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A Small Business Guide to the CPA

General rules to bear in mind when considering the Consumer Protection Act.

Dale Warburton




Despite the Consumer Protection Act (‘CPA’) having been in force for almost a year, many SMEs remain unclear about the obligations imposed and rights conferred by it.

When will the CPA apply?

The CPA applies to all transactions for goods or services in South Africa in the ordinary course of business.  A ‘consumer’ is defined as any person (which includes juristic persons) to whom goods or services are marketed, the person transacting as well as the beneficiary of a particular good or service.  A ‘supplier’ is any person who markets goods or services.

The phrase “ordinary course of business” means that if a supplier sells a product to a consumer, that consumer can only enforce his rights if the supplier is in the business of selling that particular product or service. Similarly, the consumer’s rights can only be enforced by consumers as defined – natural persons (individuals) or juristic persons (such as companies) with an annual turnover of less than R2 million. The intention is clear, to protect individuals and small businesses.

There are a few general rules to bear in mind when considering the CPA, the most important of which are articulated below.

 Suppliers and prohibited conduct

Generally, interactions between suppliers and consumers that are unfair, dishonest, misleading or unreasonable are strictly prohibited. Suppliers may not make use of false, misleading or deceptive representations through the use of exaggeration, whether expressly or implied. This would include false representations about the ingredients or quality of a product, or even that a service or repair is necessary or advisable.

Suppliers are also prohibited from making fraudulent, deceptive, false or misleading representations on the nature, advantages, properties, benefits, qualities and availability of their products. This entails that practices such as bait marketing and negative option marketing are no longer permitted.

 Suppliers and direct marketing

The CPA prohibits suppliers from engaging in direct marketing without the consumer’s consent. Any agreement flowing from direct marketing may be cancelled, for any reason, within 5 business days. This is known as the consumer’s ‘cooling-off’ right, and gives consumers a chance to reconsider what may have been a pressured decision.

 Right to return defective goods

The CPA provides consumers with a right to return goods within 10 business days if the goods were defective, unfit for their purpose or not as agreed. Consumers may then choose between a replacement, a refund or a repair (the ‘three R’s’). Furthermore, the Act provides an automatic 6 month warranty that the goods or services be free from defects. Should the goods become defective within 6 months, consumers may then request one of the 3 R’s.

 Loyalty schemes and competitions

Suppliers may only restrict the use of loyalty rewards for a maximum of 90 days in a calendar year, and only after giving the consumer 20 days’ notice.  For example, a consumer would be entitled to receive notice from an airline specifying the 90-day period in which his loyalty credits cannot be redeemed. In all other cases, loyalty rewards must be treated in the same manner as cash.

Suppliers are also required to adhere to strict requirements for competitions – they may not charge more than R1,50 per entry and the competition rules must be made available to the  consumer before entering.

 Overselling and overbooking

If a supplier oversells or overbooks, it must refund the consumer with interest and other costs incidental to the breach.

Consumers also have a right to cancel advanced reservations, subject to the supplier’s right to impose a reasonable charge (which will be determined in the circumstances).

 Grey goods and disclosure of price

A supplier is obliged to provide a clear notice if goods are grey or reconditioned. At point of sale, the supplier must expressly draw the consumer’s attention to the notice and explain it in plain terms.

The price of all products and services must be clearly advertised. Unless it is an obvious error, if there are 2 different prices, the supplier must charge the lower price. If an advertised price refers to a discount or saving, then the price payable is the advertised price minus the discount or saving, unless both the full and lower price are displayed.

Terms and conditions

The CPA prohibits excessively unfair or unjust terms, such as terms conferring the right to unilaterally alter the terms of an agreement, and requires that certain terms be explicitly drawn to the consumer’s attention, particularly those that exclude liability or that constitute an assumption of risk. Similarly, unreasonable or unjust contract terms are prohibited, including terms that are excessively one-sided or adverse to the point of inequity.

