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Discounting weight of crystal stones when returning jewellery disrupts Egyptian gold market - Daily News Egypt

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Discounting weight of crystal stones when returning jewellery disrupts Egyptian gold market

Issue opens the way for fraud, stealing citizens' gold savings, turning them into glass


Gold is considered one of the best saving tools. It is the safest and quickest transfer of funds. Consumers resort to securing their savings in times of economic crisis and high inflation. Women prefer gold jewellery because they combine decoration and savings.

In recent years, some companies have gone on to expand and introduce gold jewellery decorated with crystal stones and zircon by 10-25% of the total weight but calculate the price on the total weight when selling while promising to return the entire price of jewellery when consumers resell them without discounting the weight of the stones.

The weight of stones is a debt on companies to the consumer that must be refunded. What happens in the market destroys the savings of Egyptians when companies evade accepting the jewellery without removing the stones and include their weight when consumers resell them.

Some companies consider it as a way to profit and collect the greatest amount of money from consumers by selling glass with the value of gold and changing policies and evasion, whether by changing activity or changing the brand to a new one.

Managing Director of New Egypt Gold, Khaled Khalil, said the company’s policy is clear in re-buying the consumer’s products without discounting stones.

He added that the company highly notes through the various media and official pages on social networking sites and through its agents that its policy is clear, and does not retreat from it: stones are a debt on the company and it can repay it whenever necessary.

Head of the Gold Division at the Federation of Egyptian Chambers of Commerce (FCC), Wassfy Amin, said that the weight of stones are not profits as some factories believe but rather a debt that must be kept.

“The division has put forward several initiatives to solve this crisis but to no avail, and Egypt is the only market that follows this system,” he added.

Amin explained that the factories expanded the use of stones by between 17 and 25% of the weight of the piece.

He called on the factories to introduce pure goldsmiths without stones or to use stones in their place and by not more than 3% ؜of the weight of the piece.

He added that the excessive use of stones is a way to manipulate the weights for illegal gains, especially as companies avoid including the price when consumers resell the jewellery and instead discount the weight of the stones.

Head of the Jewellery Division in the Federation of Gold Industries, Rafik Abbasy, said that selling jewellery with stones and calculating the weight of glass is a debt and a promise from the company to repay this money to consumers.

He added that the gold division cannot oblige companies to receive the jewellery without discounting the weight of the stones, with an executive force.

Furthermore, Abbasy advised gold traders and citizens to take legal action toward companies that do not meet their commitment in the sale contract and change of policy they declared, because it is “a legalised fraud on merchants and citizens.”

He referred to the need to adhere to the consumer to guarantee his rights and write a pledge on the invoice which obliges the trader to receive the stones at rebuying, making the bill a legal document that should be submitted to the Consumer Protection Authority and the general prosecution.

Meanwhile, some gold traders are considering a proposal to establish a joint stock company for the production of gold jewellery and list it on the Egyptian Exchange (EGX) to raise capital in an attempt to face the problem of discounting stones weight while giving priority to founding partners and selling the remaining production on the market.

Former Gold Merchants Syndicate Head, Rafik Ibrahim, said that an old lady bought a bracelet and asked to stamp the bill and write a pledge from the store to buy it again without discounting the price of the stones as this money will go toward her burial.

“Since then I have a desire to tell the story to all owners of factories and workshops to take a sermon. And those who think of evading the receipt of stones reconsider and give people their rights,” he added.

He noted that evading the price of stones is a fraud and a theft of consumers’ money.

Moreover, Ibrahim pointed out that the crisis lies in the refusal of companies to receive embedded jewellery, then traders discount the weight of the stones by removing the stones and only accounting for the weight of the gold.

 

Regulators intervention, companies comply to pressure

The crisis has increased during the past few days after a company refused to accept jewellery with stones without discounting the weight of the stones from gold shops, which forced companies to think about a way to find a solution to preserve their rights and maintain their reputations with the public, he added.

Moreover, he referred to other proposals, including requiring companies to separate the weight of the stones from the weight of the jewellery and writing the details on each piece like foreign markets do. “We may ensure the commitment of the factory owners, but we cannot guarantee their children after them,” he said.

