fbpx

From Marikana Massacre To African Bank Bad Loans – Opinion

From Marikana Massacre To African Bank Bad Loans – Opinion

From AllAfrica

At first glance the connection between Marikana and African Bank Investments Limited (Abil) may seem tenuous. But there is a connection. “Moneylending” is the unholy connection between Marikana and the position that Abil finds itself in today, revealing the underbelly of a troublesome industry that has become a systemic problem for South Africa.

Even the ratings agencies believe so. They have not just downgraded Capitec, a bank similar to Abil with a huge unsecured lending portfolio, but also the “untouchable” big banks. This despite protests from the South African Reserve Bank (SARB).

The moneylending industry should not only be the subject of systematic review, but also needs to be fundamentally transformed to make way for new forms of banking, which cater to the needs of the poor instead of being an industry that feeds off extortion.

In the case of Marikana, attention should not only be focused on the massacre, but on some of the causal factors that led to the wage strikes. High debt led to higher wage demands, as wages simply did not keep up with the cost of living.

The whole of the platinum belt has become a boomtown for moneylenders. There is not one, but hundreds of moneylenders ranging from licensed to unlicensed operators. So lucrative has moneylending become that even funeral insurance companies and retailers want to cash in on the unsecured credit market.

Mining often sits side-by-side with the growth of an aggressive and relentless industry that is given a legal leg up by our system of garnishee orders. It is not unheard of for mineworkers to have two or three garnishee orders against their salaries, which results in a situation where their “take-home pay” is unable to put food on the table or take care of other basic necessities.

Moneylenders prey on economic desperation and poorly enforced rules where they carry little liability for their irresponsible lending. Many unsecured loans are provided to high-risk borrowers – low to middle income consumers – at close to the interest cap of 32.1%. It is reported that loan sharks charge even higher rates illegally.

Read more at AllAfrica