How much does it cost?

First printed in Consumer News Namibia magazine - Jan 2013 edition

As I spend most of my year living on a guest farm, I very rarely have to buy anything other than my sins of cigarettes and alcohol. I have for some time been complaining about the prices of these items, but accept this as a burden I must bear for using them.

This past week however, I had to make purchases for the farm shop. Great was my concern when I could not work out the unit prices. By this I mean the items were not marked per litre or per kilogramme but only showed a price for the item whether it was packed in 200g, 375 litre or even more ridiculously, per 180g. Now how must I compare the prices between products if they are all packed in different sizes?

I believe, consumers can gain major benefits when unit prices are provided and are easy to notice, read and use. If a shop owner can show this together with an item’s selling price, it will increase price transparency and competition. But without pressure from consumers – retailers and governments rarely do anything to provide, or improve, unit pricing.

This is why more consumer organisations and consumers themselves should campaign for grocery retailers to provide best practice grocery unit pricing – price per standard unit of measure (per kg/litre/each, etc.) – for pre-packaged food and other grocery items.

The main benefit for the Namibian consumer is that unit prices allow us the opportunity to have value comparisons, including those between package sizes, brands, product types, package types, packaged/unpackaged products, and between ‘special offers’ and regular prices. (I always joke and refer to these as Omo and Surf issues – in other words we are used to buying a certain product regardless of price, but these days we all need to be more price conscious). The unit prices of the same product and of similar and substitute products are often big.

So we as consumers can use unit prices to get much better value for money and this can result in a very big saving and substantially reduce our total expenditure on groceries. For most consumers, especially the poor, and underpaid, food and grocery products account for a high proportion of total expenditure. Therefore, the benefits resulting from using unit price information can be significant for these and many other consumers.
Unit pricing also saves the shopper from spending time calculating unit prices themselves and helps them to spot hidden price increases when, as is common, the amount in the package is reduced but the selling price is not.

Personally, I was surprised when buying chocolate for a special friend to notice how much smaller the packaging is from when I last bought. At first I thought I was just remembering wrong from twenty years ago, but on closer examination I found chocolate bars are not only more expensive, but they are packed in smaller amounts as well.

Previously, in this column and on national television, I have complained about the lack of consumer laws and this must also be addressed as an important issue within this context. However, I also believe consumer organisations such as Namibia Consumer Trust, Consumer Lobby or the Facebook interest and lobby groups such as the Namibia Consumer Protection Group can play an important role in persuading supermarkets to provide unit prices voluntarily.

After all, even the retailer must understand their own cost price in this explosion in the number of package sizes used by manufacturers. (This retailing revolution has also occurred, or is occurring, in many other countries, especially developing countries where consumer laws are less than adequate.)

If we look around the world we can see some success. In Europe, pressure from consumer groups resulted in the compulsory provision of unit prices, initially only in several Scandinavian countries, and then in each of the 27 member nations of the European Union. In 2009, the provision of grocery unit pricing became compulsory in Australia after a long and hard-fought consumer campaign.

I wonder is this will work in Namibia?

(Column in the Namibian newspaper, 31 January 2013)

Micro lending or loan sharks?

First printed in The Namibian - 24 Jan 2013

Micro lending is a fast-growing sector and the Namibia Financial Institutions Supervisory Authority (Namfisa) has invited the public to comment on the industry.

Micro-lending refers to loans under N$50 000 which must be repaid over a maximum period of 60 months to the micro-lender, usually in instalments. According to Namfisa, micro-lenders are often unkindly referred to as ‘loan sharks’, but they consider it to be unfair to say the micro-lenders are always in the wrong when it comes to misunderstandings with their customers. They further point out that “while it’s true that micro-lenders’ interest rates are higher than bank rates, this is because they provide funds over a shorter period, and at greater risk of ‘bad debts’ if their customers fail to pay.”
The industry has grown rapidly and there are now almost 400 registered micro-lenders across the country supplying close to N$2 billion. Around half of this is supplied via pay-day lenders who provide loans with a repayment period of up to 30 days.

To understand the business model, let us first look at why interest is charged. In the beginning of banking, interest was used to offset the risk of providing the credit to the borrower. There are four risks (hazards):

• The costs incurred by the bank while providing the loan had to be repaid;
• Inflation means the lender will be able to buy less for the money as time passes;
• Scarcity – in other words once it is lent to a borrower at a specific rate, it cannot be used for another loan;
• That the borrower cannot pay back the loan

(Of these four, the only real difference the government can make is in reducing the risk of borrower’s inability to repay.)

The Ministry of Finance has determined that the annual finance charge rate may not be greater than 1.6 times the average prime rate in respect of a credit transaction. The prime rate is presently 9.25 percent and thus the highest a micro-lender should be allowed to charge would be 14.8 percent per year or 1.24 percent per month. From my limited research this week, I have determined that the rates of micro-lenders are 19.50 percent for loans longer than six months or 30 percent for short term loans that last up to 30 days.

