Johannesburg - Shoprite, South Africa’s largest food retailer and an operator of furniture stores, is being investigated for reckless lending practices, the country’s National Credit Regulator said.
Two of the company’s units, Shoprite Investments and Shoprite Insurance, sold job-loss insurance and occupational disability cover to pensioners and consumers who are receiving government social grants for the elderly, the Johannesburg-based regulator said in an emailed statement on Wednesday. Shoprite also sold a consumer a job-loss insurance policy for a six-month loan that had a waiting period of six months, said the NCR, as it’s known.
The South African government has been cracking down on reckless lending as highly indebted consumers struggle to repay loans amid a deteriorating economy and rising interest rates. The NCR investigated and fined African Bank Investments Limited (Abil) before it collapsed in August last year. It has also probed practices at Capitec Bank, which provides unsecured loans to low-income earners. While the banks are regulated by the central bank and various laws, furniture retailers face fewer rules.
“The sale of retrenchment and occupational disability covers to pensioners and consumers receiving government social grants is unreasonable and imposes an unreasonable cost to such consumers because they cannot claim benefits under these covers,” Jacqueline Boucher, a manager at the NCR, said in the statement on Wednesday.
Shoprite dropped as much as 3.4 percent, the most in a month. It was 2.3 percent lower at R153.88 as of 10.03 am in Johannesburg trading.
The matter has been referred to the National Consumer Tribunal for breach of the National Credit Act, the NCR said. The tribunal should order Shoprite to refund the affected consumers, write off the reckless loans and pay an administrative fine, the NCR said.
Sarita Van Wyk, a spokeswoman for Shoprite, didn’t immediately respond to emailed questions and wasn’t available to speak on the phone when Bloomberg called her office.
BLOOMBERG