Pep smartphone rental warning
An analysis by Slant Research shows that Pep’s smartphone rental product — FoneYam — may not be as affordable as it claims to be.
Since launching in 2024, the rent-a-phone service has been a huge success for the Pepkor Group. Over the six months ending March 2025, it recorded revenue growth of more than 100%.
The book value of FoneYam customers has also surged from R258 million in H1 2024 to R1.7 billion in the same period for the 2025 financial year.
The retailer describes the offering as a “secure and affordable opportunity” to rent a smartphone. However, Slant’s calculations showed FoneYam was around 25% more expensive than a regular credit agreement plus insurance.
In addition to the price difference, customers must return the device after the rental period or pay fair market value to keep it. If they took out a loan to pay for the device instead, they would own it.
The basic pricing structure of FoneYam is as follows:
- Upfront payment — 30% of the device value
- After 7 days — 6% of the device value
- Each month for 12 months — 12 equally split payments totalling the remaining device value multiplied by 233.5%
The product includes insurance with cover for loss or theft of the device, as well as death, disability, and loss of income cover.
In cases of loss or theft, the device is replaced. If death, disability, or loss of income claims are approved, the contract becomes null and void.
Slant Research used FoneYam’s own calculator to determine how much more a customer would pay for a rented smartphone than when buying it in cash.
It determined that users would pay 185% of the device’s cash value (or 85% more) over the 12-month rental period. That is substantially higher than the gross margin on a credit agreement.
In its 2025 interim financial results, Pepkor’s chief financial officer described the product’s margin as “slightly higher” than normal credit products. Slant Research said this was a “bit of euphemism.”
The table below provides a breakdown of the costs of devices with a R1,000, R2,000, or R4,000 cash value on FoneYam
| Cash value | R1,000 | R2,000 | R4,000 |
|---|---|---|---|
| 30% upfront payment | R300 | R600 | R1,200 |
| 6% after seven days | R60 | R120 | R240 |
| Total monthly payments | R1,494.36 | R2,988.84 | R5,977.56 |
| Total cost over rental agreement | R1,854.36 | R3,708.84 | R7,417.56 |
| Difference | +85.44% | ||
Max interest rate loan and insurance more affordable
To better illustrate its point, Slant Research compared the cost of a 12-month loan to buy a smartphone — the Samsung Galaxy A05 — while paying for insurance on the device.
The Galaxy A05 was selected as the value of the roughly 2,300 FoneYam payments Slant Research analysed indicated that this was one of the most popular devices customers were renting.
The loan was calculated at 26% annual interest — the maximum rate for this type of lending. Using Techsured’s typical premiums, the insurance premium was set at 35% of the device’s value.
It is important to note that this insurance includes cover for damages in addition to loss or theft, whereas FoneYam’s premium does not include damage cover.
However, it does not have the added protection of death, disability, and loss of income cover.
Nonetheless, Slant Research said that the underlying cost of damage cover was likely to be the most significant component of this kind of insurance policy.
The total cost of the loan with insurance was roughly 61% more than the cash price of the device. The customer also gets to keep the device without paying any additional fees.
“From the customer’s perspective, FoneYam is not an especially affordable smartphone financing option,” Slant Research said.
However, the researchers acknowledged that they may be underestimating the costs involved in offering the product.
One possible factor is the increased risk inherent in letting lower-income customers pay off a device over an extended period.
That being said, the product includes an extraordinary mitigation against this — software built into the device to render it inoperable when a customer fails to make payments.
As a rental service, National Credit Act customer protection protocols, such as interest rate caps, do not apply to FoneYam.
However, unlike a traditional rental agreement for a property or a vehicle, the customer pays back the full value of the asset during the rental period, and more.
FoneYam is also not legally obliged to report its agreements and customer payment profiles to the South African Credit and Risk Reporting Association or other credit bureaus for credit checks.
However, it cautions customers that it may report the manner in which they conduct their rental payments to credit bureaus.
MyBroadband asked Pepkor for comment on Slant Research’s findings, but it did not provide feedback by the time of publication.
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