POPI - Superhero or scourge

By Wayne Mann, Director – Group Risk, The Unlimited

The widening inequality gap which exists in South Africa has the potential to destabilise the country. According to the World Bank, South Africa is already the most unequal country in the world so surely every effort should be made to encourage commerce, reduce the dependency on the State and increase the tax base.

Within this context, laws that restrict economic activity should be reviewed, and one of the first in line should be the Protection of Personal Information Act (POPI) of 2013.

The Unlimited supports POPI insofar as it addresses the responsible and secure processing of data. In addition to making South African companies globally competitive in terms of international data exchange laws, embracing these aspects of POPI can also translate into a competitive advantage for businesses. In this regard POPI has already had a hugely positive impact on our business as it has prompted us to assess how robust our systems and processes are – and ultimately our ability to store and process data securely. But what we are deeply concerned about is the impact POPI is likely to have on small businesses and ultimately, the economy.

Whilst larger corporates will, in all likelihood, be able to absorb the cost of compliance and have the resources necessary to implement POPI’s requirements, the additional cost burden is likely to cripple many smaller businesses. Their only option will be to pass the cost of compliance onto their customers which may compromise the affordability of their products or services and ultimately, the sustainability of their businesses.

But it’s not just the cost implications of POPI that are sounding the alarm bells for small businesses. POPI is delivering a double blow as it will also impact their ability to market cost effectively – particularly those businesses that depend on electronic marketing.

Imagine a small company that relies on emailing monthly specials to its 10 000 strong database – which in turn generates sufficient revenue to sustain the business. POPI will outlaw this form of electronic marketing unless people on their database have “opted-in” i.e. given their consent to be marketed to in this fashion. Not only does obtaining consent come at a cost, these businesses can also expect their target markets to contract.

As the commercial world becomes ever more vulnerable to real world and cyber criminals it is imperative that companies process their data responsibly. However, Government needs to find a middle ground in which the security of personal information can be achieved within an environment that stimulates economic activity. When one considers, firstly that small and micro enterprises provide approximately 40% of employment opportunities in South Africa; and secondly, taking into account that South African small businesses are faced with one of the highest failure rates in the world (as high as 70% in their first year according to Minister Rob Davies); can we really afford to enact legislation that places additional obstacles in the way of these businesses succeeding?

Currently, under the Consumer Protection Act (CPA), all electronic marketing in South Africa is “opt out” – consumers can pre-emptively block, alternatively demand, that a direct marketer discontinue marketing to them. The obvious question is why the change from opt out under the CPA to opt in under POPI?

Economists have long heralded small businesses as the answer to the country’s crippling rate of 50% youth unemployment. Speaking at the Ahmed Kathrada Foundation’s 5th Annual Lecture in November, Deputy President Cyril Ramaphosa noted, within the context of the urgent need to stimulate new business activity, that: “We need to pay particular attention to the regulatory environment, streamlining processes and achieving greater efficiencies. We need to remove the obstacles to small business development.”

It is difficult, however, to reconcile the Deputy President’s pragmatism with current reality. Ultimately all of us will pay a price if South Africa is unable to achieve the levels of growth required to meaningfully reduce unemployment – and accordingly, the unacceptable levels of inequality.

POPI ‘s origins can be found in legislation that has worked in mature economies. We are applying a first world solution to an economy that is contracting and in desperate need of stimulation, which is ill conceived. With that in mind, is it really that much of an inconvenience to receive those unsolicited SMS’ or emails? The business sending them may employ 10 people, who further support another 30.

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