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CAPE TOWN - Fin24 reports that National Treasury will conduct a new study to discern the profile of over-indebted South Africans, more so, low income earners.  

Fin24 records that on 16 August, senior advisor of market conduct and financial inclusion at National Treasury, Katherine Gibson drafted the preliminary terms of reference for the above study. 

The study is presumed to inform the portfolio committee on trade and industry’s draft legislation to give effect to the Department of Trade and Industry’s (the dti) policy to provide debt relief to over-indebted consumers.

The key questions which the National Treasury will probe and subsequently expect to have answered by the study are: 

  • The demographic profile of consumers who use unsecured credit, for instance credit and store cards 
  • The financial profile of consumers who use unsecured credit
  • The reasons why consumers access unsecured loans;
  • The repayment patterns of consumers who make use of secured credit, such as mortgages and vehicle finance;
  • Typical lender behaviour

According to a study conducted by National Treasury in 2013, Fin24 notes that majority of credit active consumers relied on unsecured forms of credit, owing mainly to clothing accounts, unsecured personal and microloans and credit cards. 

These consumers fall in the R3 500 and R10 000 per month income scale.

In addition, African Bank Investments Limited (ABIL) - the holding company of African Bank was placed  under curatorship by the SA Reserve Bank (SARB), as the lender caved by the magnitude of excessive losses.

Subsequently, African Bank was relaunched in April 2016 with the SARB, the Public Investment Corporation and a consortium of six local banks as its new shareholders.

Fin24 further notes that the investigative Myburgh report conducted to probe into the reason for the collapse of ABIL, discovered that 

African Bank had provided large-scale unsecured lending and that the business of the bank was conducted irresponsibly as the foreseeable risks such as a poor economy, competition and growing the debtors book was not properly managed.  

According to Dean Macpherson from the Democratic Alliance (DA), who serves on the portfolio committee on trade and industry, a number of proposals will be included in the National Treasury's study. 

"This includes the immediate steps that need to be taken to provide debt relief, especially with regards to the reckless lending under African Bank of which the SARB now owns the ‘bad book’", said Macpherson. 

"It is unthinkable that debt relief has not been provided to these people as yet, who continue to pay interest on these loans to the SARB". 

Macpherson also recommended that all debt repayment agreements be suspended until the National Credit Regulator concludes its final investigations into all loans undertaken by African Bank.

Similarly, News24 has released statistics from the National Credit Regulator in March 2017 which reveals that up to 10 million South Africans are grvaely in arrears on their debt.