Furniture retailers are moving ahead with implementing new systems despite uncertainty surrounding the National Credit Act.
UCS Software new business development executive Kevin Gray says, while there are still some grey areas in interpretation of the law, retailers are moving ahead as fast as possible. "It's a fairly high-pressure timeline that we are facing here."
The Act, which will be in full force from 1 June, aims to protect consumers from unscrupulous lending practices and requires lenders to ensure consumers are financially fit before advancing loans.
UCS Software, which has clients in the upper end of the furniture retail market, including the JD Group, OK Furniture, Furniture Mart, Ellerines and Lewis, is running a project at each of these companies.
Economically viable
Projects in the retail sector are expected to be less cost-intensive than those in the banking industry, says Gray. He says software development could take anywhere between 100 and 500 man-days to implement.
This could cost companies between R400 000 and R2 million. However, it is impossible to completely quantify the cost of the new law as many companies are still in the assessment phase and the full cost will not be known until implementation is complete.
In addition, says Gray, the implementation time and cost will vary as some companies have taken advantage of the new law to spring clean their systems and processes, while others may be running different platforms, complicating the change process.
He says some companies require little in the way of systems enhancement to meet minimum compliance requirements. Gray says companies are following a rigorous process of developing, testing, piloting and rolling out new software while also training staff to meet the obligations under the new Act.
Entry-level
The NCA aims to protect consumers that do not readily have access to the legal system and often fall prey to unscrupulous lenders, as they do not have the requisite knowledge to protect themselves.
Recent figures indicate 67% of South Africans rely on microlenders for credit and are charged as much as 175% a year in interest if a lower income - and higher risk - consumer.
However, the larger companies that serve this market are making inroads with compliance. UCS is also developing an NCA-compliant software package to address the needs of the smaller retailers, he says. These are owner-managed firms that generally have between five and 10 stores and a 5 000 to 6 000 accounts, but the software will also cater for larger retailers.
Price and Pride, part of the JD Group, which offers in-store credit, falls under its parent company's strategy. JD Group indicates the Act has "contributed to the challenge of new compliance and its associated costs".
"A multidisciplinary programme has been launched to prepare the JD Group to comply with the National Credit Act before 1 June 2007 and to identify and explore new business opportunities," it says.
Foschini Group - which owns @home and Foschini fashion stores, as well as operating an external credit granting division RCS - cites the Act as an area of concern in its 2006 annual report.
"Our areas of concern for the next few years are twofold.... The excessive credit granted to consumers in anticipation of the National Credit Act, which if not properly managed, could potentially affect good credit customers."
Foschini's external credit-granting operation - RCS Group - is being positioned to "to make the necessary changes in systems and operations to achieve compliance," it says. "The RCS Group is already compliant with many of the aspects of the new Act."
The group lists development of various credit systems to meet new credit legislation as one of its key IT priorities for 2007. "The impact of the National Credit Act is significant, and a group forum has been established to identify all areas of the business affected by this new legislation, assess levels of risk to the business and ensure compliance across the group."
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