Gigaba backs proposed bill providing debt relief
Trade and industry committee chairwoman welcomes Treasury support after public hearings
Finance Minister Malusi Gigaba has given a commitment that the Treasury supports targeted debt relief for the most vulnerable, especially in cases where their onerous debt burden is the result of reckless lending.
This was one of the items in the 14-point plan the minister released last week, which he said would lay the foundations for economic recovery.
Gigaba said he would work with the Department of Trade and Industry in the development of such a debt relief package.
The Treasury’s support for the idea so far has been cautious, in particular with regard to extinguishing debt, which it says should only apply to unsecured loans granted to borrowers with little or no income.
Trade and industry portfolio committee chairwoman Joanmariae Fubbs said she was pleased the minister had come out for the first time with such a clear statement of support. "In the past the Treasury only had one foot in," she said.
The committee has held public hearings on a law it is drafting for the provision of debt relief.
It started the process in 2014 and all the banks, the Banking Association SA, the Reserve Bank, the National Credit Regulator (NCR), debt counsellors and other stakeholders have made submissions.
A subcommittee has been working on the proposals for months and Fubbs is confident the committee will produce a final draft of the proposed law for public comment in 2017.
The initial proposal that the NCR be given more powers was not regarded as sufficient to deal with the problem as the regulator already has powers it has not used.
Fubbs said the committee would consider the bill’s first draft in August when Parliament reconvenes and would prioritise it over all other bills.
"I hope we can move forward with the bill this year, especially with the Treasury working with us," she said.
A critical element to be decided would be the criteria to determine who would benefit from the debt relief.
With the economy going into recession and more and more people becoming unemployed, the need for debt relief was becoming acute as they were unable to keep up with their payments for assets purchased.
"This is clearly not a safe position for any country to be in," Fubbs said. "We would like to deal with it before things get worse and [it] becomes a total crisis and panic."
Debt relief programmes have been implemented by about 16 countries, including India, Croatia and New Zealand, and the committee may visit Wales to investigate its programme.
The Banking Association SA is against debt forgiveness. Instead it favours the voluntary debt relief strategies now employed by banks, such as repayment holidays, debt restructuring and debt consolidation.
The Treasury has urged that research be conducted to assess the effects of debt relief.
Retailers and microlenders were likely to be heavily affected while access to credit would also become tighter.