Additionally, he explained that when companies refuse to accept the jewellery without discounting the price of the stone, its pushes consumers away from gold.

Furthermore, Ibrahim shared that the consumer believes that discounting the value of craftsmanship at sale is a loss and discounting the weight of the stones will force citizens to reconsider investing in gold and find other means due to losing when selling.

He explained that retailers are more understanding of the nature of the consumer and that using stones is a manipulation scheme and a fraud. “We should encourage consumers to invest in gold instead of making losses worse,” he said.

Ibrahim referred to the need of gold factories to offer non-studded jewellery or reduce the proportion of stones in gold works.

The pressure and threats of gold traders and retailers of boycotting these companies led to the submission of some of them. Lazurde Egypt has been a target of the campaign, which forced it to change its policy in retrieving jewellery without discounting the weight of the stones in May 2016.

This is the result of the demand of citizens to sell what they own as a result of the rise in prices of gold then to unprecedented levels, which represents a crisis for companies that receive jewellery without discounting the weight of stones, meaning that if it received a tonne of gold from the market, 10% of it will be stones, or, it will pay for 100 kg of gold at the new prices.

Lazurde said it did not refuse to accept the jewellery but postponed it, as it used to receiving some 50 kg from traders per day and received 10 kg per week and postponed the rest, which caused problems to retailers due to a cash shortage and forced many of them to refuse taking Lazurde jewellery from the public.

During a meeting held at the Marriott in Zamalek between the company’s officials and representatives of the gold division and major merchants, Lazurde revised its decision and announced during the meeting that it would not change its policy regarding the recovery of the gold works that contain stones.

The CEO of Lazurde, Seddik El Mahdy, said that the company did not change its policy.

He pointed out that the sales department postponed the receipt from some traders for a certain period during that crisis, given the problems experienced by the market and the lack of liquidity.

In addition, he highlighted that distributors and retailers play a pivotal role in the development of the gold market. The company meets annually with its merchants to support them, discuss their problems, and find solutions.

Over and above, El Mahdy added that the company discussed the problem of importing gold jewellery with stones and stressed its commitment to its policy in the recovery of gold works without discounting the weight of stones.

Head of the Gold Division at the Chamber of Commerce in Sharqeya, Wadea Antoine, said that companies are evading their promises and changing their policies by committing to restore inlaid gold without discounting the weight of the stones, as a means of profit and fraud.

Companies do not adhere to their commitments which puts a load on gold shops, and they have the choice either to bear the value of the weight of gold, or distort their gold traders’ reputation because they are the ones who deal directly with consumers, Antoine added.

Additionally, he called for a decision to oblige companies to separate the weights of gold from the weight of stones, similar to what is applied in Arab markets, in order to determine a fair price and put a sticker on each piece showing its information, in order to protect consumers from purchase manipulation.

Antoine referred to the need to activate the role of government controls through laws that impose sanctions on the violating companies and shops.

Furthermore, he pointed out that the agent of Tiba Company in Egypt sold gold works over several years and refused to receive pieces without discounting the weight of stones, causing severe losses to companies. Reports and lawsuits were filed against that company.

Traders should deal with reputable companies that stick to their promises because they are ultimately responsible for the trader. The consumer should also deal with an honest trader who has a clear policy of retrieving the items bought before without discounting the weight of the stones, Antoine added.

 

Traders caught in the crosshairs

Mohammed Aggag, a gold trader, said that 95% of gold pieces in the market are inlaid with stones, representing 10-15% of their weight.

He added that the policy of committing to recover these pieces without discounting the weight of stones is something that the concerned factory and company should do, and the role of shops is only limited to the implementation of this policy.

Aggag pointed out the need to guide consumers and making it clear that this is not the responsibility of gold traders. He said, “This decision leaves traders in a less critical situation when companies fail to meet their commitments”.

Furthermore, he pointed out that this trend will encourage consumers to turn to gold pieces without any stone, and this might push factories to manufacture only certain amounts since they would be harder to sell.

Consumers must carry the responsibility for their choices, and gold shops are not responsible for implementing the recovery policy of stone weights. “Traders are intermediates and companies should be the ones to carry that responsibility,” he added.

“It is difficult for traders to trust factories regardless of their reputations and commitment, and traders are the ones who have to directly deal with consumers,” he said.

