difficult economic cycle” – with more than half of economically active people falling behind by three months or more in credit repayments.

Roets said at the time that Pick n Pay made the announcement to open store accounts for consumers, Debt Rescue made the point that food was the one commodity that cash-strapped consumers should try to buy with cash.

“It is far better to buy assets such as a house or a car on credit. Food is something that you definitely should not buy on credit. If you have to finance food, then you are in big trouble,” said Roets.

High-end food and clothing retailer, Woolworths, also allows customers to purchase food and alcohol on credit.

Beware the dark side of Black Friday

Deeply indebted consumers should think long and hard before plunging themselves even deeper into debt by splurging on luxury goods on Black Friday.

With Black Friday and the silly season upon us, finance experts are warning consumers to steer clear of any spending sprees that could exacerbate their debt situation.

It should go without saying, but the message is clear: don’t spend money you don’t have on things you don’t need.

According to Neil Roets, CEO of debt counselling group Debt Rescue, deals offered by major retailers on Black Friday often seem so good that consumers throw caution to the wind and blow their entire Christmas budget on single expensive items such as high-end TVs and other domestic appliances.

“(Black Friday) promises deals that would tempt even the most financially distressed amongst us,” Roets said. “The short answer is – don’t.”

Roets said that his company, for the past several years, has seen the impact that Black Friday and Christmas shopping sprees have had on consumers when they approach the group to try and get them out from under the financial mess that reckless spending has caused.

“Retailers who are themselves in deep trouble because of the contracting economy have come up with a host of clever ideas to tempt consumers to open their wallets and purses, which is how the idea of Black Friday was born,” he said.

“Black Friday was initially slow to take off when the idea was imported to South Africa. Once it took hold, however, it took off like a rocket ship, and many traders are now notching up a significant portion of their yearly sales on this day and over the Christmas holidays.”

Roets said many consumers also fell into the trap of feeling a degree of resentment, believing that they had been tightening their belts for so long that they needed a break and that Black Friday would be the ideal opportunity to splurge on something nice.

However, he warned that the current state of the economy did not lend itself well to this pattern of thinking.

“We are far from seeing the light at the end of the tunnel. It is our belief – and many leading economists share that belief – that we are far from staging a recovery.”

“In short, things are going to get a lot tougher before they get better. Now is not the time to act recklessly. On the contrary – it is more important now than ever to implement fiscal discipline and save whatever money is left over at the end of the month.”

The CEO said that consumers should plan around a budget, and bear in mind that December tends to feel like a long month, as the stretch between paydays is often much longer. Those who are paid a 13th cheque also get lulled into a false sense of security, he said.

“While we all feel that we desperately need a holiday and the end of a brutal year, keep those holidays within budget and don’t think that if you don’t have the money for school fees in December that the money will somehow, magically become available in January when the schools reopen,” he said.

According to Debt Rescue’s data, half of all South Africans are three months or more behind in their repayments, having collectively notched up R1.71-trillion in debt.

Source: Business Tech

As at the end of September 2015, South Africa’s gross debtors’ book stood at a whopping R1.63 trillion, while the total credit rand value of new credit granted to consumers was close to R124 billion, says Nomsa Motshegare, CEO of the NCR.

Members of the committee wanted to know from the NCR what measures it has put in place to ease the burden of consumers who are over-indebted and struggling to repay their loans, and how it will act against reckless lenders.

The ANC’s Adrian Williams suggested that the regulator consider a kind of “debt forgiveness programme”, which would reprieve lower income groups. “This shouldn’t be for the rich who have just been spending recklessly.”
Committee chairperson Joanmariae Fubbs from the ANC added that debt forgiveness programmes have been implemented successfully in both developed and developing countries.

The NCR’s Motshegare said in her presentation to MPs that the credit regulator is continuing its investigations into reckless lenders, the overcharging of fees and misleading advertisements. “Lewis Group has for example agreed to pay a total of R75m to refund consumers since we’ve started the investigation last year.”

