Financial Mail: Drowning in debt (cover story)

Part three of my Pound of Flesh series of data-driven articles on SA consumer debt. This was the cover package of the Financial Mail on 22 March 2018.


Reckless lending is back in the dock as another consumer takes on Capitec over possible contravention of the national credit act. It’s one of many such challenges against credit providers that highlight the dire state of overindebtedness in a country where those who owe money outnumber those who earn it…

The three stories that make up the cover package all sit behind the FM paywall, so if you’re a subscriber, you can access the full article here: 

Social video: The state of SA’s consumer credit

Did you know that South Africa has more people who owe money (credit consumers) than people who earn it (employed people)? Do you know what a debt trap is and how to avoid it?

Pound of Flesh has created a short (90 second) video on these topics for social sharing – but you can also watch it here.

How indebted consumers are stretching SA to its limits

Credit extension is growing faster than job creation, and the moribund economy cannot carry that burden forever. In 2017, Pound of Flesh took a deep dive into the credit consumer numbers for Business Day. Below is an extract of the story. Read the rest of this at Business Live.


A 2014-15 World Bank report declared that South Africans were the world’s “biggest borrowers”. Consumer credit-use statistics — a comparison of employment and credit consumer numbers — suggest that South Africans are failing to manage their debt responsibly and that some credit providers might be missing the mark regarding their criteria in affordability assessments.

Despite tougher affordability requirements and large-scale efforts to educate consumers, credit use is outpacing employment growth, and the over-indebted gap is widening.

There were 16.9-million credit-active consumers in 2007, the national credit regulator’s Credit Bureau Report reads. At the time, 6.38-million (or 37.7%) had an impaired credit record. In 2013, there were 20.21-million credit-active consumers, of whom 9.69-million (47.9%) had impaired records.

A record is declared impaired if a debtor is three or more months in arrears on an account, if the debtor is under administration or if there are judgments against the debtor.

In the fourth quarter of 2016, there were 24.31-million credit-active consumers, 9.76-million of whom had impaired records — 40%, or two out of every five credit-active consumers.

While employment has increased by only 18% since 2007-08, the number of credit consumers has grown by almost 44%. The percentage of consumers in bad standing grew from 37.75%, to 40.15%. There are now 24.31-million credit consumers — more than 8-million more people than the total number of employed people in SA. Even allowing for the fact that some people such as financially supported students may not need a job to qualify for certain credit accounts and not all SA’s employed people will be credit active, there is a huge difference in the numbers.

Read the rest of this at Business Live

Hanelie: payroll’s perspective

Hanelie* has been a payroll administrator with a health services company for seven years. She’s the one who receives and administers the EAOs that come to the office.

“The thing about a garnishee,” she tells me,” is that it is very expensive. If you owe someone R20 000, and they get a garnishee on you for R300 a month, you will probably pay off almost the rest of your life, because the costs are very high.”

One staff member at Hanelie’s office had an EAO against unpaid school fees. Hanelie hauls out a file from the bookshelf packed with lever arch binders behind her, pages through the paper with a licked fingertip. “Initially, we thought it was going to take about 24 months. He owed the school R6050, but the garnishee order was for over R7000, at R300 a month, that includes the initial collection fees and all those things.”

“After the two years, we did another 14 months. And after that, we thought this should be finished by now, but when we got that statement, there was still over R2000 outstanding. We actually loaned him the lump sum just to pay them off, and he paid us the money back. Because it was just ridiculous. After three years and two months, and still R2000 owing…”

She snaps the file closed in disgust. “I also think for the creditor it is a last option, because it takes a very long time to get their money back. The people making money off the process are the lawyers and the collection agency. Some of these accounts they pay off something like R200 or R300, but you have almost a R100 admin fee. Then, the lawyers, for every phone call you make, they charge you an amount, every fax, every email is added to that person’s account.”

“Is it a fair system?” I ask.

