Shoppers leave the Makro branch in Johannesburg owned by Massmart, one of the retailers showing subdued results as consumers battle with rising debt. Photo: Reuters

Johannesburg - The recent subdued results from retailers such as Shoprite and Massmart reflect the growing pressure facing cash-strapped consumers.

At the release of the group’s results last week, Shoprite’s chief executive Whitey Basson said that all retailers were having a hard time.

“The consumer is suffering from high living costs, lower access to credit and high unemployment.”

Massmart chief executive Grant Pattison referred to the pressure on consumers as a result of increasing costs, “over-indebtedness and tightening credit extension by unsecured lenders”.

The prospect of relief for consumers heavily reliant on debt looks grim in light of the recent estimates of the number of garnishee orders that have been issued by unsecured lenders and their collection agencies.

Debt counsellor Deborah Solomon estimates that there could be as many as 5 million garnishee orders countrywide. Earlier estimates had put the figure at 3 million.

And Solomon believes that as much as 85 percent of these orders may have been issued illegally.

She said garnishee orders had a devastating impact on workers and posed a substantial risk to society and the economy. “Debt-stressed consumers are forced to default on school fees, electricity accounts and often after servicing garnishee orders, workers do not have enough money to pay for food or transport,” said Solomon.

Labour analysts say that the crippling levels of debt among workers are contributing to the “high” demands being made in wage negotiations and notes that the level of indebtedness among workers in Marikana was said to have played a significant role in last year’s unrest.

Trade unions are looking to employers to play an active role in auditing garnishee orders issued on their employees.

The National Credit Regulator figures reveal that there are 20.8 million credit active consumers in South Africa who owe R1.44 trillion. Solomon, who is the founder of The Debt Counselling Industry Portal, theDCI.co.za, said that these figures represent a crisis in a country in which there are only 13.6 million employed.

On the basis of the work she has done, Solomon estimates that workers who have garnishee orders are likely to have four each.

Earlier research conducted on behalf of law firm ENS indicated that affected employees had 2.3 garnishees, with some having as many as 12.

Solomon said she has joined up with two other companies, Red Oak Tracing and Capital Software, to offer a service that will provide employers with the ability to undertake a fully automated audit and forensic investigation of garnishee orders. Red Oak Tracing is a garnishee and administration order review specialist firm, and Capital Software is a third party payments processor and systems operator regulated by the National Payments Systems Department of the Reserve Bank.

“Garnishee orders have become the order of the day and the legality as to how these orders are taken and the debt behind them is more than questionable. The solution is to focus on the workplace,” said Solomon.

She noted that the audit and forensic investigation are aimed at two potential categories of problems. One related to identifying “abnormalities” in the process involved in issuing the garnishee, such as the garnishee order being issued in a different jurisdiction from that in which the debt was incurred; or inadequate notification being given to the consumer.

Solomon said there could also be problems with the authenticity of the debt. “A lot of garnishee orders have been issued on debt that has actually been prescribed; this is illegal, but the lender or the collection agency gets away with it because South Africans are often not aware of their rights.”

If a garnishee order was issued illegally it will be rescinded and whatever money was taken illegally will be returned to the consumer.

Solomon said that the process of investigating and rescinding the order could take up to 90 days. - Business Report