Forty-four of the investigations have been referred to the National Consumer Tribunal for hearings, one of which is the probe into Lewis Group.

Fin24 reported last year that in one instance Lewis charged a customer repayments of R18 000 after buying a washing machine for R6 000. Another customer bought a laptop, but was charged a compulsory R650 for a delivery fee, although the customer carried it out of the store. There was also R741 charged for an extended warranty.

During question time, the Democratic Alliance’s Geordin Hill-Lewis said the NCR appears unable to exert sufficient control over alleged reckless lenders such as African Bank and the Lewis Group.

“In recent months there have been numerous exposures of nothing short of viperous conduct of lenders, such as the Lewis Group. It’s not good enough to refund R67m to customers who had been overcharged when they made much more money than that with the scams they were running.

“Why doesn’t the NCR, the Hawks or the Reserve Bank take serious actions against these institutions? This reinforces the perception that there are no consequences for such behaviours,” Hill-Lewis said.
Motshegare responded by saying it is often difficult for the legal representatives at the National Consumer Tribunal to agree on dates for the hearings of the investigations that have been referred to the institution.

Fubbs concluded by saying that the committee would request the tribunal to appear before Parliament to give an update on the hearings of the investigations referred to it.

Source: ITWeb 

Indebted consumers stretch SA to its limits

Credit extension is growing faster than job creation, and the moribund economy cannot carry that burden forever

A 2014-15 World Bank report declared that South Africans were the world’s “biggest borrowers”. Consumer credit-use statistics — a comparison of employment and credit consumer numbers — suggest that South Africans are failing to manage their debt responsibly and that some credit providers might be missing the mark regarding their criteria in affordability assessments.

Despite tougher affordability requirements and large-scale efforts to educate consumers, credit use is outpacing employment growth, and the over-indebted gap is widening.

There were 16.9-million credit-active consumers in 2007, the national credit regulator’s Credit Bureau Report reads. At the time, 6.38-million (or 37.7%) had an impaired credit record. In 2013, there were 20.21-million credit-active consumers, of whom 9.69-million (47.9%) had impaired records.

A record is declared impaired if a debtor is three or more months in arrears on an account, if the debtor is under administration or if there are judgments against the debtor.

In the fourth quarter of 2016, there were 24.31-million credit-active consumers, 9.76-million of whom had impaired records — 40%, or two out of every five credit-active consumers.

While employment has increased by only 18% since 2007-08, the number of credit consumers has grown by almost 44%. The percentage of consumers in bad standing grew from 37.75%, to 40.15%. There are now 24.31-million credit consumers — more than 8-million more people than the total number of employed people in SA.

Even allowing for the fact that some people such as financially supported students may not need a job to qualify for certain credit accounts and not all SA’s employed people will be credit active, there is a huge difference in the numbers.

The official credit statistics for 2016’s fourth quarter peg collective consumer debt at more than R1.69-trillion. A significant portion of this — R8.75bn or more than half of debt book value — comprises mortgages, which are considered a wealth-creation type of debt.

For most people, a home loan will be the largest personal debt they incur in a lifetime.

If we move from rand value to sheer number of credit facilities by type, the numbers shift significantly. Mortgages only represent 4.47% of credit accounts. Credit facilities such as credit cards, overdrafts and store cards make up 65% of credit accounts and unsecured credit 14.6%.

These figures do not account for informal debt. Credit bureaus do not list what consumers owe municipalities, in school fees or unpaid medical accounts. One estimate is that only 40% of consumer-debt information is captured by credit bureaus.

As private loans and lending granted outside the formal system, such as loan sharks or mashonisa loans, are not captured, the problem is likely to be much larger than official numbers indicate.

World Bank survey data from a sample of 1,000 people in the Global Findex Report showed that 86% of South Africans took loans in 2016, mostly from acquaintances or private microlenders.

If risk pricing is added to the picture, the poorer end of the consumer market is out in the cold. All credit on offer — from loans to store cards or hire purchase agreements — is priced for risk: the higher the perceived chance of default, the higher the interest rate charged. Low-income earners will, therefore, usually be charged more than high-income earners for the credit on offer.