Moreover, a solution to this problem includes companies launching gold pieces without any stones so that they gradually occupy a large portion of the market, he added.

Aggag explained that the issue is serious as part of the capital of the gold Egyptians have is actually glass, while we are seeing the capital of companies maximise as glass passing as gold in calculating the value of a gold piece.

Additionally, he added that the solution also includes applying the old market policy which stipulates that there should be no returned stone debts, and that simpler pieces should be made available in the market. “The aim of this is to overcome the crises of the market and reserve the rights of consumers and traders,” he added.

He demanded gold traders to document legally receiving stones at the Land Registry, and distribute them on retail shops in order to reassure traders and consumers.

Ashraf Othman, a gold trader, said that the weight of stones is a debt borne by companies to consumers, and many of them cannot even stick to their promises to receive once more these gold pieces while discounting the prices of stones.

Othman added that the wave of refusing to recover the pieces increases as prices increase, as these companies change their logos as a kind of evasion.

In addition, he went on to say that the high price of gold costs companies a higher value than the returned gram. Some items were bought by consumers at the price of EGP 300 per gram, and the consumer wants to recover the value of the item when the price of the gram has changed to EGP 600.

Companies rely on compensating consumers for the loss of craftsmanship and cracked stones with the increase in the price of  a gold gram, Othman pointed out.

He added that it is difficult for companies to identify the weight of stones on each piece in advance due to different measures, and “companies will not agree on that” according to him.

Furthermore, he explained the need to issue a written agreement from the company with each piece, in which the company would pledge to recover the items without discounting the weight of stones.

Moreover, the loss of the “compliance paper” deprives consumers of their rights to recover the items without deducting the weight of the stones, he added.

Ayman Al-Azazi, a gold trader, said the solution to the crisis is companies writing the weight of stones on each piece and not considering the stone weight part of the overall weight of the gold item.

Al-Azazi added that it is also necessary for gold traders to refrain from receiving inlaid items without receiving information on the weight of stones, which prompts manufacturers to write weights on each piece, or produce items without any stones. He added “Consumer bears the weight of glass and pay a high cost for craftsmanship, and when it comes to reselling the gold item, the stones are broken and their price is deducted and this is fraud.”

Some companies launch large quantities of gold jewellery inlaid with glass stones, and then change their names and refuse to receive the items again, he added.

Some companies added 50kg of glass to their balance, then shut down and changed their names and opened a new company instead, and so on.

Ashraf Gomaa, a gold trader said that the policy of retrieving the items without discounting the weight of the stones is fraud and harms retail traders. Many companies fail to fulfil their promises and refuse to accept the inlaid items.

He added that traders are the ones whose reputations get harmed. He wondered about the role of the gold division and the Gold Traders Syndicate to reserve the rights of gold traders.

Saudi Arabia and certain Gulf markets have become aware of the problem of stones and have set strict rules for it. The Saudi Ministry of Commerce’s regulations stipulate that if the gold pieces contain “fake” stones of no value representing over 5% of the weight of the item, their price will be deducted from the item, however, if the stone is of a value, its price would not be deducted.

There is no legal documentation of the debts for the stones on returned items within companies, nor is there any legal monitoring of the behaviour of companies in these funds.

Head of Assay and Weights Administration, Abdullah Montasser, said that the size of the inlaid gold items represents about 95% of the gold traded in the market.

The laws of assaying gold items do not distinguish between the inlaid and plain items. The weight of the stones cannot be separated from the weight of the gold item itself, and the value of the item is calculated based on the overall weight of the piece, he added.

Montasser continued that the consumer must have his right reserved by writing a formal agreement on the invoice with the trader’s commitment to withdraw the items without discounting the weight of the stones. “Otherwise, the law does not protect fools,” he said.

“The new system, which will be implemented by the beginning of next July, will include taking pictures of the final product, in addition to barcodes for each piece. The consumer has the right to sell it again to the trader with the same specifications without breaking the stones, otherwise it is a punishable offense.” Montasser concluded.

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https://ww.dailynewssegypt.com/2019/06/22/discounting-weight-of-crystal-stones-when-returning-jewellery-disrupts-egyptian-gold-market/
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