Fixed Term Agreements

The maximum period for a fixed term agreement is set at 24 months, unless there is a demonstrable benefit in the consumer’s favour. Consumers are entitled to cancel fixed term agreements on 20 days written notice, subject to the supplier’s right to impose a reasonable cancellation fee (which cannot negate the consumer’s right to cancel). Suppliers must advise their consumers of the impending expiry of the contract 40-80 days before such expiry, and must also inform them of any proposed material changes. Unless the consumer cancels such contract, it will be automatically renewed on a month-to-month basis.

 Breach of CPA

It is clear that the CPA has changed the legal landscape and shifted the power from suppliers into the hands of consumers. The National Consumer Commission is tasked with investigating alleged offences and enforcing the Act. It is empowered to impose a fine of up to a maximum of 10% of the supplier’s annual turnover for breaches. Whilst this sanction is probably reserved for the most severe contraventions, the reputational damage flowing from a lesser sanction will far outweigh the cost of ensuring compliance at the outset.

Dale Warburton consults to various clients on compliance with the CPA through Caveat Legal. Hehas a BA and LLB from UCT. He was admitted as an attorney in early 2011 after completing articles at Cliffe Dekker Hofmeyr. Dale spent a year at Clicks Group advising and training on the Consumer Protection Act, and establishing standard operating procedures for the group.

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4 Vital Differences Between King III And King IV™ On Corporate Governance

Ilana Steyn, unpacks some of the most significant differences between the Institute of Directors in Southern Africa’s (IoDSA) latest report on corporate governance, the King IV Report, and its former version, King III.

Ilana Steyn




April 2018 marks a year since the effective date of the IoDSA’s (Institute of Directors in Southern Africa) latest report, the King IV Report on Corporate Governance ™ (King IV™), on effective and ethical corporate governance.

What is the King Report?

If you’re not familiar with the King Reports: it’s a series of reports that translate international standards and big-time happenings on corporate governance into set of local principles. Each new Report replaces the former.

The aim of the King Report is to set up actionable principles for South African company leadership to act as modern, good corporate citizens.

It also ensures those in leadership positions act in the best interest of the company and all parties influenced by the company. The first Report, King I, published in 1994, and was the first officiated document of its kind in South Africa.

Related: How To Say ‘No’ At Work (Infographic)

Why is it useful to my business?

The Report also promotes transparency within your company’s leadership to ensure transgressions aren’t hidden that will eventually damage the company. The Report also ensure blunders can be evaluated, found and corrected ASAP. Today, its mandatory for all JSE listed companies to implement the Report into their company policy.

If you’re a smaller business or a non-profit, you can comply with the Report voluntarily; by applying the principles you’re essentially ensuring the long-term sustainability and survival of the business.

It also helps that create a healthy corporate culture and when your business’s foundation is healthy, growth is unthreatened.

If you haven’t applied any of the former Reports in your business, you’re in luck; King IV™ is the simplest, and seemingly the most practical, Report in the family of four reports.

Why was King IV™ needed?

Companies, especially smaller businesses, often struggled to apply the King III due to its long-winded structure.

King IV™ was needed because King III, published in 2009, was out-dated in terms of present-day concerns like technological advances, the increased need for online transparency, long-term resource sustainability and information security.

Here’s the rundown of the most significant differences between King IV™ and King III.

1. King IV’s™ structure is much simpler to apply

While King III did a good job of summarising the extensive scope of effective and ethical governance into 75 principles, the Report still lacked clear guidance on real-world application.

Ensuring the effective incorporation of all 75 vague, ethical principles was too exhaustive for most companies to implement, monitor and account for.

That’s why King IV™ took a different structural approach. King IV™ boiled good corporate governance down to 17 simplified principles, each supplemented with various recommended practices to make it easier for smaller companies to implement the principles within their day-to-day running.

2. King IV™ spotlights practical implementation

King III lists multiple ethical principles and then commands companies to explain how their management and actions honour those principles. Unfortunately this meant companies approached it like a mindless compliance checklist.