“I don’t think the process is fair, but also I don’t think it is fair to have debt and not pay it,” she responds. “I think the making of debt is not [treated like] a serious thing. It is still quite easy to do. It is supposed to be harder [to be approved for credit]. When I look at the garnishee orders we get, it seems to be that retail debt is quite easy to obtain. But as soon as you actually want to buy some assets, like vehicles or whatever, then they have all these laws and it is strict.”

“I don’t know what the answer is for this. It is a problem, but the debt is a problem, and the not paying it back is a problem. That is the main problem. But there are people making money off it…” Lever arch files of people making money off it.

Jabu: I think these people are crooks

Jabu*, 37, was working as the cleaner and general assistant at a small business in Emalahleni in Mpumalanga, with around 12 employees at the time of our interview. She was one of five people on the payroll who had garnishee orders against their salaries. The week before we met, she was informed she was facing possible retrenchment which was subsequently confirmed. It was her second retrenchment.

Jabu speaks at a whisper: “I was working at a mine, ne, but they retrenched me. After that, my mum passed away, so things were too difficult for me. I must look after myself, the children, and I am a single parent,” she says, “Another lady says to me ‘there’s an administration, they help the people’ so I went to there, to administration…”

At that time Jabu had a Jet account, and personal loan from Nedbank. She calls it “cash”, and I gather that it swiftly disappeared into a hundred uses. She had applied for them while employed, in good faith, but without her job anymore, Jabu admits she stopped paying her accounts. The administrators told her they would consolidate her debt, fit her monthly payments into her meagre budget. They told her to come back and tell them when she found a job, but at first when she found work she didn’t, choosing to use her full paycheque to get back on her feet after a year without an income. Then the system caught up with her. The payroll administrator, Hanelie* – Jabu calls this function “HR” – got a call and a garnishee order was delivered.

“They garnish me R400 every month, but if I go to them and ask for a statement of how much I owe now, they don’t want to give me a statement. I went to HR and told her this, so HR called them but they don’t want to give her a statement. Every month they garnish me, but if I go there for a statement, they tell me that the boss is not here. When I say ‘Who is in charge if she is not here?’, they jiga-jiga.”

After listening to an advice programme on the radio, Jabu went to court and got an order compelling the administrator to issue monthly statements or cancel the EAO. Finally the statements started rolling in.

She fishes out a page from her bag. The paper is limp and worn thin. It is almost perforated into eights from folding and refolding. That is last month’s one. The current statement has faired better. It is stamped with a legal firm’s mark at the bottom. The top bears account numbers, file numbers and a case number. It is all very official looking, and it tells me that Jabu owes just under R12 000 still. Her Jet account is paid off. Her Nedbank loan still looms large with R10 626.25 outstanding. Qalisa Finance needs R1 600 and change from her too.

At R400 a month for five years, she’s been garnished R24 000. There is no sign of this on the account statement. “Distribution” on the statement comes to just R3 175.50 without any indication of what period that covers. Jabu has no idea how long it will take to pay off the outstanding amounts.

“What is Qalisa?” I ask. “I don’t know,” she says. “Because if I ask they say ‘Qalisa is them’, the administrators, but I don’t know this ‘Qalisa’.”

“What are these costs? These admin costs?” I ask. She shakes her head. “I don’t know.”

Jabu’s voice is thick with despair, and catches in her throat. “I think these people are crooks really. They said they are going to help me to pay all my debt, but they can’t [be doing this]. Sometimes Jet calls me or Nedbank, and they ask ‘When are you going to pay?’ but every month they take money. Still they always call. I told them that I am on administration, and they say ‘We don’t know about that’.”

She has no plans to challenge the garnishee. She says she does not know about the Credit Ombud. She talks about her debt with a deep sense of inevitability. “If I am retrenched next week, I will go to these people and say ‘I am no longer working, so can we please decrease my instalment?’ I don’t know. We will see if I am lucky or not. Only God knows.”

“It’s not a good thing, garnishee. It is not a good thing. The problem is that when we work we get accounts, but when we lose our jobs, problems start. You don’t understand. There’s nothing that is permanent in life. God will provide. I told myself, if they retrench me, maybe it happens for a reason.”

