EXTENDING credit to black South Africans following the advent of democracy in 1994 was meant to assist in abolishing the legacy of apartheid. Instead, it brought hardship to many poor people, who became heavily indebted.
But, at the same time, it helped people improve their lives. Unsecured lending is far more nuanced than is often suggested.
Deborah James, professor of anthropology at the London School of Economics, attempts to unravel the many aspects of SA’s debt burden in her latest book, Money from Nothing: Indebtedness and aspiration in South Africa.
James says her interest was piqued in the early 2000s when she was visiting her students around SA. On long road trips she heard radio phone-in shows where listeners suggested debt was an "absolutely gigantic phenomenon".
She has also written books on land reform and migration in SA, and found some of the people she had been tracking for years were "faced with new privations" as they were burdened with mounting debt.
Between 2007 and 2009, she travelled the country speaking to people from various walks of life, including medium-to well-paid government employees, and people from low-to middle-income neighbourhoods in Soweto and Impalahoek village in Mpumalanga.
She interviewed bank employees and registered microlenders, and sat in on debt counselling sessions.
Drawing on this, she provides a comprehensive, nuanced account of a complex issue, dispelling the simplistic idea that debt is bad. But she also raises questions about SA’s attitude to debt and highlights concerns about the authorities’ response to growing indebtedness.
James asks why employers don’t take more responsibility for garnishee orders, or emolument attachment orders, against their employees by refusing to implement them and perhaps going to court to defend their decision.
She says cases such as that seeking amendments to the Magistrates’ Courts Act could help level the credit playing field.
Stellenbosch University’s Legal Aid Clinic has brought the case against credit providers and a law firm managing debt collection relating to the abuse of emolument attachment orders to secure repayment of unsecured loans.
The clinic is seeking to change aspects of the Magistrates’ Courts Act to allow only magistrates to grant judgments and issue emolument attachment orders. Clerks in magistrates’ courts can issue these orders and are not required to examine the details of the case or whether the repayment terms are fair.
"Part of what I have realised is that if that really dodgy area of illicit practice going on in the name of the law were really clamped down upon, at least borrowers and lenders would be on a relatively level playing field," James says.
She also questions why SA’s financial institutions are not playing a bigger role in easing indebtedness, and why public interest lawyers are not getting involved. Why do authorities focus more on punishing borrowers than curbing reckless lending?
"The tendency has been in legislation to make the borrowers perform, not the lenders … it’s telling borrowers shape up, tighten your belts, budget properly. That is important but no one is telling the banks and magistrates’ courts to shape up," James says.
Her book takes an academic approach to lending, interspersed with the personal accounts of South Africans who are in debt to create a human view of the situation.
It is possibly the first book to tackle debt and credit in SA from a broader view, drawing on the tools of anthropology, rather than being a strictly economic take.
It should be required reading for bankers and policy makers.