Taking a loan or accepting finance is only the beginning of a deep, dark vortex that few members of our population with the exposure to understand its implications ever see

For the last 10 years we at the Vuka Trust have been researching, implementing and watching the development of various financial rehabilitation aids, programs and systems.
The National Credit Act (NCA), for example, that formalised what used to be a process called “voluntary distribution” and turned it (with some tweaks and additions) into debt counselling. We’ve assessed and investigated cases from the unbelievable to the truly shocking – but most shocking of all – is the generality of South Africans’ ignorance to what is really going on “out there”.

For most, I suppose, it’s simply “not their problem” or it doesn’t affect them. But when a significant number of our policemen and women, municipal workers and basic services support staff are so significantly indebted, none of us can say that the state of debt in this country does not affect us.

Seated on a flight from Cape Town last month besides a Chief of Traffic who had just attended a Traffic Department Seminar – I was able to confirm what I have seen in the hundreds of financial assessments for members of the SAPS in Gauteng – that officers in general are extended so far beyond their means that taking “gifts” from the public is more of a survival mechanism than an additional source of income. This gentleman even had mixed feelings about punishing “gift-takers” – not that he wouldn’t do it with all due alacrity given the evidence, but his demeanour when he spoke of the dire financial straights of his officers told me there was genuine compassion for his men and women – despite the widely known illegal practices. The significant concern for the Traffic Department – and one way this may affect you in the very near future – is the introduction to South Africa of the “points system”, which will mean the introduction of hand-held devices. If our friendly traffic officers were asking for a Coke before – without the points system – what will it be worth for him or her to look the other way when his hand-held device tells him you only have a few points less?
Or maybe we should look at the bright side – at least one segment of the population has a way to get out of debt in their lifetimes! (And in return we’ll get to keep our licenses…? Hmm… so is there really a problem here? Apologies to our international readers – I think perhaps you have to be African to appreciate the humour in that question.)

And I know what you’re thinking now: “But they got themselves into debt”, “they signed the contracts” and, if it was that simple, you, as a member of the general public with all assumptions in place of what should be, could quite possibly be right. But taking the loan or accepting the finance is only the beginning of a deep, dark vortex that few members of our population with the exposure to understand its implications ever see.

Debt is quite strictly regulated, yes – but there is a decade or more back there where no such regulations were in place. And the new rules only applied to current debt. Until a recent ruling, the interest chargeable on overdue debt was completely uncapped – meaning that interest of R100 000 could quite easily be accumulated on a debt of R5 000.

Remember the recent outcries by civil servants about pay increases? The ones that seem to get stuck on half a percent that perhaps you wondered if half a percent could really be worth battling about… well the truth is that for some municipal workers, police officers and soldiers, half a percent can mean the difference between feeding the family for another few days or not – I’m not exaggerating.

An example or two, if you can stand, it might illustrate: One of our clients has seven African Bank loans. She is charged the standard R50 per month for each loan – meaning that before she even touches capital, she is paying a monthly admin fee of R350. Why seven loans? Well, before the NCA came into effect, loans of less than R10 000 could accrue any interest rate the lender desired. So instead of issuing one loan on R30 000, a typical micro-lender would issue five loans of R6 000, with the benefit of monthly admin charges for each loan. We approached African Bank on her behalf, asking for a consolidation of the various loans into one single loan amount and pursued the matter to senior management, and while we were heard sympathetically every time, the request was declined each time as it’s “not the bank’s policy”. At a standard banking institution, this same client was charged R35 for each debit order that went off for these loans – meaning that the loans themselves cost her R595 monthly, before interest or repayment of capital. She earns R5 800 a month, so 10% of her monthly income now goes purely to lining banker pockets, without any tangible benefit to her. The interest rate on the loans is between 36 and 57%.

Letsatsi micro-lenders, a large lender with thousands of clients among government employees – has a general error miscalculation in their system. Every loan we audit from them results in a refund due when compared to their original copy of contract. One municipal employee borrowed R8 000 from them, defaulted along the way and ended up paying them R42 000 through a garnishee order. R19 000 of that was determined by our auditors to be beyond the scope of the contract she signed with them and is due back to her. Of course, in order to get it back, she would need to pay an attorney thousands of rands.

One municipality lost four staff members in the last three months to suicide over debt. Another neighbouring municipality has over 1 000 employees who take home less than R700 a month (due to garnishee orders and other collections). Considering that transport in that area alone would cost one employee a minimum of R350 per month (could you support your family on R350?), the result is massive loss of experienced staff as it becomes more viable for them to stay home and save the transport cost.

Very few clients approach us because they know something is wrong with a loan. Most are just in trouble and need help, and it’s in helping them determine what kind of help they need, and where they really are financially, that we uncover these gross injustices, like “re-ordered” garnishee orders. One garnishee order per judgement is what the law says – but uneducated payroll officers and accepting clients simply accept these “re-issues”. They are completely irregular and would only ever be issued in the most exceptional circumstances, and in my 10 years experience, I have never seen one that stands up to those requirements.

Even the retail accounts that go “legal” are causes of gross injustice. Not, perhaps, in the hands of the retailers themselves, but a current survey of collection accounts has demonstrated that the eventual amount collected on “handed over” accounts is well in excess of 200% of the original capital amount! Collection fees, legal fees etc – there are one in a million cases where these are not excessive. Like one collection agency who charges each debtor for which they have garnishee orders in place a “contact fee” of R35 monthly – on a client for whom they receive payment monthly directly from the employer? What did they do? Phone monthly to say “thank you for your payment” and then charge the client R35 for the pleasure?

Wake up South Africa! Vuka!

If one retailer hands over R1 000 000 a year to be collected, at least R3 000 000 will be collected on that one hand-over. The system is broken. There are laws in place, but there is no police force and no one body of regulators prepared to bear the burden of sorting it all out.

At Vuka Trust, we’ve pushed through a decade of denial of a problem, then acceptance of a problem and the implementation of a half-solution – and now it’s returned to ignorance of the problem because it’s just too complicated to grasp. The solutions are out there. In addition to ourselves, there are one or two organisations that will affordably assist, but, of course, reaching those deeply in need often costs us far too much in “gifts” to people in the right places to share the information with their own staff. And so the cycle continues.

But you can help. Spread the word – get your colleagues asking the right questions, get them researching debt and their rights and, for goodness sake, if they can’t afford to live on what they take home – get them to get help!

So next time the police officer asks you if you “can buy him a Coke” or you watch another municipal strike on television, or the dustbins accumulate on the curb for a week – you might remember that there’s more to this picture than “corrupt cops” and “greedy employees”. Perhaps this all starts with the greed of far larger and more financially powerful institutions.

For our international members: perhaps this will stand as a glimpse of the story behind the story; some hint of why the rumour of the continued rape of Africa by “Western” forces continues. Not endorsing the rumour in any way, but every attitude has some vague basis in a true experience somewhere and perspectives shade it into someone’s truth.

If your heart beats to the rhythm of an African drum – you are doubly blessed!

Vulameghlo!