The NCA was a ground-breaking move within the credit industry for it represented the same revolution that had occurred on the political front within the banking environment. It was to represent equality whilst doing away with unfair advantage and control by those far greater than you or I. It was a unique tool that was designed to help every South African should they ever need it. The reward for understanding its powers could mean the difference between saving you home or car if ever the day arose.
It is obvious why it was not welcomed within the banking front, why its success has been the most understated by media coverage and why it is the least known saving grace for many of today’s South Africans. Unfortunately by being the least understood by the SA consumer has also meant that many homes, cars and possibly lives have been lost unnecessarily.
It also means that five years into the enforcement of the NCA, it has become blatantly obvious that something is amiss when looking at the levels of debt amongst us.
Debt Counsellors have been screaming “reckless lending” for years yet many a deaf ear has been turned especially when taking on the banking fraternity. It has also recently become apparent how the effects of reckless lending will now touch every South African life, including those with perfect credit ratings.
Our levels of debt are no longer on crises proportion, but rather on epidemic status which is guaranteed to leave scars for many years still to come.
With the total outstanding amount owing by consumers standing at R1.36 trillion while NCR figures show South Africa’s ‘credit active’ population totals 19.6 million. If 47% have impaired records then 9.3 million struggle with payments.
What many fail to register is that our ‘credit active’ population is our workforce. The fact that our ‘credit active’ population exceeds those employed tells a story of its own. With only 13.6 million employed, it is fair to say that more than 47% of SA’s entire workforce contributing into the SA economy is currently in financial stress.
There is an automatic knock on effect that occurs when there are such high levels of over indebtedness within the contributing sector to the overall economy. Consumers with high levels of debt or impaired credit records spend far less within the retail sector; they increase the number of insurance policies lapsing; continual dipping into pension funds only deflate the value for others in years to come, while those working within these sectors become affected due to this cycle. Their awards are retrenchments, few annual bonuses or no increase, company cut backs with short hours or pay cuts – and these are only a few illustrations of further economic pressures that start to infect our economy and society. Companies, who base employment criteria on strict positive credit record results, now have limited options for employing new members of staff. It is also guaranteed that close to half of their current staff compliment would no longer adhere to company policy.
When one suffers from financial stress, there are high levels of absenteeism, higher risk for white collar crimes, petty theft and less productive hours in the work space. Our natural instinct is to go into survival mode, our thought patterns change from rational to desperate – our actions become manic and often unthinkable and totally out of character.
The current debt epidemic is indicative that many still do not understand budgeting; the spending of money or the impact and devastation that debt causes in one’s life once it spirals out of control. Urgent action needs to be taken at the place where this ‘workforce’ spends most of their time, which is their place of employment.
If companies undertook to verify every garnishee order that was currently on their payroll, they would be shocked at the level of orders that are fraudulent. Yet these orders are placed on the employees’ salaries far too easily and companies now need to take control of their own well being by helping to ensure their staff’s.
As human beings, we have come to develop a culture of success through the money we earn, the car we drive and the house we live in. Many people in debt, who have taken out more than two personal loans, in a 24 month period or less, predominantly cannot remember what they spent their money on but almost directly thereafter state that they took out further loans afterwards in order to survive.
It is also fascinating when one notes that people will speak about almost anything, from drugs to religion, to crime, to sex but they never speak about their debt or acknowledge their true financial status. SA has a culture of hiding debt in the closet, especially from partners. Debt is SA’s biggest taboo and it is within this culture that we need to have dramatic mind shifts.
There are such high levels of embarrassment and humiliation when a garnishee order is placed onto an employee’s salary, that there has been cases of suicide, family murders and employees absconding shortly thereafter. It is important to note that when most garnishee orders are taken, there is little to no regard for the persons existing situation, living expenses or salary.
There are in fact many cases whereby the multiple garnishee orders, accumulate to more than the poor person in questions salary. One only then needs to ask the question of how far you would go to feed your family or just simply to exist.
It is especially within the work environment that employers could make the biggest impact in helping to uplift and inspire a new culture in awareness of financial well being.
Millions are swamped in debt but our courts are not swamped by lenders being charged with reckless lending. Yet officials air their concerns about possible lending ‘abuses’ which have become clear examples of exploitation. How else does one explain a growth in unsecured debt from 789 million in September 2011 to 4.1 billion in September 2012.
There are effective solutions to gain control over our debt epidemic but none would truthfully be achieved without South African Directors, Shareholders and general business people taking control of their own employee’s financial education, which would ultimately lead to financial empowerment.
This certainly does not mean staff loans or hand outs to those in distress. In fact it is not advised as this would not be an authentic solution or a respectful one for someone in need. One needs to resolve the root cause and not merely disguise only one of the symptoms. The only effective resolution would be through staff education, motivation and performance based incentives.
No matter how bad an employee’s credit rating, company performance bonuses, ratings and promotions should be linked to improved credit ratings. This would lead to a universal awareness of why certain practises are toxic when in the debt trap, how to manage finances effectively while getting out of debt , right down to the critical need of knowing your financial status on all credit reporting systems.
Every South African ought to take credit reports at least twice a year. Financial theft and identity fraud are on the increase and once your financial opportunities have been tapped into by unscrupulous fraudsters, it becomes a living nightmare to rectify.
The simplest solution to a massive problem, which is not only on the increase but also affects people to their very core of existence, is to know what is listed about you on the bureaus, with the knowledge to repair a quandary should it ever arise.
It is imperative that every South African understands the impact of our current debt epidemic and actively seeks advice from existing structures that can offer accurate solutions.
There are training solutions available for companies and their staff whereby every person is individually assessed, solutions provided for as per their assessment and taken through a skills empowerment program. Issues such as garnishee orders and admin orders are each verified to ensure that they are valid, while the staff member is encouraged to make certain lifestyle changes. It is an advantage for employer and employee to increase levels of financial education in SA – even more so when there is simply no cost attached to be part of the program.
Always remember that debt has no respect for race, age, gender or social standing. You can also be guaranteed that it will be accompanied by harsh emotional, mental and physical trauma.
Debt will enslave you into working for it and kill your inner being. Debt is also the new word for slavery amongst 9.4 million South Africans.
This article was first published in Volume 1 Issue 02 of The SA Leader magazine.
