Me and my net curtains

A little while ago I bought some net curtains (rock and roll!). I bought them from someone who works in the ministry who also sells things (a bit of import-export on the side, you might say). Lots of people do it. It helps to top up salaries (low, a reflection of productivity?) and I think it is a good thing.

- I asked how much.
- R300. S/he showed me the price written on the packet.

I looked how much I had in my wallet. Only R200.

- Oh no s/he said, R200 is fine for cash.

I asked why and it turns out that the R300 is for people who buy on credit. I didn't ask how long people pay over, but that is an interest rate of 50% if you take R200 as the price, and 100% if the price could have been as low as R150 as I suspect. If I guess that is paid over just a few months, then the interest rate becomes a few hundred percent over the whole year.

I've got nothing against that -- I love THIS UK company which charges several thousand percent interest APR for small short-term loans (see HERE). I think that small time money lenders in the developing world are a good thing; they help to tide families over when they need it most, offer a quick and convenient service and the transaction costs are low.

In a large furniture store, two prices are given depending upon whether you pay cash or purchase over a period of several years -- the long term purchase is the headline price and the framing is a reduction if you pay cash. That means that the interest rate is not given.

Below is an example. (Furniture is amazingly expensive in South Africa, even for cash.)



So you pay R1,700 for cash (that’s about $210 at the current exchange rate). If you pay monthly you make 24 monthly payments of R157 and pay an additional R170 deposit. That is a total of R3,938 over 2 years! (But don’t worry – it includes all costs!)