Report Topics:
Report Topics:
1:- General Information
2:- Cooling-off Period
3:- Pyramid Schemes
4:- Multi-Level Marketing
5:- P Product Regulations
6:- Credit Restrictions Country
7:- Money Collections
8:- Licenses
9:- Status of Direct Sellers
10:- Earnings Claims
11:- Taxes and Fees
12:- Social Security
13:- Others
General Information
The Direct Selling Industry in South Africa is regulated by the Consumer Protection Act as well as the Companies Act. In addition, there is also a strong degree of self-regulation by the DSA through its Code of Conduct, which is closely aligned to the abovementioned Acts of law. A requirement of DSA membership is written acceptance of the DSA Code of Conduct.
Cooling-off Period
In terms of the Consumer Protection Act, a consumer may rescind any transaction resulting from direct marketing without reason or penalty, by notice to the supplier in writing, or another recorded manner and form, within five business days after the later of the date on which the transaction or agreement was concluded or the goods that were the subject of the transaction were delivered to the consumer.
The DSASA’s Code of conduct is aligned with the Consumer Protection Act and as such DSA member companies are required to:
- Exercise responsibility for compliance to the Code regarding each of their Independent Direct Sellers..
- Be able to impose disciplinary measures on those who violate their policies
- If necessary, remove those who continue to infringe their policies and rules and
- Ensure that effective methods are employed to handle customer complaints
Pyramid Schemes
The Consumer Protection Act legislates against the operations of such schemes. Direct Selling compensation plans are accepted as being legal provided that the earnings of Direct Sellers are based on sales of products or services.
Multi-Level Marketing
All companies are required to register with the Commission of Intellectual Property Commission (CIPC). All and are regulated by the Consumer Protection Act. Additionally, direct selling companies are regulated by Acts relating to the products or services that they sell.
Product Regulations
There are no prohibitions on the sale of any specific products by direct selling companies. However, the sale of certain products such as wine and spirits, medical products and drugs are subject to specific requirements. Certain cosmetics have specific legislation as to content (e.g. certain skin lighteners) and these may be sold neither by direct selling companies nor by retail outlets. The Department of Health has issued proposed regulations relating to Rebates, Bonusing and Sampling. The Direct Selling Association of South Africa had submitted to the Department of Health comment on these proposed regulations but has had no response to its comments. The exemption of Schedule 0 products from the restrictions placed on Rebates, Bonusing and Sampling has been extended to 18 August 2026 after the Direct Selling Association of South Africa and other associations had made presentation to the Department of Health’s pricing committee. Ongoing engagement between the DSA and the Department of Health’s South African Health Products Regulatory Authority (SAHPRA) is seeking to establish a platform that ensures the continuity in South Africa of direct selling companies who sell Complementary Medicines and Supplements (CAMS) while complying with regulations. The regulations for Complementary Medicines that SAHPRA had issued in 2017 had been found by the High Court of South Africa to be unlawful for Complementary Medicines and Health Supplements and SAHPRA has been given a year to correct these regulations.
On 04 August 2022 SAHPRA issued Guidelines for Borderline products. A “borderline product” is a product for which the regulatory pathway for a medicine, medical device, cosmetic, foodstuff, biocidal or general product is not clear until the classification status thereof is decided by the Regulatory Authority and the product is designated to a particular regulatory pathway in South Africa. The DSA had submitted comment on these regulations but has not as yet had any feedback on its submission.
On 31 January 2023 the Department of Health issued Regulations relating to the labelling and advertising of Foodstuffs. The DSA had submitted comment on these regulations but has not as yet had any feedback on its submission.
Credit Restrictions Country
The National Credit Act covers all aspects of the credit process. It applies to all institutions which provide credit, including banks, retailers, and other lenders, which does include direct selling organisations which provide credit. The onus now falls on the credit provider to ensure that the consumer falls within the provisions of the Act and the resultant agreements to provide credit, which fall into various categories according to the size of the loan needed. Consumers will have to be properly credit assessed and credit providers have to register as such.
The Credit Act legislates for all transactions processed on credit.
The Act covers all aspects of purchasing, such as a six months credit account which is considered as cash or on a long-term repayment basis where interest is charged. Where the payment of direct sales falls within these provisions, i.e. payment over a period longer than six months, the same provisions apply.
The rights of both consumers and businesses are largely circumscribed by common law, statute law and agreements made between businesses and consumers. Thus, any down payment or deposits made on purchases to be paid for over a period longer than six months would be governed by the provisions of the Credit Agreement Act.
Money Collections
According to the Credit Agreement Act, a sale repaid over a period of either three months or six months is regarded as a cash sale, when payment is made either by means of a credit card or by means of credit granted by the individual companies from the individual company. Some companies require an initial deposit to be made before granting credit.
Other companies offer a Lay-by system where a deposit is made, followed by periodic payments and at the end of the lay-by period, either six months or twelve months, the goods are handed over to the purchaser.
