Programme Director, Mr Eusebius McKaiser
NCF Chairperson, Mr Thami Bolani
National Consumer Commissioner, Ms Mamodupi Mohlala
Distinguished delegates
Ladies and gentlemen
Thank you for the invitation to address you here today. I want to take the unusual step to talk politics with you today – of course, this is a very unusual step for a person who has been a Member of Parliament for the past 17½ years, but as with consumer affairs, life is full of surprises.
This conference affords all of us an opportunity to stand back from the nitty-gritty of consumer legislation and litigation, and try to reposition the debate. Perhaps we need to ask what it is that we are looking for in life – each one of us as individual citizens and together as a nation. Our Constitution defines its purpose in the Preamble as, “Lay the foundations for a democratic and open society in which government is based on the will of the people and every citizen is equally protected by law; and improve the quality of life of all citizens and free the potential of each person.” So it is important to establish what happens in that “democratic and open society” and who “every citizen” is who is “equally protected by law”.
The economist, John Kenneth Galbraith, in The Good Society, as though in an address to this conference writes:
An evident purpose of the good economy is to produce goods and render services effectively and to dispense the revenues therefrom in a socially acceptable and economically functional manner. There can be no question that the modern market economy in the economically advanced countries does produce consumer goods and services in a competent, even lavish fashion.
Not only does it supply food, clothing, furniture, automobiles, entertainment and much else in diverse abundance, but it goes far to create the wants that it so satisfies. The sovereignty of the consumer is one of the most cherished ideas in orthodox economics; that this sovereignty has, in substantial degree been surrendered to those who serve it is the most resisted. Yet nothing is more apparent than modern advertising and merchandising effort. Economists committed to the more rigorous levels of accepted thought do not watch television.”
So, we need to confirm that this behaviour is indeed common in a democratic and open society such as the one created by our Constitution. And, that in this open society, consumer goods and services are produced in a lavish fashion; that wants are created by the producers of these goods; that the consumer is sovereign but that the sovereignty is surrendered, from time to time.
But, it is important that we understand that the “dispensing of the revenues” in a “socially acceptable and economically functional manner”, as Galbraith writes, is not pre-ordained. We live in a society where the producers of goods and services would want to maximise their returns, ignore the rights of the consumers of those goods and services and behave in a socially unacceptable manner that will leave consumers impoverished, unless the good in society (like those of you gathered here! ) invest in empowering consumers.
This is a fascinating debate – what are consumer rights? Are they the rights to exercise the freedom to choose? And if these are the rights of consumers, are there accompanying responsibilities? And do these responsibilities include those that may prevent the freedom of choice? Who exercises these responsibilities – is this actually the consumer sovereignty that has been surrendered?
It is important also that we pause to consider the economic consequences of consumer behaviour in South Africa. Three points are pertinent in this regard - firstly, let me state the obvious – we live in a highly unequal country; secondly, we are a country with a very low savings rate, and thirdly, we are a nation of highly indebted families.
If we examine these issues a bit more closely, we will appreciate that the levels of inequality drive a segment of society, not the very poor who are effectively excluded from financial contracting, but everybody above the very poorest to try and live beyond our means.
In respect of savings, the total saving ratio in our country is 16.1% of GDP, of which household savings contributes a mere 1.6%. For the economy to grow at levels close to 6% per annum, at which level we will create sufficient jobs for job seekers, we will need a savings ratio closer to 30% of GDP. Low savings acts as a brake on growth and jobs potential. There is also a telltale sign in the low household savings level because there is clearly no cushion to deal with emergencies, save to borrow – frequently at “emergency rates”.
Thirdly we are a nation of highly indebted families. The last release by the Reserve Bank indicates that household indebtedness is at 75.9% of disposable income. Of course, if we disaggregate this ratio, we will establish that the middle classes are in way above 100% - all of next year’s earnings are already spent! There is this staggering number of 18.84 million ‘credit active people’ in South Africa; this is a number substantially higher than the total number of formally employed people. Of these 18.84 million, a staggering 8.8 million (46.7%) have impaired credits.
A large number of these people are now in debt counselling, and it appears that the bulk of people who find themselves in counselling are there as a consequence of consumption (as opposed to investment) spending. The concern for the future is, of course, that whereas interest rates are at historic lows (the repo is at 5.5%) and so debt service costs are low, as interest rates rise, so increasing numbers of people are pushed over the brink. So, it is safe to infer that we live beyond our means – we spend money we have not earned yet, on goods we do not need.
Either the marketing in South Africa is so powerful that we cannot help ourselves, or we try and “Keep up with the Kunenes”; or this is the consequence of what the Preamble to the Consumer Protection Act describes in the following terms, “The people of South Africa recognise that apartheid discriminatory laws of the past have burdened the nation with unacceptably high levels of poverty, illiteracy and other forms of social and economic inequality.” If the latter were the case, who would be the people worst affected? But, actually it is not the poorest South Africans who find themselves in the debt trap.
