Consumer Studies

What you must be able to do

• Define a contract and name the five types of consumer contract
• Explain the cooling-off period, exemption clauses, warranties, guarantees and grey goods
• Identify scams, stokvels and pyramid schemes and say which are legal
• Describe the main taxes, the difference between simple and compound interest, the repo rate, and the CPI and inflation
• Compare fossil and regenerative electricity sources and gas, save electricity and water, and explain how municipalities are funded and what municipalities and communities must each do.

Core content · Contracts and consumer protection

Every time you sign up for a phone plan, a gym, a lease or a loan, you enter a contract. Section B, Question 2 (40 marks) starts here because a consumer who understands contracts is very hard to cheat. The law behind it is the Consumer Protection Act 68 of 2008 (CPA), and for credit the National Credit Act 34 of 2005 (NCA).

Unfair business practice means a seller treating consumers in an unfair, unreasonable or unjust way. Examples: misleading or false advertising, hidden costs, pressure selling, unfair contract terms and refusing to honour a warranty. The CPA forbids these. A consumer can complain to the supplier first, then to the National Consumer Commission, the Consumer Goods and Services Ombud or the provincial consumer protector. Credit complaints go to the National Credit Regulator.

Core content · Cooling-off period and exemption clauses

A cooling-off period is a short time during which a consumer may change their mind and cancel, without giving a reason and without paying a penalty. Under the CPA it protects consumers who buy through direct marketing, where the seller approached them: door-to-door selling, telephone selling, or a sales presentation. The period is five business (working) days.

An exemption clause is a term in a contract or a notice (for example on a parking ticket or a shop wall) in which a business tries to limit or avoid its responsibility if something goes wrong. Examples: “Goods cannot be returned” or “Not responsible for lost or stolen items”.

Core content · Warranties, guarantees and grey goods

Implications for the consumer: grey goods are often cheaper, but the local agent may refuse to honour the warranty, to repair the item or to supply spare parts, and the goods may not suit local conditions (for example plugs or voltage). Always ask who will service the product before buying.

Core content · Scams, stokvels and pyramid schemes

A stokvel is a community savings club. Members contribute a fixed amount regularly into a common fund and take turns to receive the pot, or keep the money for a shared goal such as groceries or funerals. A legal stokvel has a written constitution, known members, a bank account in the group’s name, records of contributions and agreed rules for payouts. An illegal one collects money from the public and promises returns that cannot be paid.

Core content · Taxes

South Africans pay tax so that government can fund services such as schools, clinics, roads, police and social grants. Most taxes are paid to the South African Revenue Service (SARS); property tax is the exception.

Core content · Interest rates and credit

Interest is the cost of borrowing money, or the reward for saving it, shown as a percentage. The two methods are simple interest, calculated only on the original amount, and compound interest, calculated on the original amount plus the interest already added. Compound interest grows faster, which helps savers and hurts borrowers. The exam guideline says no calculations, only the difference.

The repo rate is the interest rate at which the South African Reserve Bank lends money to commercial banks. Banks add their own margin, so when the repo rate changes, the rate on loans, credit cards and bonds usually moves with it. The National Credit Act sets the maximum interest rates credit providers may charge for each type of credit.

Core content · Inflation and the CPI

Effect of inflation on consumers: the money they earn buys less (lower purchasing power); disposable income shrinks; households cut back on non-essentials and may struggle to afford basic needs; savings lose value; salaries often rise more slowly than prices; and consumers borrow more, which raises debt. Higher inflation can also lead to a higher repo rate, which makes instalments more expensive.

Core content · Electricity, water and municipal services

Where this is examined. Electricity, water and municipal services belong to Question 2 (The Consumer), not to Question 5. Expect short items (2 to 5 marks) such as listing municipal services or two ways to save electricity, and a closing item (up to 8 marks) that asks you to evaluate an energy source, a rubbish problem or the work of a municipality.

Gas as a household energy source. Advantages: heats and cooks quickly, costs less to run than electricity for cooking and still works during load shedding. Disadvantages: it is a non-renewable fossil fuel, leaks are a fire and explosion risk so the room needs ventilation, and cylinders must be refilled and stored safely. Cost: the stove and cylinder cost money to buy, but the monthly running cost is usually lower than electric cooking.

Responsible use of electricity and water

Electricity. South Africa gets most of its electricity by burning coal, which releases carbon dioxide and other pollution. Supply has also struggled to keep up with demand, which has led to power cuts (load shedding). Using less electricity lowers your bill, lowers pollution and eases the strain on the grid.

• use energy-efficient appliances and LED lighting;
• switch off lights and appliances not in use; unplug chargers and avoid standby;
• use a geyser blanket, lower the geyser thermostat or fit a solar water heater;
• wash full loads, use cold or short cycles, dry clothes on a line;
• cook with lids, use the microwave for small portions, match the pot to the plate;
• keep fridge and freezer seals tight and defrost freezers.

Water. Only a small part of the world's water is fresh, clean water that people can use, and South Africa is a water-scarce country. Water is polluted by sewage, chemicals, detergents, oil poured down drains and litter. Polluted water makes people ill, harms plants and animals and is costly to clean. Population growth, droughts and leaking pipes cause a shortage, including a shortage of fresh, clean water.

• fix leaking taps and pipes quickly (a dripping tap wastes many litres);
• take a short shower instead of a bath; close taps while brushing teeth;
• run washing machines and dishwashers full;
• collect rainwater and reuse greywater (for example on the garden);
• water the garden early or late, plant water-wise plants;
• never pour oil, paint or chemicals down drains or throw litter in stormwater drains.

Municipalities and communities

Funding of municipal services. A municipality pays for its services from property rates and taxes, service charges for water, electricity, sanitation and refuse removal, grants from national government, and fines and licence fees. When residents do not pay, the municipality has less money to maintain pipes, roads and power lines.

Evaluating service delivery. To judge a municipality, ask whether its services are:

• reliable: water, electricity and refuse removal arrive on time and without long interruptions;
• available to everyone: all areas are served fairly;
• safe and well maintained: clean drinking water, repaired roads, working drains;
• affordable and honest: fair charges, money spent on services and not wasted;
• responsive: complaints and reports of faults are answered quickly.

Tip: make a three-line flash card for every definition in this topic. Definitions are the cheapest marks in Question 2.