King IV™ also states principles, but more importantly, requires organisations to actively report on the implementation of the recommended practices thereof.

Mervyn King, the chair of the King Committee, dubs this the shift from a “apply OR explain” mentality to a “apply AND explain” mentality. The Report also allows organisations to report on alterative-implemented practices – provided they support and advance the principle.

Related: How to Make Your Business Model Go the Distance

To make the application simpler to grasp, King IV™ clearly differentiates between the long-term Outcomes, the ethical Principles and the recommended Practices. Essentially the new structure and its requirements mean companies have to engage in thoughtful implementation and reporting of those practices.

3. King IV™ is inclusive to more than just large companies

After King III, there was a significant demand for the inclusivity of smaller businesses, and governmental or non-profit organizations in the King Report.

Consequently, King IV™ dedicates an entire supplement chapter to guiding municipalities; non-profit organizations; retirement funds; small and medium enterprises and state-owned entities in the implementation of the Report.

Also, where King III used terms like “companies” and “boards”, King IV™ very purposefully uses more inclusive terms like “governing bodies” and “organizations” throughout the report. It’s clear that King IV™ aims to move the principles on good corporate governance into real-world action – for all organisations.

4. Difference 3: King IV™ pushes for more accountability, transparency and reporting

What King IV™ does quite differently from King III, is recommending the application of its principles within set timelines, reports and committees within it’s recommended practices.

King IV™ strongly propagates transparency, the delegation of responsibility and the implementation of accountability by putting pen to paper in term of officiated aims, bodies responsible for those aims and the provisions of consistent reports.

Take leadership as an example, where King III would just stipulate what being a good leader means, King IV™ advises you to set goals, delegate responsibility and evaluate progress through reports and accountability.

An example would be to set up a committee, consisting of lower management levels, with clearly identifiable responsibilities and then to measure their progress via reports. It comes down to the ignorance no longer being a valid excuse. Directors should be aware of all issues within your company.

Directors should take responsibility for everything that happens within their organisation – you can’t plead innocence on the grounds of not knowing. There should rather be reports in place to identify and uncover any discrepancies early on.

Essentially, where King III lacks in the aim of ensuring the actualization of good corporate citizenship, King IV™ steps up the game.

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Can Your Words Be Used Against You?

Yes, they most certainly can. Here’s what the RICA Act has to say about recordings.

Andrew Taylor




“This call may be recorded for quality control and records purposes…” Anyone who has been on hold with insurance companies would be familiar with these words — but what are the implications of a recorded conversation and when is it legal?

In essence, the Regulation of Interception of Communications and Provision of Communication-Related Information Act of 2002 (mercifully shortened to ‘RICA’) permits any person, who is a party to a conversation to record that conversation, provided that it is direct communication — which is defined as oral communication between two or more persons that occurs in the immediate presence of those persons.

Section 4 of the RICA Act governs this aspect of our monitoring law. What is unclear, however, is the degree to which this extends to legal persons, such as a company that monitors a call centre agent’s performance, for example.

Related: Understanding Shareholder Agreements

Evidence in legal cases

While limited to direct communications and not covered by third party interception, such as an eavesdropper, the lesson here remains pretty stark — you could legally be recorded during any conversation you have.

The implications of this are significant — just ask former Springbok player Luke Watson, who had a conversation recorded during a function in 2008 that was subsequently leaked to the media.

Furthermore, with the widespread use of smartphones, together with applications freely available on the relevant app stores, designed to record cellphone calls, the likelihood of you being recorded — whether you know it or not, is ever increasing.

Beyond the moral or ethical ambiguity of this, the legal ramifications of what is recorded are more certain — the recording may be used against you as evidence in any criminal proceedings, or equally as possible, in civil proceedings where, for example, agreement to a contract or term thereof is in question, or in the insurance company’s case, whether or not to repudiate a claim based on the information you provide to them.

