In the current economic climate, consumers are feeling the pinch and struggling to make ends meet, having to get back on spending and concentrate on servicing basic needs and consolidating their debt. A long road that is easier said than done, this sort of climate makes it easy to understand why consumers become frustrated as their perceived quality of life is being compromised and why credit financial instruments become part of their monthly spending and repayment cycles. When new credit facilities become available to consumers it can have disastrous effects especially when they’re desperate, making short decisions that will affect them in the long run. Which is why this latest development could land many South African’s in hot water.

The supermarket says it will use its Smart Shopper card programme, to select shoppers who qualify to buy on credit.

Pick n Pay providing food on credit

As the South African economy is struggling and the food prices have increased significantly, some supermarkets have opted to sell food on credit. Pick n Pay is the latest store to join Woolworths and other stores in offering its customers the option of purchasing groceries on credit.

The supermarket says it will use its Smart Shopper card programme, to select shoppers who qualify to buy on credit. The Smart Shopper loyalty programme was launched in 2011, has over seven million members and has played a key role in helping to lift Pick n Pay’s bottom line, according to the retailer’s 2017 annual report. It also means Pick n Pay has a wide pool of credit shoppers to select.

The retailer is pulling out the stops to lure shoppers into stores by offering them favourable credit terms. Shoppers will be offered up to 55 days’ interest-free credit. Pick n Pay deputy CEO Richard van Rensburg says the store accounts have been designed to exclude hidden fees that exacerbate the cost of credit and charge the lowest monthly fee of R10.

Pick n Pay’s motivation to offer credit purchases

Pick n Pay is in the middle of a turnaround strategy that plans to return the retailer to its former glory after years of neglecting investments in stores and losing market share to rivals Checkers, Shoprite and Woolworths.

Its turnaround, which still has around two to three years to go, has focused on retail basics such as improving customer service, cutting costs, revamping stores and hooking shoppers with lower prices. Its foray into store accounts comes at a time when credit providers are batting to collect payments from consumers who remain increasingly hard-pressed due to rising living costs and the worrying state of the economy.

Pick n Pay has teamed up with credit provider RCS for the store accounts. It said RCS would be taking all the lending risk as the credit provider will be vetting the creditworthiness of shoppers, granting credit facilities and taking on potential bad debts.

Pick n Pay also enters a market fraught with regulatory requirements, with the National Credit Regulator (NCR) upping the ante on sanctioning credit providers that recklessly offer credit to consumers.

What the experts are saying

However, debt counsellors have warned that it’s not advisable for shoppers to buy food on credit due to interest charged on them.

“Food is a necessary living expense which you need to be able to have access to and it’s not wise to spend credit on food, especially when you can’t afford to pay that credit off in its full capacity at the end of the month.”

“The wrong message is sent to the public. If a big retailer like PnP tells people it’s ok to take credit to buy food, we are not sending the right message to a country where people are suffering financially. There are so many people who are over-indebted. Something like this can only make things worse.”

Financial literacy needs to be improved & restrictions imposed

A call has been made for retailers to be more circumspect when offering credit deals during these trying economic times. Customers are also urged to be more savvy about financial literacy issues. Retailers need to educate consumers on what they’re getting themselves into and the repercussions and responsibilities involved in these sorts of transactions. Strict regulations should also be imposed to avoid predatory credit/lending which will only result in consumers taking on larger financial burdens.

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If you’re feeling overwhelmed by your current financial situation, feel free to contact us. To Speak to one our consultants about debt review contact us here.