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Correction: This article has been amended to clarify that the R1bn refers to the total credit facility made available by Pick n Pay for cards. It does not refer to credit already taken up by customers, as Fin24 wrote in a previous version of this article.
Johannesburg - Pick n Pay says it has granted R1bn for its credit cards facility which was launched last year, in a scheme that allows customers to purchase food on credit.
"The figure refers to the total credit facility that has been granted. In fact, customers using our store card have taken up a small fraction of their total credit facility, well below R200m," said David North, Group Executive, Strategy and Corporate Affairs.
The supermarket group on Thursday announced that 56 000 customers had taken up the store credit card since the product was launched in September 2017.
Debt counselling firm, Debt Rescue, described the staggering figure as "bad news" for consumers.
“What for many was clearly a last resort, the Pick n Pay credit line was clearly a last-ditch effort to feed their families,” said Debt Rescue CEO Neil Roets.
Pick n Pay came under criticism last year when it launched the product, with concerns that the facility would sink cash-strapped consumers further into debt.
The retailer has maintained that the card “offers the most affordable form of credit in the market, with a 55-days free credit payment option”.
Announcing the company’s annual financial results on Thursday, the firm stated that the creditwas accessed through the customer's Smart Shopper card, “with the credit provider carrying all associated funding costs and credit risk”.
The card is operated in partnership with RCS.
Roets said the VAT increase which came into effect at the beginning of April, together with fuel price hikes had placed consumers in an “exceptionally difficult economic cycle” - with more than half of economically active people falling behind by three months or more in credit repayments.
Roets said at the time that Pick n Pay made the announcement to open store accounts for consumers, Debt Rescue made the point that food was the one commodity that cash-strapped consumers should try to buy with cash.
“It is far better to buy assets such as a house or a car on credit. Food is something that you definitely should not buy on credit. If you have to finance food, then you are in big trouble,” said Roets.
High-end food and clothing retailer, Woolworths, also allows customers to purchase food and alcohol on credit.
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