There is some proposed self-regulation occurring with regards to clients with “over-indebtedness” – however this would mean sharing clients’ data across all micro-lenders. This would include sharing data on good clients - and this the micro-lenders are wary of. One possible answer is a national credit register where all credits of each person are recorded and thus ensuring no “predatory” marketing and less over-lending occurs. This would mean within your data there would be a “big brother” indicating when you have reached your debt level as determined by the legislation. I think you can see how this could mean less self-governance and a certain loss of self-determination and responsibility. At the same time, the organisation or corporate body that has the rights to hold your information must be well managed and regulated.

The suggestion of a national credit register was submitted to the Parliamentary Committee on Economics, Natural Resources and Public Administration in 2006 and has been part of discussions held with Namfisa in the creation of the Financial Institutions and Markets (FIM) Bill but I am not sure what is the status of such legislation since the Consumer Credit Chapter has been removed from the FIM Bill in March 2012.

My question to you, the reader, is: Do you want government to do something about the possible exploitation and would you accept the consequences of having a company keep all credit data about you and your family?
Follow me on twitter: @miltonlouw

Printed in The Namibian on 26 Jan 2013 

Innovation needed for home ownership

The Namibian - 16 Jan 2013

Home ownership is a problem in Namibia. According to estimates by the Minister of Regional, Local Government, Housing and Rural Development, Honourable Jerry Ekandjo in 2011 “..there is a backlog of about 300,000 houses and that 70 per cent of the population cannot access decent residential properties mainly due to issues of availability and affordability. This alarming situation calls for radical policy measures to restore the housing market.”

As a consumer activist it is not sufficient that I only state the obvious problems facing Namibians, but that I also apply myself to proposing solutions to these identified economic, social and cultural (ESC) rights. Thus I would like to share two ideas, the first to help reduce the household rental burden and the second to increase home ownership. Lastly, I suggest a policy of purposefully creating mixed income neighbourhoods.

Subsidised rental housing

In earlier days most large employers provided subsidised rental in houses and flats owned by the company. During the past twenty years most of these companies have reviewed their ownership of property and sold off their properties as “this was not their core business”. In this way, some of them have “increased” profits by selling the properties (TransNamib is a typical example), but at the same time decreased the salary value of their employees. In addition, in those years most municipalities were also providers of rental housing.

The social responsibility of companies and municipalities must be encouraged. The fact is that employees with less worries, make happier employees. The asset owned in the property by the company is also a positive income for their balance sheet.  The Government can also encourage subsidised renting by companies if they provide a tax exemption to these companies.

Rent to buy

I propose we develop 5,000 homes for lower income earners proportionally throughout the country. The National Housing Enterprise (or another appropriate body) should build quality houses valued at N$ 200,000 each and make this available to civil servants and other employees who already qualify for home loans, but cannot afford the present sky-high prices. Under the rent-to-buy scheme the local municipality must supply serviced land at cost price and allow the future home owner to pay off the land price over a five year period.

If the land loan is fixed at 5% interest over five years for a service plot valued N$ 50,000, the home owner would pay N$ 950.00 per month to the Municipality. The repayment on the NHE built house would amount to N$ 1320.00 over 20 years with a fixed interest rate of 5%. Thus the home owner would be paying a monthly amount of N$ 2,200.00 for the first five years, and only N$ 1,320.00 per month over the last fifteen years. In most cases, the home owners would reinvest this additional monthly saving they are used to paying to improve their properties.

Home ownership would increase not only the wealth of our people, but would also increase their participation in their communities, saving the authorities amounts otherwise used for policing etc. in areas where people are not proud home owners.

Mixed Income Neighbourhoods

Mixed income neighbourhoods by definition include different types of housing units such as flats, town houses and single family homes for people with a range of income levels. In other words various price ranges and housing preferences within one development. The town planners or even government can put guidelines in place for the number of type of each housing unit within a development to encourage integration of differing income levels within a community. Such guidelines will go a long way to eliminate neighbourhoods of concentrated poverty and combat residential segregation.

If nothing else helps, perhaps we will see the implementation of what one of my friends proposed on Facebook: “Write a petition and sue government for violating or neglecting its citizens the basic right to shelter as provided for in the constitution.”

Follow me on twitter: @miltonlouw

Printed in The Namibian on 17 Jan 2013 

A New Year’s Resolution for 2013

At the start of every calendar year, we take the opportunity to look at the past year and decide which things we wish to change. We then call these promises we make to ourselves “resolutions” because we promise to stop doing a negative habit in the future. For 2013, I want you to not only think of your bad habits you want to change, but also add a new “good habit”.

For the year ahead, promise yourself to “Mind Your Own Business”.

On the one side, this advice means that you should not poke your nose into the affairs of others or to put it better, “If it is not your business, do not make it your burden”. The second meaning is for you to look after your money affairs wisely – as if YOU are your own business. It is this second meaning that I wish you to take to heart this year.

