Have you received a letter with the subject line “Compulsory Participation in the Consumer Goods and Services Ombud” from Trifecta Capital acting on behalf of the Consumer Goods and Services Ombud? Did the letter tell you that you have to pay a levy, and registration is compulsory for identified entities? Is this a scam? Do you have to pay this levy? Do you have to participate and register?

Unfortunately this is NOT a scam. The Consumer Goods and Services Ombud (CGSO) was established in terms of the Consumer Protection Act (CPA) to deal with consumer-related disputes. They are genuine and so is the levy you have to pay. Many people have received the letter. This might not seem fair considering the taxes and other levies you already pay, but such is life.

There is now a new levy on virtually all consumer businesses in South Africa.

Who should pay the levy?

Unfortunately the position is not clear and many people are not sure whether they must pay.

According to the letter from Trifecta Capital “all entities whose business activities fall within the supply chain that provides, markets and/or offers to supply goods and services to Consumers and the ambit of the CPA, fall within the jurisdiction of the CGSO, unless they belong to an industry that is regulated elsewhere.” It applies to “Consumer Goods and Services Industry Participants“. What does that mean?

The CGSO website (which has many broken links and ambiguities) says “All suppliers in the consumer goods and services industry, including retailers, suppliers, wholesalers, distributors, manufacturers, producers, importers, intermediaries, logistics and supply chain agents.” What does that mean?

Let us break it down. You have to look at how things are defined in the CPA. Goods and services are very broad and include many things. “Consumers” are essentially all natural people and any legal person with a turnover of less than R2 million. A supplier is any person who markets any goods or services – basically everyone. So, most businesses market goods or services to consumers and are therefore in the consumer industry and must pay.

But your customers may not be consumers (as defined) and therefore you might think that you do not need to pay. But if you are in the supply chain that eventually provides goods or services to the consumer, you must also pay. The ““supply chain” with respect to any particular goods or services, means the collectivity of all suppliers who directly or indirectly contribute in turn to the ultimate supply of those goods or services to a consumer, whether as a producer, importer, distributor or retailer of goods, or as a service provider“. Most businesses are in a consumer supply chain.

So, virtually all consumer businesses in South Africa must pay and must comply with the Consumer Goods and Services Industry Code of Conduct.

Who is exempt?

You are exempt and do not need to pay if:

  • the goods or services you provide do not fall within the definitions in the CPA,
  • there are no consumers at the end of your supply chain,
  • your transactions are not covered by the CPA,
  • you are bound by another CPA code prescribed by the Minister,
  • you are regulated by other public regulation (like attorneys regulated by the Legal Practice Act),
  • a complaint falls within the jurisdiction of another ombud with jurisdiction,
  • you are in the automotive industry,
  • you provide an electronic communication service, or
  • you are an organ of state or financial institution.

So, many organisations might be exempt.

Who has already registered?

About 60 companies, like Discovery, Shoprite, MTN, Pioneer Foods, JD Group and Club Leisure. There are benefits to registering.

How much do you have to pay the Ombud?

The annual levy can be up to R250,000 depending on what your annual turnover is. Only very large entities pay R250,000. If your turnover is less than R1 million, there is no levy. If your turnover is between R1 million and R5 million you pay R1,500.

CGSO Group Turnover Range Annual Fee
Super Group R5 bil + R 180,000
Group 1 Above R3 bil to R5 bil R 160,000
Group 2 Above R1 bil to R3 bil R 90,000
Group 3 Above R500 mil to R1 bil R 35,000
Group 4 Above R100 mil to R500 mil R 5,500
Group 5 Above R50 mil to R100 mil R 3,500
Group 6 R1 to R50 mil R1,680
Group 7 R1 to R1 mil No cost

There might also be a special levy.

What happens if you do not pay?

The CGSO will take legal action against you to recover any outstanding levies you owe them. They will also report any non-compliance to the National Consumer Commission so the Commission can investigate.

Who is Trifecta Capital?

The CGSO has appointed Trifecta Capital to help collect the money.

Is there any legislation that requires companies to belong to the CGSO or is it voluntary?

The Consumer Goods and Services Industry Code of Conduct defines the CGSO as a voluntary Ombud scheme set up in line with the CPA. There is also no mention of levies in either legislation.

Does the Ombud have the authority to implement punitive measures?

The recommendations of the Ombud are not binding on the subscribing members unless both parties to the dispute accept the CGSO’s proposed resolution. Complainants may also institute legal proceedings or approach the National Consumer Commission.

If the CGSO cannot resolve a complaint, how can consumers get recourse?

It’s understandable for consumers to seek resolution without going through lengthy, costly litigation. Sections 70 and 71 of the CPA describe consumer rights and alternative dispute resolution. Consumers may approach the following agents when trying to resolve a dispute with a supplier:

  • an accredited industry ombud;
  • a person or entity providing conciliation, mediation or arbitration services; and
  • a consumer court.

If the above agents assist in resolving the matter, they can record the resolution in the form of an order and submit it to the Tribunal or the High Court, if the parties consent to that order.

Other questions that have arisen

  • Does the levy apply to foreign entities?
  • What happens if some of your customers are consumers under the CPA and some are not? Would you still need to pay the levy?

How can we help you?

  • Find answers by asking us to answer your questions.
  • Determine if you are one of the organisations that must pay by asking for advice from Michalsons.
  • Be exempt by asking us to help you to motivate to the CGSO why you should be exempt.
  • Respond to notifications from the Ombud by asking us to help you.
  • Comply with the Consumer Protection Act by asking for our assistance.

Simply enquire using the form on the right.