So, the interesting question of protection and rights appears to be whether both the protection and the right should not vest before the act of consumption?
Should the “surrender of (consumer) sovereignty” not occur before consumers, and the entire economy, find themselves deeply indebted?
Or, perhaps we should explore the psychology of why people consume as extensively as we do. What are we after? And why do the normal checks and balances that should sit deep inside our own psyche not help us to decide? You know, that basic question that ought to arise inside our heads, does not arise – ‘it would be nice to own, but I cannot afford this and everything else that I already have’, so we blame the sellers and the bank that lent us the money, but take ourselves out of the equation. Might it be that our best efforts happen too late, and that as a consequence, we actually do not afford “every citizen” (read that as debtor and creditor) the “equal protection of the law”? I am posing the difficult question of whether there should be an obligation to limit the right to spend money that has not been earned.
Perhaps we are looking for solutions in the wrong places. About three years ago, President Sarkozy expressed a concern about the value of available statistical information to society. He then established a commission on the “Measurement of Economic Performance and Social Progress” which was chaired by Professor Joe Stiglitz, advised by another Nobel Laureate, Professor Amartya Sen and coordinated by Professor Jean Paul Fitoussi.
They reported last year and their report is fascinating reading; it concludes that GDP measures economic output and tells us nothing about the wellbeing of citizens. Just before turning to their report, its relevance here is that it enquires into social progress – the question before us is whether the kinds of consumption we observe in South Africa is a measure of social progress.
In other words, when we see the fancy cars, expensive designer label clothing, visit the extraordinarily opulent houses, or attend the over-the-top parties, weddings or funerals, whether we are participating in marking the social progress of those who did the spending, or as frequently is the case, the borrowing to do the spending, or whether this is an excursion into fantasy land?
The commission report attempts to define wellbeing and what should actually be measured.
Their recommendations include the following:
1. When measuring material wellbeing, look at income and consumption rather than production.
2. Emphasise the household perspective – this would include in-kind services provided by government as well as taxes paid to government.
3. Consider income and consumption jointly with wealth;
4. Give more prominence to the distribution of income, consumption and wealth;
5. Broaden income measure to non-market activities, a feature which in South Africa will include how families and extended families function.
I want to repeat that the value of this report is that in trying to measure how we live, we must look past the material possessions to fully appreciate our wellbeing. It will be necessary to explore these measures at a national, as well as at a family level.
It is in this context that we must recognise that part of the struggle for consumer rights, is a battle against consumer wrongs. It is a battle against displays of conspicuous consumption. It is, therefore, the responsibility to undertake adequate consumer education long before people find themselves either a debt trap or in possession of expensive but useless goods. This undertaking is part of a human rights undertaking that will assist families to attain a better quality of life.
The culture of human rights is integral to the democracy which we earned and now own, and that our Constitution defines the rules of. But, we need that constant reminder that democracy is not merely the exercise of the right to vote once every few years. The quality of democracy is always a function of how actively its citizens participate, especially in matters that affect them. And in this regard, there are worrying signs of inactivity, especially in poorer communities where we need active citizenship the most.
There are vast differences in the degree of participation between affluent and poor areas in institutions of oversight such as school governing bodies, community police forums and even municipal ward committees. More affluent and thus more articulate, confident and empowered communities leave nothing to chance – citizens participate. In poorer communities that were once the wellspring of resistance against apartheid and injustice, communities have either just demobilised, or are so jaded by other battles that participation is a serious problem.
There are some things that others cannot do for people, and participation is one of those matters that cannot be outsourced, and governments are poor proxies for active citizenship. I recognise that sometimes frustration at the sense that particular communities are being ignored wells up and that there are violent protests. Oh, yes, these communities are consumers of municipal services – so, all of the consumer rights issues are applicable also in this context! But, violent protests in a democracy cannot replace the responsibility to participate in decision-making and oversight. That there are violent protests probably speaks to the fact that consumer (or general citizen) education is deficient.
Democracy functions best if there is direct accountability. Direct accountability requires organisation and education – and this provides a voice to people. In everything that we do, we should endeavour to strengthen the voice of the people. Having a voice will not only result in being heard, it will also raise the sense of wellbeing of the people. Encouraging a voice, is actually encouraging empowerment – a word that we must rescue from its current incorrect use. I have used the example of communities and their relationship to government services, but the same issues hold true for the relationship between consumers and suppliers in whatever sector. Government can and must provide protection – the National Consumer Commission is part of this armoury. The commission is still very young and will develop a presence in pursuit of its mandate.
My contention is, however, that regardless of how dynamic and vocal the commission is or becomes, it can never substitute for active, organised, educated and voiced consumers who demonstrate an interest in their own affairs.
So, I end by appealing to community-based organisations and non-governmental organisations that we, in government, cannot ever replace your energy. Help us to be better servants of your interests.
Organise! Don’t agonise!
Thank you.
