Fast little loans
This article was first published in the fourth-quarter 2012 edition of Personal Finance magazine.
Some people call them “donkeys” – the low-value copper coins that collect obstinately in jars and are notoriously difficult to move.
There are always risks when mentioning slang words, one of which is that they so often have multiple meanings. But across the world there’s a thread of “awkward and dumb” that links the various meanings attributed to the slang use of “donkey”, which is why it’s so appropriate for small change.
When I was young, we called it “shrapnel”, symptomatic perhaps of the militarism that pervaded South Africa in the 1980s. Times have changed but coin collections persist, especially behind sofa cushions. So what do you do with those coins? In short, what is the fine print of legal tender?
Surly shop assistants and social pressure make it difficult to pay for a newspaper or a loaf of bread in five- and 10-cent pieces, and spaza shops are as reluctant as supermarkets to let donkeys in the door.
One spaza shop owner in Cape Town reportedly has a thriving business because he accepts five-cent pieces as payment, but his success underlines the fact that they are deeply unpopular everywhere else.
The South African Mint stopped producing fives in April. Their numbers will slowly start to decline, and tens will become the prevailing small irritant invariably found in the company of paperclips.
The person, like the spaza shop owner, who can make coppers attractive by restoring their usefulness will be, literally, sitting on a copper mine. In the meantime, you could stuff them into material to make a doorstop that doubles up as a handy cosh, but there’s a limit to how many doorstops you need.
The collection tins that sit on shop counters are a potential depository. I can’t bring myself to put coppers in them because it feels as if I’m short-changing a deserving cause, but if it works for other people, no doubt the charities are pleased with all they get.
If there is a vending machine in your vicinity, you could take a handful (literally) of coins and eventually you will have inserted enough for the chocolate or cooldrink of your choice. The drawback is these machines don’t take five-cent coins, and if the dispenser is in your workplace, you will have to put up with some good-natured teasing or some scowls – depending on the temperaments of your colleagues – because it is a fairly noisy process. But you will have turned donkeys into something edible.
Entrepreneur Emile Langenhoven offers a simpler, better alternative. His company is the pioneer in the field of coin conversion and in 2009 he installed a Coin It kiosk at the Kraaifontein SuperSpar near Cape Town. You simply pour unsorted coins, including one- and two-cent pieces, into the Coin It. The device counts them and prints out a receipt, which you can exchange for cash at the supermarket teller or use like a voucher to buy goods in the store.
The Kraaifontein device was imported from Denmark, but Langenhoven found it was not ideally suited for his purposes and he is in the process of creating a South African-made machine. He plans to replace the Kraaifontein Coin It and put eight more of the locally made devices in the Cape Town region.
“We will start rolling out at the end of September and plan to have them all in place by Christmas,” he says. The intended sites are the SuperSpars in Zevenwacht, Vangate, Gugulethu, Khayelitsha, Edgemead and Stellenbosch, as well as the Bellville and Tableview KwikSpars.
The Coin It deducts a fee of 12 percent before it prints out your receipt. “As soon as we get a larger base of devices, we can look at lowering the fee,” Langenhoven says.
You can find out more about Coin It at the website www.coin-it.co.za
Also in the Western Cape (maybe it’s the sea air that makes us think about these things), Capitec Bank is testing out cash recyclers that accept loose change.
You can insert South African coins from five cents to five rands into a Capitec cash recycler, and it will deposit the money into an account at the bank to pay off debt or to add to savings. The account can be yours or someone else’s.
Cash deposits at Capitec cost 80c per R100. (Global One accounts at the bank have an administration fee of R4.50 a month – in case you want to open an account solely for this purpose.)
At the time of writing, two recyclers were in operation: in Stellenbosch (at Eikestad Mall) and in Tygervalley. These took in coins totalling about R27 000 in the space of a month, Capitec says.
Another recycler, at N1 City in Goodwood, will have gone live by the time you read this. Five more are planned and the provisional sites are: Parow Centre, Cape Gate Centre, Nonqubela Mall in Khayelitsha, Blue Route Mall in Tokai and Bayside Mall in Tableview.
Banking transactions are automated, so you can’t exchange coins at a Capitec counter, but what about the other retail banks?
A mixed picture emerges. Standard Bank and Absa allow both clients and non-clients to change coins for notes at any branch with teller facilities.
At Standard Bank, it will cost you 6.75 percent of the total value of the coins exchanged, and the coins need to be counted and separated by denomination.
At Absa, you will pay a cash handling fee of R4.85 plus R1.15 for every R100 of the value of the deposit, Arrie Rautenbach, Absa’s head of Retail Markets, says.
You also need to sort the coins by denomination in a standard format. For example, if you are using a small plastic bank bag, you put in a hundred five-cent pieces per bag, 50 twenties, and so on.
First National Bank (FNB) will swap coins without charging a fee and is not as exacting about the way the coins are divided up, other than having a preference for them to be sorted by denomination.
But FNB will exchange only for its own clients. The reason is legal, it says. “According to the Financial Intelligence Centre (FIC) requirement, currently commercial banks can swap coins for notes only for clients who conduct banking accounts with us,” Barry de Witt, chief executive FNB Banking Channels, says.
It’s unlikely a criminal gang would ever launder its ill-gotten gains by changing them into almost worthless coins, taking them to a bank in a front-end loader and exchanging them into notes again, but the Financial Intelligence Centre Act (Fica) combats money laundering by saying that an accountable institution (a bank) cannot conclude a “single transaction” (exchange coins) unless you present your identity document and proof of residence.
So, technically, the Act does not demand that you have a bank account, just that you are Fica-ed. The bank has to keep a record of a whole bunch of things related to the transaction, such as your identity and the size of the transaction. That’s not your concern, but from the bank’s point of view, it’s much handier simply to require that you already have an account (in other words, it already “knows” you).
The FIC confirms that “it is correct that a bank must establish and verify the identity of anyone who transacts with it”. If you are not already an accountholder, the FIC says, the bank needs to establish and verify your identity for a transaction.
I presented my point of view to FNB, which confirmed “that our original response is valid”.
Nedbank allows accountholders to exchange coins at any branch free of charge, Preni Naidoo: divisional executive – Self Service Banking at Nedbank, says. Non-clients cannot change coins.
Standard Bank and Absa don’t ask non-clients for identification. But be aware of Fica in the background and, if you want to avoid the possibility of frustration, even if remote, take your identity document and proof of residence when “laundering” coins.
At all four big banks, normal fees apply if you deposit coins over the counter into an account – and that can be costly. But Standard Bank points out that its savings accounts provide for a certain number of free cash deposits in a month.
To a question about whether it plans to introduce a device similar to Capitec’s, Naidoo says Nedbank has deployed 10 devices that accept cash deposits to current, savings and credit card accounts.
“We will be rolling out a further 80 this year and 70 next year. Development is under way to add additional functionalities to these devices, which we aim to introduce during the latter part of 2013.”
The other three banks replied that they were investigating the options.
Humble as they are, these coins represent an opportunity to teach young children about money. The process of collecting, counting, collating and converting (or depositing into a low-cost account) can be part of their educational toybox. And it’s never too soon to learn that transactions in the financial services sector usually come at a cost.
The window for engaging youngsters in this activity may be quite small. Once they develop a disdain for high-input, low-reward activities and begin using slang, it may be decades before they get a kick out of collecting a whole R24.76 in a jar. Gee, they may even be in their 40s before they rediscover this particular joy of getting something for nothing.
This is the last Fine Print. It’s been fun for me over the years, and I hope you have enjoyed it too.