Related: Protect Your SME From PoPI

Know the business exception

Section 6 of the RICA Act contains a course of business exception that allows the interception of indirect communication:

  1. a) By means of which a transaction is entered into in the ordinary course of business
  2. b) Which relates to that business
  3. c) Which otherwise takes place in the course of that business.

While there has not, to my knowledge, been a reported case that deals with this aspect of the RICA Act, the implications regarding the use of this information to evidence the valid conclusion of a contract or as to the intentions of the parties to a contract are significant, particularly given that the scope is relatively broad, although limited.

The matter has, however, come before the Constitutional Court in the 1999 criminal case of S v Kidson, where the court held, per Justice Cameron, that unless a “reasonable expectation of privacy exists” it would be difficult to prevent the recording or interception falling within the ambit of the RICA Act.

Where to from here?

From both a commercial and criminal perspective, this should serve to remind us all of our wise grandmother’s words — if you have nothing nice to say, rather say nothing at all (especially because you never know whether you are being recorded).

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Why You Shouldn’t Be Sweating The Fine Print

Signing a contract is a big deal, and you never want to sign anything you don’t fully understand.

Andrew Taylor




While it is almost always a grudge purchase, ensuring that you have had a legal eye cast over a contract you intend to conclude means that you are protected, that you understand the nature of the obligations you are taking on and perhaps, an even better deal for you.

Given that legal agreements are an important aspect of commerce, we have distilled key points for you to consider, before engaging with external counsel. This will make the process more efficient and, hopefully, less expensive.

Reviewing a contract is a tricky business, not entirely different from asking a builder to finish building a half built house. However, there are some useful techniques to ensure you get the most out of the exchange with your lawyer.

Related: Why Your Business Needs Employment Contracts

Always create a timeline

You have lived and breathed your business and this transaction, while your attorney is possibly hearing about the matter for the first time.

Setting the scene correctly puts your attorney in the picture and explains what you want out of the exchange. Print this out for your attorney.

It will help an attorney identify key areas of risk which you might not have anticipated. Be sure to also tell your external counsel how quickly you need the review to be done. Setting expectations means there is less chance of disappointment later.

Provide supporting documents

It wastes your time and money when your attorney has to come back to ask you for supporting documentation.

Try to anticipate which documents will be relevant to your transaction and bring copies of them to the meeting for your attorney to consider. If you have previous versions of the agreement, for example, bring those too.

Remember, the more background work you do, the simpler and more efficient the process will be.

Understand your needs

Are you looking for a high level overview of your document to highlight some key contractual risks or are you looking for a thoroughly sanitised document reviewed from every possible angle?

I recently had to look over Jim’s Sale of Business Agreement for the potential acquisition of his Technology Company. He came to me with limited areas of risk which he had identified and wanted me to look at these clauses.

I was able to advise him to push back on certain clauses he had already negotiated and the resulting document placed him in a stronger legal and financial position. It was easy to justify the costs associated with the review.

This is not always necessary though — where there is limited legal exposure, or you have no bargaining power, the role of the attorney can be restricted, but still worth the investment since you have assurance that your legal exposure is as restricted as possible.

Be guided by the relative value of the document and the ensuing legal responsibilities — is this a standard supply agreement with a strange payment clause or a multi-national acquisition of intellectual property? The type of expert you engage with will vary, as will the cost of the review.

Related: Protect Yourself: How to Structure Your Consulting Contracts

Areas of concern

Directly related to knowing your business and understanding your needs, is your responsibility to communicate specific areas of concern to your attorney.

A recent client’s business processed a lot of personal information, in accordance with the Protection of Personal Information Act, but, the contractor they were about to sign a service supply agreement sought to have access to some of this personal information.

Had the client signed this agreement without a review of the potential legal consequences, it would have resulted in a clear breach of an essential provision of his own terms of use.

Seen alone, there was little risk, but within the context of this business, we were able to avoid this. A trusted and qualified expert will help you navigate the complex commercial world.

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