Surge in South African pawnshops as customers seek quick cash
Facing the burden of rising costs, consumers in South Africa are seeking relief through pawnshops. Here’s how the process works…
As the economy keeps shrinking, pawnshops in South Africa such as Cash Converters and Cash Crusaders are reaping profits.
While there is positivity over our new Government of National Unity, Mzansi is still stuck in the grip of trying economic times. Unemployment is higher than it’s ever been. Way too many people are surviving well below South Africa’s living wage, relying on SASSA government grants as their sole source of income. And the country has slumped to number four in Africa for investor attractiveness.
All the while, pawnshops in South Africa have been showing strong growth in the face of increasing financial pressure, reports Daily Investor. Specifically Cash Converters, which started back in 1994 as a second-hand goods trader. The company’s CFO Peter Forshaw says pawnshops in South Africa are booming because consumers are in desperate need for cash in hand.
PAWNSHOPS IN SOUTH AFRICA
Cash Converters were among the first to bring international franchising to pawnshops in the country to lend the industry a sense of legitimacy. As Capital Pawn explains, pawnshops in South Africa are much more than an outlet to exchange or buy/sell goods. They effectively operate as mini banks, too, with certified pawnshops able to offer low-interest loans as practical solutions for people in need of cash in hand.
From a single Cash Converters store in 1994, it has grown into a chain of more than 85 stores across Southern Africa with over 1 000 employees. The company holds master franchise licences in sub-Saharan Africa, Nigeria and Namibia.
NATIONAL CREDIT ACT
However, the National Credit Act of 2007 is when pawnshops in South Africa really took off. The act provided pawnshops in South Africa the ability to legally enter the credit space. The industry grew rapidly by offering instant cash for assets. And providing credit to South Africans overlooked by major banks and those who exist in the informal sector.
You give the pawnshop an item of yours, and the company gives you its cash value (dictated by them) on the spot. When you want the product back, you pay back the principal amount plus a service and interest fee. Forshaw explains there is zero credit check: “The only factor in the agreement is the value of the product you provide us as a basis for your loan. Better still, if you can’t settle the credit agreement, there’s no financial repercussions. All that happens is you don’t get your goods back.”