Instead of excluding poor and risky consumers from credit, many providers allow access but at higher interest rates. Prohibitive rates, greater need — due to lack of generational wealth or more insecure income — and a lack of financial education collide, often overwhelming the most economically vulnerable.

Under apartheid, most South Africans were denied access to certain financial services including credit, either through direct policies or systemic barriers. When that political system was dismantled, there was a desperate need to reform the social system and the barriers to financial inclusion.

The government has been chipping away at the legislation ever since with repeals, new acts, amendments to existing legislation, patches and policy reimagining. The goal is a very narrow sweet spot — increasing financial access while limiting opportunity for abuse of the hungry-for-credit populace.

The Usury Act of 1968 was replaced by the National Credit Act of 2005. The National Credit Amendment Act in 2015 was a further tightening of the reins, especially in terms of the affordability assessments that credit providers are now required to perform. With each new piece of legislation, the government has tried to get one step closer to that dual target.

Their success is a matter of debate, depending on which side of the market you find yourself. One particularly controversial move was the credit information amnesty, or as the credit and legal fraternity know it, the Removal of Adverse Consumer Information and Information Relating to Paid-up Judgments regulations, 2014.

It compelled credit bureaus to remove information of judgments, defaults, and terms such as “delinquent” or “slow paying” from consumer credit profiles, provided that the capital amount owing had been cleared.

This became a requirement of the bureaus and the credit providers supplying payment information to them. It also meant that no matter how abysmal consumers’ track records of debt payments were, if it was paid up, they were given a clean slate by credit providers doing new assessments.

It was championed by the Department of Trade and Industry and one that caused some ructions between it and the Treasury. In 2015, the then chief director of financial sector development at the Treasury, Ingrid Goodspeed, said that the Treasury had “fought that credit information amnesty, we fought it to the last day”.

Credit providers needed “more information, not less”, she said at the time.

“The fact that you wipe it out has not … changed anything. The same people who were overindebted before are now even more overindebted.”

The Treasury was asked to update its position on the matter, but was unable to respond in time for publication.

Officially, two out of five consumers are credit-stressed, and unofficially, the picture is much worse. By omitting municipal, education, private or loan-shark debt, and education debt, our country’s credit numbers underplay a significant portion of the personal debt carried by the average consumer.

Add to that the pressure of crippling debt-recovery measures such as garnishee orders and asset attachment, insecure employment, stretched regulators, loopholes in the laws and the rising cost of living and the picture is far worse.

Economists say that the amount of consumer debt a country can support depends on the health of the underlying economy. SA may be about to find out what the limits are.

Source: Supermarket
Graphics credit: Dorothy Kgosi

Fewer seek credit as tough times bite

Consumers, many of whom are vulnerable in an environment of rising retrenchments and weak economic growth, are trying to pay down debt.

Consumers adopted a cautious stance to credit applications in the first quarter of 2017, figures from the National Credit Regulator show.

At end-March, credit applications decreased by 998,000 to 9.53-million, representing a quarter-on-quarter decline of 9.5%, the regulator said. Consumers, many of whom are vulnerable in an environment of rising retrenchments and weak economic growth, are trying to pay down debt.

Head of Absa home loans Carel Grönum said last week household debt to disposable income, at 73%, was at its lowest level since the global financial crisis. Credit bureau Compuscan recorded a 13% year-on-year increase in the number of accounts that were more than three months in arrears in the first quarter, suggesting consumers cannot afford to take on more debt.

The total value of new credit granted in the first quarter fell 5.6% from the fourth quarter of 2016 to R116.5bn, representing a 7.5% year-on-year increase, the regulator said. The largest increase was recorded in the developmental credit category, which nearly doubled to R5bn. The value of mortgages granted and of other secured and unsecured credit agreements, fell.

Credit facilities such as credit cards and overdrafts increased moderately, while short-term credit granted also declined.

By Hanna Ziady for Business Day

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