Saturday, 9 January 2016

A late Christmas present

You might not have seen it but the consumers of Botswana were given a Christmas present late in December. Not everyone knows about it yet but it’s a good one. Ok, it’s not like a new laptop or an iPad but it might end up being more valuable.

Almost all of us have seen examples of overpriced goods in stores in Botswana belonging to South African chains. Just over a year ago we looked at one store which was well known for what seemed like an abusive pricing policy in Botswana.

This chain would simply import products from South Africa with a label showing the price in Rand and then put another label on top with a new price in Pula. All it took was to peel off the Pula label and compare it with the Rand price to establish that the prices were being significantly marked up. For example one item we found was marked for sale in SA for R28.99 but was labeled here for P31.80. When we looked at the exchange rates at the time the markup was over 20%. Other products had a mark-up of closer to 40%. We found one item that was marked as being on a 2-for-1 sale in South Africa but when we bought two here in Botswana we were charged for them separately. When you did the maths for that purchase, the current exchange rate and the absence of the special offer in Botswana the markup was over 50%.

Following some considerable pressure from consumers that store changed its policy slightly. Instead of those fantastic markups they adopted a new approach. One-to-one pricing. If something was for sale in South Africa for R50 they’d re-label here in Botswana at P50. Same number, different currency.

This is still abusive. Given the current exchange rate and even taking into account the fact that many foodstuffs in South Africa are exempt from VAT, the difference isn’t sustainable. Yes, it’s possible that it costs a little more to transport food to Botswana compared to South African but if that’s the case why don’t prices vary within South Africa? I don’t see higher prices in Polokwane than in Pretoria, do you?

Some have suggested that there are special levies and taxes to pay when stores import foods but are you aware of them? I’m certainly not. If they exist perhaps the stores should tell us about them so we can understand their plight.

Others have told us that costs in Botswana are higher, that store staff demand higher wages, that power and water are more expensive and that the air we breathe somehow makes the prices higher here.

So here’s a question. How come, if all of this is true, that some stores charge the same price in Botswana as they do in SA? How come these stores, as one MD told me, take the Rand:Pula exchange rate and do a direct adjustment so that something costing R50 in SA is priced at about P40 here? If they can do it, how come other stores aren’t doing it? How come in the last few days alone members of our Facebook group have sent us the following examples of comparative prices:

R89.95 – P89.95
R119.95 – P119.95
R29.95 – P34.95
R249.95 – P279.99

What does the law say about pricing in Rands? Very little. In fact it's not illegal to sell things in Rand in Botswana. The Bank of Botswana confirmed that to us earlier this year, saying that "in accordance with Section 30 of the Bank of Botswana Act, traders are permitted to exchange goods for currency acceptable to them" and that it is "not unlawful for customers to offer to pay for goods and/or services using foreign currency provided they both agree to the terms of the sale". They said that the choice of currency is "a private matter between the seller and the buyer".

But try offering to pay in Rand and see how far you get.

However, Section 13 (1) (e) of the Consumer Protection Regulations says that "the advertisement or representation of a commodity or service [...] with the intent not to dispose of the commodity or service as advertised or represented" is forbidden.

So here comes the Christmas present. Alongside all the Consumer Protection Regulations that we’ve grown to know Section 17 (1) (j) says that “any other method, act or practice” is forbidden once the Ministry declares it to be “an unfair business practice under this regulation”. In other words the Ministry can receive complaints and then rule a specific practice is now forbidden.

In a press release on 23rd December the Ministry of Trade and Industry did exactly that when it said that
“it has established that some businesses, especially chain-stores, are displaying their merchandise in other currencies especially the Rand, instead of Pula.”
It went on:
“This is (an) unfair trade practice whereby the Pula/ Rand exchange rate differential is not passed onto the consumer. Therefore businesses that are practicing this are advised to stop forthwith and failure to do so may result in their trade licenses being reviewed, which may lead to their suspension or cancellation” and advised the public “not to accept paying for merchandise that is priced in the Rand or any foreign currency other than the Pula.”
So no argument any longer. Stores in Botswana, whether they like it or not, are obliged to pass on the exchange rate benefit to consumers in Botswana. Nobody is saying they can’t set a price that is reasonable and that makes them some profit, but they now have to at least tell us why the item priced at R50 doesn’t cost P40. If there are good reasons then they should be telling us. That’s all we’re asking, for a little respect for our laws and regulations.

The first pat on the back from Consumer Watchdog in 2016 goes to our very good friends in the Ministry of Trade and Industry. Well done to them!

Now, about pyramid and Ponzi schemes…

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