Business Studies - Term 2 - Week 10

Imagine you’re in a minibus taxi from Khayelitsha to Cape Town CBD. The driver charges you R25 instead of the usual R20, claiming 'load-shedding' makes trips more expensive. This is a common example of price gouging, an unethical business practice where sellers exploit a situation to unfairly increase prices. Unethical business practices are actions by companies or individuals that break moral rules or harm others for personal gain. These include bribery, false advertising, tax evasion, and exploiting workers. In South Africa, such behaviour can be seen in fake 'specials' at supermarkets, or when a business pays workers below the minimum wage. A common misconception is that only big companies can act unethically, but even small spaza shops or informal traders can make unethical choices. Recognising these actions is the first step to stopping them.

Sipho buys a phone in Polokwane advertised as 'brand new', but it turns out to be a second-hand device with missing parts. Not only does Sipho lose money, but the business also loses his trust and future sales. Unethical behaviour damages a company’s reputation, leading to loss of customers, legal penalties, and even closure. For society, it can mean unsafe products, unfair competition, and increased unemployment. In South Africa, the Competition Commission often investigates price-fixing and collusion, like when bread companies secretly agree to raise prices. The harm goes beyond just the buyer and seller—it affects families, communities, and the economy. Some believe 'everyone does it', but ethical businesses like Ahmed’s corner shop in Durban prove that honesty builds loyal customers and long-term success.

Lerato works at a clothing factory in Mthatha. She notices her payslip shows fewer hours than she actually worked. This is wage theft, a form of exploitation. Another example is when a cellphone network advertises 'unlimited data', but the speed drops after a certain usage—this is misleading advertising. In Soweto, a construction company might pay bribes to get contracts, which is corruption. To spot unethical practices, ask: Is someone being treated unfairly? Is information being hidden or twisted? Are rules or laws being broken? Don’t fall for the misconception that unethical actions are always obvious—sometimes they are hidden in small print or behind closed doors. Careful observation and questioning help reveal the truth.

Banyana Banyana’s sponsors make sure their adverts are honest and their contracts fair. Ethical businesses follow the law, pay fair wages, and treat customers and staff with respect. They have codes of conduct—written rules about what is right and wrong. In South Africa, many companies sign the King Code, which guides ethical corporate governance. Businesses can train staff, set up whistle-blower hotlines, and reward honesty. For example, a Durban supermarket might display a sign: 'We do not accept bribes.' This builds trust and attracts customers. Some learners think ethics is just about avoiding jail, but it’s also about building a good reputation and long-term success. Ethical behaviour is a daily choice, not just a legal requirement.

Step 1: Read the scenario. Thandi takes a taxi from Soweto to Johannesburg. The driver charges R30 instead of the usual R20, saying 'everyone is doing it because of petrol hikes.' Step 2: Identify the unethical practice. The driver is price gouging—raising prices unfairly during a crisis. Step 3: Explain why this is unethical. It takes advantage of passengers who have no alternative transport, especially during load-shedding or fuel shortages. Step 4: Suggest a solution. Taxi associations could set clear, fair prices and display them in vehicles. Final answer: The driver’s action is unethical price gouging. Setting and displaying fixed prices would help prevent this. Quick check: Would you feel cheated as a passenger? Yes—so the practice is unfair.

Step 1: Read the scenario. Ahmed sees an advert for a 'R99 unlimited data' plan. After 5GB, his speed slows to almost nothing. Step 2: Identify the unethical practice. This is misleading advertising—the company hides important information in the fine print. Step 3: Explain why this is unethical. Customers are tricked into buying a product that does not meet their expectations. Step 4: Suggest a solution. The company should clearly state the speed limit after 5GB in the main advert. Final answer: The advert is unethical because it misleads customers. Honest, clear advertising would solve the problem. Quick check: Would most people feel tricked? Yes—so it’s misleading.

Question: Lerato works overtime but is not paid for extra hours. Is this ethical? Let’s think: Did Lerato agree to work extra? Yes. Was she paid for it? No. That’s wage theft—an unethical practice. Model answer: Not paying for overtime is unethical because it exploits workers and breaks the trust between employer and employee. It can also lower morale and cause staff to leave, which hurts the business in the long run. Now you try: Sipho is promised a bonus for good sales but never receives it. Is this ethical? Answer: No, it’s unethical because the employer broke a promise and exploited Sipho’s effort. This can also make other workers lose trust in the business.

Question: A construction company in Polokwane pays a bribe to win a government contract. Is this ethical? Think: Did they follow fair procedures? No. Did they gain unfair advantage? Yes. Model answer: Paying bribes is unethical because it breaks laws and creates unfair competition. It also damages the business’s reputation and can lead to legal action. Your turn: A supplier gives free gifts to a manager to get chosen for a deal. Is this ethical? Answer: No, it’s unethical as it influences decisions unfairly and can lead to corruption in the business. This can also result in poor quality products or services being chosen over better ones.

1. List two examples of unethical business practices you have seen or heard about in your community, such as overcharging during a crisis or selling expired goods. 2. Define 'misleading advertising' in your own words, making sure to include why it is unfair to customers. 3. Name one reason why businesses should act ethically, considering both legal and reputation effects.

1. Explain how price gouging during load-shedding affects customers and the community as a whole. 2. Identify an unethical practice in the following: A shop sells expired food at a discount. Describe why this is a problem for consumers. 3. Suggest one way a business could encourage ethical behaviour among staff, such as training or rewards for honesty.

1. Analyse the impact of wage theft on workers and the business, considering both financial and morale effects. 2. Justify why a company should avoid bribery, even if it helps them win contracts, using both legal and ethical reasons. 3. Solve: A company advertises 'free delivery', but adds a hidden R50 fee at checkout. Is this ethical? Explain your answer fully, considering the effect on customer trust and business reputation.

• A shop increases bread prices during a flood
• A store offers a discount on old stock
• A business pays staff overtime
• A company donates to charity

Answer: A shop increases bread prices during a flood

Price gouging is unfairly raising prices during a crisis, such as a flood. Offering discounts or paying overtime is not unethical, and donating to charity is ethical. Learners often confuse any price increase with price gouging, but it only applies when people are taken advantage of in emergencies.

• It confuses competitors
• It tricks customers into buying products
• It increases staff salaries
• It reduces product quality

Answer: It tricks customers into buying products

Misleading advertising deceives customers, making them buy something they may not want or need. This can lead to loss of trust, complaints, and even legal action against the business. Some learners think it only affects competitors, but the main harm is to the customer who is misled.

• Paying below minimum wage
• Bribing officials
• Displaying clear prices
• Selling expired goods

Answer: Displaying clear prices

Displaying clear prices is transparent and fair, helping customers make informed choices. The other options are unethical and illegal in South Africa. Some learners think selling expired goods is acceptable if discounted, but it is still unethical and unsafe.

• Price gouging
• Wage theft
• Misleading advertising
• Fair competition

Answer: Misleading advertising

Hiding important information about the product is misleading advertising, not price gouging or wage theft. Many customers only discover the speed limit after purchase, which is unfair and damages trust.

• Bribery