It has been more than six months since the inception of the Consumer Protection Act (CPA), and South African businesses are no nearer to understanding the impact of it than they were on 1 April. Thami Bolani, chairman of the National Consumer Forum, says this was clear at a recent conference of the Consumer Goods Council of South Africa, where concern was raised over business’s lack of understanding of the Act itself and the impact it will have on business.

“Understanding the Act is one thing, but implementing it in such a way that it does not impact your business negatively but rather to benefit it, is another,” he says. “While there are business leaders who have actively engaged with the Act and taken the time to familiarise themselves with it, my sense is that business did not prepare for the Act, despite having more than a year to do so.”
Bolani says that means South Africa has a very long way to go before the benefit of having legislation that makes South African consumers some of the most protected in the world is felt.

There is no doubt, he says, that the Act will fundamentally change the way business is done. This is a sentiment echoed by the website, The Consumer Protection Act Made Easy (www.madeasy.co.za), which says the Act requires businesses to transform the way in which they interact with consumers and to ensure that all their dealings with consumers are fair, reasonable and honest. The Act regulates the activities of suppliers and creates rights for consumers. It applies to virtually every entity supplying goods and services in South Africa and the transactions it enters into with consumers, says Salina Govindsamy, an attorney and CPA expert with the firm Gavin Cow Inc.

“There are two sides to the CPA. The one side is the potential for the National Consumer Tribunal to issue a fine of the greater of 10% of your annual turnover or R1 million. The other side of the CPA,” she says, “is that it can be seen as a blueprint to providing excellent customer service. Therefore, becoming CPA compliant can be seen as a business advantage, as you can use it in your marketing campaign and explain to your consumers exactly how well-protected they are when they do business with you.” While the Act is written in plain language, it cannot simply be understood as a compartmentalisation of separate fundamental rights, she says. “All of the eight fundamental rights of the Act are interlinked; for example, the right to disclosure is linked with the right to fair and responsible marketing.” It is therefore advisable for businesses to employ a legal expert with knowledge of the CPA to ensure that all aspects of the business are compliant.

“Business will be expected to make changes to their current modus operandi. The extent of the changes is dependent on their current commitment to ensuring their customers are well-protected,” says Govindsamy. “If the business has consumer-friendly policies and procedures in place, the changes need not be drastic, and vice versa.” Compliance means taking a holistic view of one’s business, she says, and it has to be personalised – the Act will impact differently on different businesses, as it is not ‘one size fits all’. “One must first understand the Act itself, then how the Act could impact on the individual business, and only then can one develop and implement an action plan to ensure the business benefits by increasing market share through its compliance and, ultimately, add to the bottom line,” according to www.madeasy.co.za. “The challenge that the suppliers of goods or services will face is that it is not just a matter of simple compliance. While many organisations may have the in-house skills to interpret the Act in the context of their business, they will find it difficult to implement, as it is cross-cutting and will require behaviour changes across the organisation.”

Effective risk management will require, first, that everyone across the organisation is attuned to they could place the organisation at risk and, second, that a sustainable change to functional behaviour is instituted, it says.

According to Govindsamy, initial costs may be high, depending on the company’s existing commitment to customers, but it should be seen as an investment, the benefits of which will be reaped for years to come. “It must be remembered that the most financially sound businesses have consumer friendly business practices and this, in turn, results in consumers repeatedly engaging in transactions.” Bolani believes businesses need to change their attitude to the Act, as many are negative towards it. “The perception that the Act will impact negatively on profit margin, leading to higher prices of goods and services, does not benefit the process at all. We have much education that must still take place around this Act – for business and consumers alike.”

He says business needs to engage more with the Act and other consumer legislation in an effort to change attitudes. “South African consumers have been extremely exploited, and still are. It will take time for this Act to really address the situation, but businesses not taking this Act seriously may find themselves out of business altogether.” Says Govindsamy: “Like with any new piece of legislation, the more you engage with the CPA, the better your understanding of your rights and obligations are.

This is particularly crucial as they may be consumers who try to use the CPA in a manner that is not intended.” It is only when business has intimate knowledge of the CPA that one can deal with such matters effectively. “This knowledge, unfortunately, cannot be obtained with a simple read-through of the provisions of the CPA. You need an expert.” Natasha Harding, marketing executive of Coface South Africa, says with each additional piece of legislation, the business environment in the country grows more complex. “South African corporates have many challenges to manage. These include changing legislation, above-inflation salary and wage increases, low business confidence and sluggish markets in many sectors.” Getting to grips with the CPA is, therefore, crucial. “Overall, it is my opinion that the CPA will create stability in the business arena,” says Govindsamy, “and therefore should be viewed as a positive social advancement.”