Many of us are very hard working and conscientious towards our employee and make doubly sure that we look after the “boss’s money”. It is this same attitude we need to have towards our own money. Start with a simple exercise. Make up a table of four columns with the headings Month, Income, Spending and Saved. Now write down how much you earned every month of 2012, with the amounts you earned, spent and saved. If you are anything like me, you probably have very little in the last column. That is why we need to change our habits for the year ahead. We want to put some away for our holidays at the end of the year, and more importantly so we can have a January 2014 with some money in our pockets.

If you have good financial discipline, you should be able to save around 10% of your monthly salary and in this way be able to save the equivalent of at least a month’s salary by the end of the year. In other words you will be able to give yourself a thirteenth cheque.

If you struggle to save and not touch the money that is left in your account, consider opening a unit trust account through a financial advisor. The benefits are that the money can be directly debited off your account every month, you can increase the amounts quite easily and it takes around 2 working days to get your money after you inform the institution you wish to sell your unit trusts. Keep in mind, though you are able to get this investment amount out easily, it is suggested you use unit trusts as a medium- to long-term investment strategy for the best results.

With a small start (and less risk of failure because of small steps at a time), you can soon be seeing an improvement in your bank balance and in your mental health because of less worries.

Mind Your Business Online

As the New Year started, the newspapers have been reporting an increase in cyber-crime.

As we become more involved with online and mobile banking remember the following advice to ensure your personal business is protected:

·         Never reply to emails with personal information. No matter how good the email looks, no bank or financial service provider will use email to check your details.

·         Never click a link in an email to go to your banking web site.

·         Use a unique (and different) password on every site.

·         Use 2-factor authentication whenever possible. For example a pin code device in addition to your site password.

·         Be careful what you write online. You never know when a possible job interview can turn out bad because of what you wrote on Facebook or elsewhere.

·         Password protect your devices such as your cellular phone and computer.

I wish all the readers of the Namibian a prosperous, healthy and wealthy 2013. May we all work together in making our country more consumer friendly for the benefit of its residents and all its visitors.

Confusing pricing and its remedy

Recently I received letters from to consumer regarding their experiences with pricing of items.

“I wished to buy some material and was looking at various options in the Chinese shops in the area. I noticed a sign for material that was normally marked for N$ 29.00 was on special at N 19.00. As the pattern as agreeable to me, I proceeded to buy around 10 metres. When I came to the till, the shopkeeper rang up the purchase at the price of N$ 29.00 rather than the advertised discount price. I immediately brought his attention to this fact and insisted he ring up the total at the advertised lower price. I was shocked when the shopkeeper started shouting at me, and even physically assaulted me while chasing me from the shop. During the scuffle, I received a push and landed quite hard on the sidewalk. I reported the incident to the Police but they were only interested in the physical assault and could do nothing about the pricing difference between what was advertised and what was being charged. I am a pensioner and would like to know, as a consumer, what rights do I have regarding this issue?”

“While doing some shopping at one of the larger wholesalers in Windhoek I noticed a certain brand of mussels was showing a very good price on the labelling attached to the shelf. I double checked that the bar code of the product and the price label were the same and proceeded to take 6 cans of the mussels. I had lots of other shopping to do and filled the trolley by the time I had to pay. By chance I happened to look at the register while the shop assistant was scanning the cans of mussels and realised the price was almost double than that indicated on the shelf. I immediately objected and insisted she call a supervisor when she told me that it was a computer problem and she was not responsible. The supervisor was very helpful and went with me to examine the pricing on the shelf. When the pricing on the shelf was checked against the cans she realised that it was “an old price” still being displayed. Nevertheless, she assisted in checking through the mussels at the advertised price and had the price corrected on the price thereafter. How many times do this kind of thing happen because how can we remember the price on each product when we make our choices?”

In the case of the consumer who is a pensioner, very little can be done about the difference between product pricing and what is being charged at the counter – at present. The proposed Consumer Protection Act would address what is in effect misleading advertising, but more importantly, the law will prescribe certain deterrents such as fines and even possibly imprisonment of sellers intentionally misleading the public. My advice is to pursue the criminal charge of assault as too many of our business owners treat their customers without respect.

In regards to the consumer purchasing mussels; they have found a business that really believes in a healthy consumer relationship. The business you mentioned has not only got a policy of refunding you if the product is overcharged, but they also have a very responsive customer helpline which you can contact – even while you are in the store and having a problem. That is the kind of business e should all support by spending our money there.

After all, as a consumer the true power you have is in the colour of your money. Buy where you receive good service and deny your money to shopkeepers who treat you badly.

I would like to take this opportunity to wish all the staff and readers of the Namibian for the opportunity given to me to write my small contribution to making this country a better, happier place for us all. May you and your loved ones have a blessed Christmas, and may we continue in 2013 in improving our personal lives with better consumer protection awareness.