Her hands float upwards, coming to rest on the slightest swelling beneath her ribs. Her voice is barely audible over the hum and buzz of the old office fittings: “And now I am stressed… about my baby. My boyfriend passed away. I didn’t know I was pregnant until after…” She was four months along.

* Not her real name

Judy: just sign here

Judy* is a 33-year old admin clerk in a health services office, in Witbank/Emalahleni. She’s a petite woman, immaculately put together with fierce hair and nails. No kids yet, she says, but she does support her younger sister.

Judy’s mom passed away in 2006, leaving at least three years of unpaid electricity and municipal levies on her property “They [the municipality] wrote me a letter, saying I must pay,” she says. “I went to the municipality and said ‘I won’t pay this money because I didn’t use the electricity’. I was not staying with my mom, and she’s passed away. But they said that I must talk to a lawyer because the issue is already in the hands of their lawyers.”

A few months later she was asked to come to a law firm with her mom’s death certificate. “I didn’t read this whole paper they gave me,” she admits. “They said to me ‘just sign here’ so I signed and signed. Then after a few years, they sent a letter here [to her work] that I am garnished for my mother’s [debt].”

I didn’t speak to [the lawyer], only his staff. They didn’t explain [what I was signing]. I told our accounts department, but they said ‘Judy, because you have signed those papers, we must garnish you’.

Why did you sign without reading?” I ask. “You know, I was so sad. My heart was so sad. I was crying that day because I even have proof that the person who is responsible for this [debt] is no longer here.”

Judy’s first language is Zulu, and the documents she signed were in English. But she’s more than proficient in English, and doesn’t think that having the papers in Zulu would have made any difference to her acceptance of them. Instead, she says, “If they had given me time and explained that these papers are an agreement that you’ve signed to say your mother’s money owing [is your responsibility], maybe it would have made sense.”

But they just give me papers and say ‘sign here, sign here, sign here’.” Her sharp nails stab at an imaginary contract. “Then they take the documents they had asked for, and said I could go. It was short. I remember I was on lunch.”

Judy is being garnished R350 a month. “I don’t know [how long it will take to pay off]. It was R14 000 and something then, and when I look at the [statement] now, it says R9000 and something. It is a long time. Now it’s like I am paying two times electricity because here they garnishee me, and I must still go to the municipality and pay electricity there also.”

She doesn’t know what fees are being added by the lawyers to the municipal debt. They do give her a statement every month, but she says, “I just see the money is going a little bit down, but I don’t really understand what is happening.”

Judy says if she had known she would have rather made a plan to pay the outstanding money directly. “Because garnishee has closed lots of doors. I can’t open accounts because my payslip says ‘you are garnished’.”

How garnishees keep gouging debtors

Despite a landmark ruling from South Africa’s Constitutional Court (on the legality of certain elements of garnishees), and the laws being amended accordingly, the issue of aggressive and unethical collections is not “job done”. Pound of Flesh spoke to consumers and looked at the legal status of garnishees for Business Day in 2017. Below is an extract of the story. Read the rest of this at Business Live.


Global garnishee use

Emolument attachment orders (EAOs) are sanctioned by courts as a solution to the “problem” of debtor default. Most of what is called “garnishees” in SA are actually EAOs.


EAOs are court-issued documents served on employers of debtors, compelling them to garnish the debtor’s wages and submit these payments to the creditor who secured a judgment. EAOs are administered by the Magistrates’ Court Act, the National Credit Act, the Debt Collectors Act and other legislation such as the Basic Conditions of Employment Act.

Garnishees are supposed to be the nuclear option when all other attempts to compel repayment have failed. The fallout is nuclear too.

In 2012, garnishee orders and overindebtedness were closely linked with the Marikana massacre. Garnishees and loans from registered credit providers and unregistered loan sharks were a significant contributing factor to the Marikana wage dispute and strike.

In 2015 and 2016, the Stellenbosch Law Clinic, 15 consumers (mostly workers from the winelands) and their advocates took on 13 creditors, the law firm Flemix & Associates, the justice minister, the minister of correctional services, the trade and industry minister and the national credit regulator.

Read the rest of this at Business Live.