These regulations cover all all aspects of consumer purchasing are not specific to direct selling. .
Licenses
Independent Direct Sellers are not required to be licensed.
Status of Direct Sellers
The independent Direct Seller is not an employee of the company and therefore does not receive benefits usually offered to employees by employers such as pension fund or medical aid and thus must make their own provisions in this regard.
The agreement entered into between the direct selling company and its independent Direct Seller is used to assess the independent status of the Direct Seller.
Earnings Claims
Direct selling companies must not misrepresent the actual or potential sales or earnings of their direct sellers. Any earning claims must be based on documented facts.
Taxes and Fees
Income Tax – South Africa operates a residence-based income tax system which means that South African residents must account for their worldwide income regardless of the source. In direct selling organisations the onus is on the independent representative to register with the South African Revenue Services (SARS). submit the required tax returns and pay the relevant taxes.
Dividends Tax – Dividends paid by a company is subject to dividends tax in the hands of the recipient of the dividend.
Capital Gains tax – applies to a resident’s worldwide assets or assets situated in South Africa owned by a non-resident. Capital Gain Tax is triggered upon disposal of an asset.
Excise duties – are imposed on the local production of a number of commodities. Excise duties and levies are imposed mostly on high-volume daily consumable products (e.g. petroleum and alcohol and tobacco products) as well as certain non-essential or luxury items (e.g. electronic equipment and cosmetics).
Customs Duties – are payable in respect of imported commodities or finished goods at varying rates. Surcharges are also payable at varying rates in certain instances.
Value Added Tax (VAT) – is currently levied at 15% on the supply of standard non-exempt goods and services by vendors at each stage of the distribution chain. VAT is an invoice-based added tax. In general terms, vendors collect output tax from their customers and are able to reclaim refunds of VAT paid on inputs. VAT is also levied on the value of imports. Certain exemptions and zero ratings apply.
In direct selling companies, VAT is either included in the prices shown on the order form or added to the sub-total of the products purchased or service rendered. The total VAT included in an invoice needs to be reflected clearly on an invoice. The company then collects this amount from the consumer/independent Direct Seller when payment is made and paid monthly or bi-monthly to the SA Revenue Services (SARS). Additionally, independent Direct Sellers whose turnovers exceed 1 million rand per annum must register for VAT and charge their direct selling company VAT on commissions being received by the independent representative. For this purpose, turnover represents sales plus commissions received.
Skills Development Levy – this is a levy which has to be made on a monthly basis to SARS, based on the monthly salaries and wages bill of each enterprise at a rate of 1% of payroll for payrolls that exceed R500,000 per annum. The organisation has to join a Sector Education and Training Authority (SETA). For direct selling companies this is usually the Wholesale and Retail SETA, but it may also be one of the other SETA’s depending on the product or service being offered by the direct selling company. Companies are required to train their staff through accredited training programmes and may claim back annually up to 50% of their Skills Development levies paid from their relevant SETA through the annual submission of an Annual Training Report and a Workplace Skills Plan.
Employee’s Tax – All remuneration from employment is subject to a monthly employee’s tax known as “pay as you earn” or PAYE in excess of R91,250 per annum. The employer must deduct PAYE monthly from salaries and wages and pay the amount deducted to SARS monthly. Spouses are taxed separately on their taxable income.
Social Security
There are no social security obligations on direct selling organisations in relation to the activities of their direct sellers.
Unemployment Insurance Fund (UIF) – All remuneration from employment is subject to a 1% UIF deduction from the employee’s remuneration with a monthly maximum of R148.72. The amount of UIF deducted from the employee’s remuneration needs to be matched by the employer and the total amount needs to be paid by the employer monthly to the Department of Labour. There are no UIF obligations on direct selling organisations in relation to their direct sellers.
Compensation Fund – All employers have to register with the Department of Labour’s Compensation Fund which seeks to take care of employee’s medical expenses when injured on duty. Compensation Fund contributions are calculated on the basis of the nature of the business as well as on the value of payroll of the company and is due annually. There are no Compensation Fund obligations on direct selling organisations in relation to their direct sellers.Financial Sector Conduct Authority (“FSCA“).– direct selling organisations as well as other organisations that sell long term insurance policies are regulated by the Financial Sector Conduct Authority (“FSCA“).in accordance with the Long Term Insurance Act.
Protection of Personal Information Act (POPIA)
The Protection of Personal Information Act (POPIA) came into effect on 31 July 2021 and seeks to regulate the protection of personal information. Essentially, the purpose of the Protection of Personal Information Act (POPIA) is to protect people from harm by protecting their personal information. To stop their money being stolen, to stop their identity being stolen, and generally to protect their privacy, which is regarded as being a fundamental human right. Direct Selling companies are required to obtain permission from their Direct Sellers to store their Direct Sellers’ personal information specifying the reason for the need to store the information as well the duration for which the information will be stored.