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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.


Innovative Business Solutions And Compliance

Compliance with certification is a strong way to demonstrate that you are managing your business proactively.




As a business owner, you are probably aware of where your business could improve. Sometimes a business owner would like to improve their business but is not sure how to begin. Therefore, it is of the utmost importance to develop an environment which will foster innovation and create key steps to improve your business while simultaneously trying to comply with all of the necessary legalities.

It is important for an entrepreneur to assess their situation first. Most business owners will ask the question why? Why can’t everyone will follow the same steps to success. Every business is different and unique, therefore, before you start making changes within your business, it is a good idea to make sure you have a full understanding of the factors affecting your business success and whether you are complying with necessary legalities.

Compliance may actually improve performance by giving your business a competitive edge. Legal compliance can assist you with improving your customer relations, enhancing your reputation and most importantly avoiding the cost of legal proceedings.

There’s this saying, ‘What gets measured gets improved’ explains Charles Gaudet, founder and CEO of Predictable Profits, a consulting firm that offers advanced marketing techniques to entrepreneurs who are passionate about expanding their small businesses.

Related: Compliance For Entrepreneurs

Here are a few strategies that you can use to make your business more profitable in the future.

Innovative Marketing solutions

For every business owner, marketing is an important tool to improve their businesses. You may think that you are missing an opportunity if you don’t jump right attracting customers with some type of marketing message.

However, as quoted by John Rampton ‘’one of the best things you can do to achieve growth is to slow down and spend time studying the trends.” What does this mean?  While rushing into marketing your product you tend to forget certain details, and once it is out in the public its difficult to forget or to undo. Therefore, its very important to research the market and consumer trends before launching anything.

This becomes very important when you consider the potential risk to your business for the infringement of another product, which is confusingly similar to your product. You also do not wish to be guilty of using a similar brand name, slogan or logo as one of your competitors.  Therefore, before you set out your personalised solutions when designing ads and directing messages to consumers ensure you are not infringing on anyone else’s rights as this will likely lead to expensive legal costs for your business.  

Compliance Breeds Confidence

It is important to remember that clients are concerned whether suppliers are properly compliant. Compliance with certification is a strong way to demonstrate that you are managing your business proactively and that the money a customer will spend i.t.o. buying your goods or services, is in safe hands. Conversely a failure in compliance can, as well as exposing you to the risk of regulatory sanctions, severely damage your business’ credibility.

Related: Why HR Legislation Compliance Can Curb Business Failure

For example, in the financial services industry there is an increasing requirement to demonstrate strong security to both external auditors and prospective customers.

With regulation that you feel is of no value, determine how to satisfy the requirements with the minimum effort necessary. Do, however, double check that you are not missing out on a benefit that may be rewarding for your business.

In conclusion, it is important to note when improving your business one always need to act in accordance with the correct laws and procedures. Therefore, if a company is embracing the difficult task of being compliant, I recommend using this as a competitive weapon to improve your business. It just might end up making you and your team better which is usually rewarded with more business.

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Policies and Procedures – A Critical Business Support Tool

No longer just an administrative burden, policies and procedures are an essential business support tool in a complex business environment.

Neil Summers




In South Africa, SMMEs account for more than 70% of the overall employment rate. It’s critical, therefore, that SMMEs maintain both stability and growth concurrently – our country’s economic development depends on it. However, the tension between stability and growth must be managed, particularly in today’s complex regulatory environment with its ever-increasing compliance requirements.

Smaller organisations often consider policy creation, management and distribution as an administrative burden. Fortunately, growing numbers of small business owners and managers are realising that accessible and clearly-written policies and procedures are essential to business success.

Companies that create, manage and distribute clear policies and procedures reap significant business benefits, some of which are highlighted below.

Consistency and Stability

Clear policies and procedures ensure that staff and management adhere to specific ways of working, minimising time spent on analysis and interpretation, while creating consistency and stability across the organisation.


Policies and procedures allow new hires to onboard quickly, while ensuring they adhere to standard practices and controls.

Related: Your Business Needs a Corporate Governance Policy


Health and safety policies not only protect staff, but also visiting clients and stakeholders.



It is important to define boundaries around a position or role. Employees must know and understand their respective responsibilities.

Cost Efficiencies

Standardised procedures lead to cost efficiencies from both time and resource perspectives.

Geographic Spread

Policies and procedures allow organisations working in different areas to develop a uniform approach to business processes which, in turn, supports internal staff transfer when and if required.


Businesses operate in a highly regulated environment. Proof of compliance is not only required in terms of the regulatory environment, but also in terms of risk management and governance. SMMEs do not always appreciate the value demonstrable risk management and governance structures can have, albeit as intangible assets. These structures enhance the oversight role of any business, providing more developed and sustainable business strategies. An additional benefit is the ability to manage liability arising from negligence or malpractice suits. It is no longer enough just to have a policy in place though – distribution and access must be shown.

Related: HR Management Basics For The Small Business

Learning Culture

SMMEs can create and develop a learning culture depending on the availability and distribution of policies and procedures. Tests and assessments linked to specific policies confirm knowledge transfer, formalising both learning and the eligibility to complete tasks.

Given the ever-increasing complexity and competitiveness of business today, policies and procedures provide the parameters and guidelines of business operations, enhancing efficiencies, increasing value and promoting professionalism. Policies and procedures are no longer just an administrative function, they are a critical tool for business success.

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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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