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PoPI regulations: Don't kill the goose that lays the golden eggs

The promulgation of the regulations mandated by PoPI is extremely important because they will in effect indicate what companies need to do to comply with the Act. Unfortunately, the current draft regulations have the potential to damage the direct marketing industry quite significantly. Dmasa has made a submission to the Information Regulator on the offending regulations, but I feel it's important to raise our reservations publicly as well.
© Aleksandr Elesin via 123RF.com.

At the outset, it is important to emphasise the important role that direct marketing plays in the economy. It is the vehicle through which businesses and other entities, such as charities and non-profits, can expand their customer or membership bases, or alert existing customers or members to new opportunities. Direct marketing is critical to a vibrant economy.

Economic inclusivity

Less obviously, direct marketing also acts as a driver of economic inclusivity. It is a way for economically disadvantaged individuals to receive information about products or services targeted directly to their needs. In addition, direct marketing using relatively inexpensive digital channels can enable micro enterprises to access new markets and customers, thus promoting their growth.

Recent research conducted across the Dmasa membership base indicates just how important this industry is, and how worthy of protection. It contributes substantially to both economy and fiscus and provides numerous jobs. Members of Dmasa – and there are many, many non-members – employ between 45,000 and 92,000 people, of whom 26% are under 25 years old. Moreover, 50% of their employees are employed in call centres.

The majority of these young people and/or call centre staff are likely to hold only a matric, and so are most economically vulnerable.

The research also shows that our member companies have a turnover of between R12bn and R30bn per annum, and thus contribute anything between R500m and R1.3bn in tax. They also spend in the range of R84m to R177m on marketing themselves, another contribution to the economy, aside from the economic activity their work on behalf of clients supports.

Unintended consequences

One of the regulations that will negatively impact the direct marketing industry relates to Section 69 of PoPI, which only permits companies to communicate with individuals who have previously opted into receiving such communications. This provision is based on similar legislation in developed markets such as the United Kingdom, but it is not suitable for a developing economy such as South Africa. Many South Africans do not properly understand the role that direct marketing plays, and do not know how to protect their privacy without depriving them of information they would wish to receive.

If this regulation is made effective immediately, it will have the effect of crippling the direct marketing industry. Not only will many of the jobs it provides, directly and indirectly, be lost, but the vast majority of the economically excluded will be denied the opportunity to receive information that could help them enter the mainstream economy.

Dmasa, therefore, recommends that the opt-in regulation is deferred for at least three years, preferably. This will give the industry time to undertake the necessary educational drive and put effective opt-in systems in place.

Opt-in mechanism should be simple

The second flawed regulation concerns the mechanism by which individuals can opt to receive direct marketing. The draft regulation proposes the use of a form, Form 4. However, Form 4 is extremely detailed, which will have the effect of greatly reducing the chances that it will be filled out at all. Furthermore, it is not clear whether it would need to be completed on paper or whether it could be done online.

My strong contention is that the opt-in mechanism should be simple and should use any channel, as the customer him- or herself prefers. In particular, simple opt-in via electronic communication should be accepted. Given the speed at which technology is changing, I further believe that the actual technology to be used should not be prescribed.

Dmasa have conducted exercises to ascertain the effect of applying these two regulations on certain of our members, and the conclusion is clear: the effect would be crippling, and the majority of jobs would be at risk.

Dmasa agrees wholeheartedly that protecting data privacy and ensuring data security is important. At the same time, it is imperative that the regulations do not impede economic progress – building a strong, inclusive economy is critical to the stability of a democratic South Africa. The PoPI regulations must balance both.
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