Share

Pepkor unit sold unemployment insurance to pensioners on welfare

A unit of retailer Pepkor Holdings has been sued by South Africa's National Credit Regulator for selling unemployment and disability insurance to pensioners on welfare who would never be able to claim those benefits.

The High Court case against JDG Trading, which sells furniture and offers financial services, accuses the company of taking advantage of some of South Africa's poorest and least financially literate people. In 2015, the regulator initially took JDG to the National Credit Tribunal over the practice in a case that was unsuccessful.

JDG "is selling insurance that certain consumers, pensioners and disabled persons do not need, cannot claim benefits for, and yet pay for,: the NCR said in court documents. "There appears to be a lack of compliance with the duty to explain this to pensioners, particularly to those illiterate pensioners."

A date for the case to be heard is yet to be set.

JDG sells the insurance as a mandatory requirement for customers who wish to buy goods from its stores on credit. The cover enables the company to be repaid in the event of the shopper's death, unemployment or disability, even though only the first of those applies to some buyers, including pensioners.

Regulator 'paternalistic'

In its own court papers, JDG says that the "bundled" nature of the credit insurance makes the policies cheaper on average for clients, some of whom are employed. The company accuses the regulator of being "paternalistic" for assuming that pensioners don’t understand what they are purchasing.

"We are in no position to provide further comment as the legal process remains ongoing," Pepkor said.

The case is similar to one filed against South African retailer Lewis Group four years ago. It also follows court actions against a unit of Net 1 UEPS Technologies, which ran payments for South Africa's welfare department and used that system to deduct extra cash for products ranging from loans to mobile-phone airtime.

More than 17 million people in South Africa get welfare payments, which total about R150 billion a year. Those payments will be temporarily increased because of the impact of the coronavirus outbreak.

"This is completely at odds with the principles of social solidarity and consumer protection," said Roseanne Harris, a university professor and former president of the Actuarial Society of South Africa, in an independent expert statement included in an application by the Black Sash Trust to join the case as an amicus.

"I am very concerned that JD Group appears to be suggesting that vulnerable policy holders should cross-subsidise the employed."

Biggest component

Harris's analysis of the policy showed that retrenchment cover is the biggest component of its costs and together with disability cover resulted in the premium being four times the amount that could be justified by population mortality for life cover only.

Pepkor, which also owns the Pep and Ackermans clothing chains, is one of South Africa's biggest retailers. Its majority shareholder is Steinhoff International Holdings NV, the global furniture retailer that came close to collapse following an accounting scandal in late 2017.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.0%
Rand - Pound
23.91
-0.0%
Rand - Euro
20.41
+0.1%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.13
-0.0%
Platinum
908.05
+1.2%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders