Money-go-round: personal economies of wealth, aspiration and indebtedness
Deborah James, Anthro Dept, London School of Economics
Paper for Local Economies workshop, Wiser, Wits, 15 September 2010
Please do not cite without permission
Abstract Considerable attempts to create a single economy of credit, in part through
regularizing microlenders (especially the much-demonized loansharks or mashonisas), have
been made by the South African government, notably through the National Credit Act. This
paper problematizes the idea that there is a one-way progression from ‘informal’ to ‘formal’
in this regard. It suggests that the difference between borrowers and lenders is often
blurred; that lending is often done by groups rather than by individuals (in a variant of the
well-known stokvel), and may represent a response to the so-called ‘formalisation' (Guyer
2004) of financial arrangements by those who have considerable experience of this, rather
than being a bulwark against it. It shows that aspiration/upward mobility, and the problems
of credit/debt that accompany these, have much longer histories; and that these matters
can give us insights into the contradictory character of the South African state. Its
‘neoliberal’ dimension allows and encourages free engagement with the market and
advocates the freedom to spend, even to become excessively acquisitive of material wealth.
But it simultaneously attempts to regulate this in the interests of those unable to participate
in this dream of conspicuous consumption, or those whose readiness to engage in it leads
them into difficulties.
Anthropologists customarily are seen – rightly or wrongly – as
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framing their research and write up their findings in obscure terms which (at worst)
can only be understood by the initiated or (at best) are irrelevant since they cannot be put
into practice.
This workshop aims to see whether this subtlety can be maintained while yielding results of
interest to bankers, debt counsellors, government officers and NGOs.
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relying too much on detailed case studies and ignoring statistical/survey data.
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vehemently criticizing certain political/economic approaches, especially those often
characterized as neoliberal or market driven.
Here, anthropologists have much in common with other left-of-centre activist academics (a
local example is Patrick Bond)
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problematizing narratives that arise within some policy circles. Most relevant to
today’s proceedings is a ‘modernization’ narrative: Previously there was a dual economy: a
modern and subsistence/traditional; or a formal and an informal (also described as
‘second’). Those in the traditional/informal/second economy were subject to discriminatory
procedures, racially exclusive mechanisms, and the like. Policy ought to strive to eliminate
the barrier between them, and thus create a single economic field.
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Example: the National Credit Act: outcome of much debate in parliament to which
government, unions, members of civil society and human rights NGOs contributed
Our aim is to continue using detailed case studies, to transcend the simple ‘critique’
approach, but certainly to continue problematizing the narrative ‘inevitable movement
towards modernity/formality’ approach.
Our research does not endorse the simple story of people moving from informal to formal
economic arrangements: but neither does it deny this. Likewise, although it echoes the
general cry about South Africa’s inequality, and concedes that some individuals or groups
end up incontrovertibly richer or poorer, it does not agree that movements up or down the
scale need be inexorable. Instead it demonstrates
 an uneven movement between the two that may go in different directions at different
times.
 an intrinsic interdependency between, and co-existence of, the two arenas
 that some individuals or groups advance by small increments up through the ranks while
others sink into unstable piece work or full unemployment.
The background to our study is South Africa’s advance along its trajectory into what some
term neoliberalism but others have termed a state-driven, distributional regime. The
grounds are shifting and uncertain. There is much in the way of riches that are promised to
the many but often only the few are seen as benefitting.
Much of what we will be emphasizing is already well known to those of you who inhabit the
practical world or world of business, away from the ‘ivory tower’. This is especially so for
those who are attempting to extend services to those formerly excluded – or protect those
who were suddenly included much too quickly, from the terrible curse of becoming overindebted. You already know, for example, how
 Members of community savings schemes bank their money
 Those who bank their money have engaged in a sudden upsurge in stokvel
membership, or maintain and proliferate their membership of funeral societies while
also holding funeral insurance policies.
We are thus hoping to learn as much from you as you might glean from us about the
interpenetration of formal and informal spheres – and what this might mean for the
practical arrangements and problems with which many of you are concerned. Where we
hope to be able to offer some insight is in how to conceptualise these sometimes counterintuitive combinations.
This paper is based on
interviews with the microlending, NGO and human rights fraternity who concern themselves
with problems of indebtedness, and fieldwork conducted over two years in Impalahoek, in
Mpumalanga’s lowveld, and Doornkop, a section of Soweto.
There are certain assumptions that my research problematizes:
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That people who combine formal and informal, or who even withdraw from the
formal financial sector to invest in a stokvel, are regressing or slipping back into a traditional
or irrational economic zone. In Impalahoek I came across a range of new savings or rotating
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credit clubs run by government employees (especially teachers and nurses), the moneys
collected on the monthly payday from each member, instead of being simply distributed as a
lump sum to each in turn on a rotating basis, were being loaned out – either to members or
their friends, colleagues or relatives – at interest of 20-30%.
One such club member/founder ran ‘Build Yourselves, Relatives’, a club with 9 members, each
contributing R1000 a month. If a member does not pay, or skips a month, this member is
considered to have loaned the money to him or herself. Next month, s/he pays R2000 plus 30%
interest. Defaulting members were thus being charged as though they had borrowed the
outstanding amount. Following similar principles, members also loan money to other people –
mostly friends or relatives. They had started as a non-interest, non-loan-oriented savings club, but
members were keen to escape from the clutches of stores that sell furniture on hire-purchase, ‘I
wanted to prevent members from buying goods on credit. At the end of the year, you can buy
what you want with cash,’ said the founder. He considered himself to have been wronged by a
furniture store when his bank account had been garnished - at a cost of R2000 - for allegedly
missing a monthly repayment. Complaints to and enquiries from the store credit manager had
yielded no results. To avoid such situations in future, he and other members were now aiming to
put together a sizeable cash sum on the annual date when their turn came, so as to be able to buy
items of furniture, electrical appliances, building materials, a car; or (in the case of other members,
and reflecting the aspirational character of the times) to pay for summer holidays at beach resorts.
The club had tried a range of banks, and later the Post Office, as a means to pursue their new
investment strategy, but never succeeded in being paid the advertised interest on their savings. At
this point they started lending to members, and - in turn - to relatives or friends of those members.
But they kept open their bank account, using it now as a repository for funds rather than a source
of interest.
Are these savings clubs formal or informal? If informal, they had certainly been inspired by
engagement with the formal credit sector – in the peculiarly skewed version previously
available to members of black communities in rural areas. Whatever one might term them,
these newly reinvented lending and borrowing clubs also followed certain formal and
bureaucratic financial principles, and were reliant on bank accounts as a place for depositing
money and keeping it safe.
One could pursue this line of argument still further, to consider how formal financial
arrangements converge with, or are imitated by, formal ones.
Esther Maseko, a teacher, belongs to a variety of funeral societies. Each involves a monthly
contribution, and each requires her participation in communal helping arrangements in the event
of a death. Asked for the logic behind this, she stated that each caters for a separate branch of the
family: one her parents, one her in-laws, one her brothers, and so on. Yet the one she had joined
to pay for her own expenses was much more modern in orientation; it was repudiating the idea of
investing in funerals and had taken up the idea of buying shares, etc.
Is it far-fetched to equate this to someone with a diversified portfolio of investments in a set
of formal financial institutions? I will come back shortly to the idea of ‘investment’.
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That those with credit cards and vehicle finance have no need of loans from informal
lenders. On the contrary, people often use such a lender as a last resort: the final option
when all others have already been explored, undertaken in addition to not instead of these
other options. Why should this be so? Because of new, non optative forms of expenditure.
These need not simply be expensive cars or designer clothes: far less frivolously, higher or
further education is now considered mandatory.
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The major difference between this and the previous generation, and the biggest single new
expenditure making credit a necessity, was no informants in Mpumalanga and Soweto had not had
further or higher education, but virtually all found it mandatory to send 3 or 4 children there. This
was what induced one schoolteacher into approaching a loan shark, after having exhausted all
other more formal sources of credit, and in addition to her loans from these sources. Those who
were most vulnerable were those whose families had been most rapidly upwardly mobile,
especially the new swathe of civil servants in country areas. In contrast, those whose parents were
already middle class, had owned real estate/property, and had been relatively well educated
themselves, were least likely to get into serious debt themselves.
This is why catch-all phrases like ‘black diamonds’ are unuseful. Even the ‘LSMs’ now often
mentioned in SA fail to capture the disparaties between families’ experience over several
generations.
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That exposure to consumption of commodities, and especially consumer credit, only
took off in the 1990s, and that people’s indebtedness is a distorted – if not quite explicable –
manifestation of SA’s democracy.
Families have a long exposure to consumer credit. This often started with parents buying furniture
on HP for a daughter as part of her trousseau, after which she and her husband would continue
buying furniture, item by item, always on HP, until the house was considered to be fully furnished.
This slow-and-steady approach to indebtedness was, it is true, supplanted when types of available
credit diversified and expanded markedly in the 1990s (most typically with a move from furniture
only, through store cards and vehicle finance, to mortgages). But families with an existing credit
history of this kind did not necessarily immerse themselves in the new and ‘reckless’ forms of
borrowing (the assumed flipside of ‘reckless lending’). The example of the teacher above, with his
credit-granting club, is a case of someone whose earlier exposure to the frankly preposterous
practices of the furniture stores had prompted him, instead of venturing further into the world of
formal borrowing, to initiate his own arrangements. (A further manifestation of this is how, some
twenty years back, locals set fire to the local furniture shop, hoping thus to expunge the records of
their debt.)
In this case, the attitude to the formal lending sector – or at least to its worst aspect – was
an outcome of the distorted version of the market rooted in an earlier period, with
consumers offered only particular types of credit at extortionate rates and under
disadvantageous terms. It is these arrangements which have given some consumers a
distrust of the ‘formal’ system – though none abandon it completely - and turned others to
criminal activities of the kind frequently associated with the ‘informal’ sector. These include
 Collusion between agents collecting money or repossessing furniture and the
indebted clients
 Opportunistic repositioning to take advantage of changes in the law. Those formerly
working as ‘debt administrators’ under the terms of the Magistrates Court Act, for
example, immediately recast themselves as ‘debt counsellors’ under the terms of the
National Credit Act, and continued making money by shady or illicit means
 Illegal moneylending itself, of which more below.
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That South African consumers can be subdivided into clearly demarcated and
definable categories - along roughly the same lines as the subdivision between ‘formal’/first
or ‘informal’/second economy – and that better understanding each of these segments will
allow for better policy on tackling indebtedness for each of them.
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One aspect of this tendency to neatly subdivide, is to assume, as does some of the
legislation, that loansharks (mashonisas) are a definable group, contrasted with those who
borrow from them, and that these can be isolate, and regulated. My research shows that –
except perhaps at the extreme ends of the scale - borrowers and lenders cannot be easily
separated. In many cases they are the same people, but at different times and in different
registers.
 Big loansharks: often lending amounts of R1000 or more and typically charging 50%
per month, taking borrowers’ ATM cards and ID.
Some in Impalahoek started as schoolteachers, or initially worked as indunas for a white farmer,
later becoming store-owners who made a large part of their living from money lending. (It was
from one of these lenders that the nurse mentioned earlier had borrowed money to put one of her
children through university). Others in urban settings combine work in the formal sector (eg one of
the state-owned enterprises) with money-lending to fellow workers; or position themselves
outside the gates of labour compounds to offer loans to workers.

Small time lenders: lending amounts of less than R300, charging about 15% interest,
sometimes increasing in the case of non repayment at month end but not by the
same rate every month, not keeping ATM cards.
One Impalahoek lender, Samuel, had a package of activities characteristic of those who have
‘multiple livelihoods’. He started as a gambler in, and later as the ‘owner’ of, a dice-board
gambling operation: one of a number of micro-businesses that surround the pay-point on pension
day. He loaned people money with which to gamble or, when they borrowed from big mashonisas
in order to play dice and were unable to pay back, he would lend them small amounts to help get
them out of trouble. Repayment dates were not calculated or scrupulously recorded so “It is hard
to calculate how much I earn”.
The money does not come in at one time. Somebody will come and give me R150 and say
“here, Samuel”. Some people are herding cattle… Some don’t work, they will ask for money. They
will do piece jobs, building, making bricks. Those will come to me and I will lend them. Others, who
work, don’t get paid on the same date. Some on 15th, some 25th, some month end. Some are
herdsmen, looking after cattle for pensioners. After pension day, they’ll come to the kraal, and will
get their pay, then they’ll pay me. I don’t have a specific amount of income. … I can’t predict.
His disability grant, starting in 2007, provided an additional source of income, allowing a complex
livelihood strategy to emerge, constituted out of a series of small sequential steps separated from
each other in time. After receiving the grant, Samuel buys chicken feet to barbecue by the
roadside, which generates some money for loaning, the interest on which enables him to buy
more chicken feet. The dice game both depends upon but also helps to fund these other income
streams. His inability to calculate profit comes from the fact that all this happens sequentially, bit
by bit. Nevertheless, there is a certain logic in his separating of ‘capital’ from ‘interest’: ‘I gain. And
my gains, I just put in my pocket, and the original money that I lent them, I lend again’.
Such lenders are not in competition with the larger ones: seen in rational terms his products
were distinct from theirs and aimed at a totally different market.
 Credit-granting savings clubs or ASCRAS: charging around 30%, not keeping
borrowers’ ATM cards, thus having no collateral other than ‘trust’, and experiencing
more trouble with repayment.
Build Yourselves, Relatives’ was one example, started by the teacher to enable he and his fellow
members to keep themselves out of the hands of the furniture stores and to help them earn better
interest than the banks or post office savings accounts could provide. Members were of course
both borrowers and lenders at different points in the cycle. Susan, an Impalahoek teacher who
belonged to another club, combined a variety of credit arrangements: as club member she
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borrowed money from the club, usually lending it out to neighbours, while simultaneously
engaging in the formal credit sector, having borrowed money from the bank.

Others: Positioned somewhere along the scale, there is also a wide range of small
lenders throughout urban townships or small-town settings in the former homelands.
The ubiquity of these – and their relative invisibility – became evident to me when I asked a young
woman university student to help me get an interview with a mashonisa in Orange Garm. She
returned a few days later, revealing that to her amazement her own mother was making money on
the side as a mashonisa. Such lenders, like Susan above, were operating both within and beyond
the formal system. I learned from Daphney of Kagiso Trust that many smallscale lenders come
asking her for advice on how to bank their own proceeds. They feared being exposed to the state
for their illicit lending practices if they did so, and wanted help in getting around this.
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That the real solution to overindebtedness and people living beyond their means is
by attending to ‘demand’, through ‘financial education’ and teaching people how to budget.
(To problematize this is not however to undermine the very real contribution made by those
who undertake such education.)
Surveys have indicated that it is generally those in middle income brackets who have been
most liable to indebtedness. Examples above, like the nurse who needed to send her child to
university, demonstrate this. One aspect explaining this is that banks, registered microlenders, and
stores that sell on credit on the one hand, and ‘big’ mashonisas lending amounts of over R1000 on
the other, are willing to lend only to those who have a regular income. They do not expose
themselves unduly – or at all - to the risk of non-repayment. The former require a ‘payslip’, the
latter do the equivalent by confiscating the borrower’s ATM card and ID book. Their clients are
people employed in private industry, state-owned enterprises, or the public sector; or those
receiving regular social grants. All four are in evidence in urban settings, but in Impalahoek the
latter two were the only real source of regular income. In sum, only those earning a regular income
are in a position to get into debt to one of the bigger mashonisas (as to a formal financial
institution) and to be able to afford to even start repaying these.
What these surveys less often reveal is that lenders to whom these salaried people are
indebted are often salaried people too. As stated earlier, it is difficult to discern a clear basis for
demarcating between different categories. For some, a regular stream of income is a basis for
lending money. For some, in contrast, such an income stream turns them into ‘prey’: they become
regular borrowers whose wage can be plundered at the end of every month, thus providing
lender/mashonisas with their income. What would predispose a person to one of these two
options? (Anecdotal evidence from Impalahoek does suggest that some who start as borrowers in
some cases become lenders in their turn. There is a sort of pyramid scheme effect, since there
would always have to be more borrowers than lenders for this to be a workable enterprise.)
Let me try to analyze further this process of ‘making money from nothing’ on a
‘money go round’.
In a town like Impalahoek in the former homeland, government salaries and grants represent the
main sources of regular income. Is it simply the case that loansharks, microlenders and retailers
cluster around the recipients of these state moneys like ‘bees around a honeypot’, aiming to
ensure that state moneys are redistributed into their own pockets? Is this just a version of the
‘fortune’ to be made ‘at the bottom of the pyramid’, as it was rather benignly called by XXX. This
was what first seemed to me to be the case – I had an image of state moneys flowing outward to
the bank accounts of civil servants and thereafter trickling further downwards and outwards to
credit-providers, formal and informal, who thus ‘made money from nothing’ in a peculiar lowveld
version of ‘financialisation’. But I soon realized it was more complicated than that. The most
successful mashonisas include those who are themselves in state employ: they are ‘reinvesting’
their state salaries (or, in the case of small-scale lenders, their grants) in order to make them grow
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yet further. Perhaps this blurred line between borrowers and lenders, and those in formal and
informal/illegal employment, which then hardens into a more definite division between them at
the extreme ends of the scale, is one of the great undiscovered reasons for the sharp inequalities
that are said to characterize South African society.
Whatever the case, it is obvious here that, at least in rural settings, one needs a steady
stream of income in order to get into debt, or – conversely - to procure the basis for a
growing and expanding income.
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That another solution is to tackle the ‘supply’ side, by ensuring that all are gainfully
employed, thus obviating the need for smaller-scale illegal lending as a money-making
activity by the unemployed. There is an implicit assumption in accounts of financialization,
described elsewhere in the world and closely associated with the credit crunch, that money
ought to be made from production (as in classic accounts of capitalism) rather than through
investment, lending, and the like. In South Africa, given the reduction in numbers of formal
jobs after the liberalization of the economy, much store has been set by entrepreneurial
activity as a means to solve the problems of unemployment. The obstacles for some such
entrepreneurs derive from two things. One, again, is an inheritance from the past: the
skewed history of credit, and in turn of property ownership, which obtained before 1994.
Either property sales were unviable because of general indebtedness, or property was
‘ringfenced’ because of the history of state-provided housing in African areas.
Frank Pule, an aspirant entrepreneur, started his business buying property on auction, when a
number of houses were being sold off in the early 2000s, especially in areas south of
Johannesburg, not far from Soweto, where townhouse clusters were the norm. He put the
availability of such houses down to the aspirations – sometimes unrealistic – of the newly salaried
classes moving out of Soweto, and to the unboundedness of their aspirations to be upwardly
mobile. They had ‘got in over their heads’ and their new houses had been repossessed. ‘People
don’t know what it is like buying a house. They think ‘because I am working at SABC, I will afford
this house’. He mentioned the ready availability of credit as a factor inclining people to buy houses
without giving it much thought. ‘…the banks, of course, are the greatest culprits’. This enterprise
had originally seemed to have considerable promise, but he encountered problems. The
indebtedness of house buyers had originally meant the ready availability of repossessed
townhouses, but problems of debt had now worked their way through the system. As a result,
there were now fewer potential buyers looking for townhouses.
Turning instead to buying and selling houses in Soweto posed different problems. There was
popular opposition to any attempt to commoditize these houses (conceptualized as jointly-owned
family property, even using such houses as surety for loans, or taking out subsequent mortgages
for further building, had made many owners vulnerable to their repossession. Mortgages had not
been necessary to buy the old-style state-built township houses in Soweto, since these had been
signed over to the families that had occupied them during the apartheid era. But some people had
over-reached themselves, either using their houses as surety for bank loans, or borrowing money
to build extensions. In either event, defaulting on the loan from the bank would end in tears. In his
example, a son or daughter said ‘ “Ma, I have started working, the bank can offer me R80 000 or
so. Can we build two rooms and a garage here outside?” And then they build this. As soon as he
cannot afford [the repayments], the bank comes and attaches everything. They sell the whole
house.’’
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While this sounds traumatic for the occupants of the house, in practice it was more likely to spell
disaster for an entrepreneur, such as Frank, who was trying to profit from the entry of such
property onto the open market. He and others in a similar position had quickly learnt the error of
trying to have anything to do with the sale of a ‘family house’ in Soweto, since ‘the history of that
house keeps you out’. The family ‘won’t want to leave.’ Neighbours knew the house as having
belonged to a family over several generations, and the owner would have been secretive about
having taken out a bond. ‘Now if the bank comes and says “we’re taking the house” and people
look and say “hey, we know the great grandmother etc, and now this is the 4th, 5th generation,
there is no way these people can owe money”. For a speculator or agent to buy such a house was
to invite the wrath of local vigilantes.
Another obstacle to small scale enterprise is the tenuousness of income which relies on the
sale of, and the willingness of the upwardly mobile to buy, precisely the goods, financial
services and credit products which are the topic of this paper. The case of insurance
salesmen is a good illustration (Baehre, XXX). While many township dwellers have
enthusiastically bought formal insurance, they have also proved ready to cancel their
policies when times are tough, or when they need a lump sum. This inconstancy has
disastrous effects on the economic situation of the middleman – the insurance broker, and
has a knock-on effect on their indebtedness in turn.
One such broker who had recently approached Magda Sekiba, a debt counsellor, for advice, had
fallen into arrears with his payments on his car and house because of clients cancelling policies,
thus threatening this commission-based source of livelihood.
Conclusion
To return to the initial problematizing of the division between formal and informal
economies: two key texts in economic anthropology can illuminate some aspects of this
(Guyer; Bloch and Parry). They show that instead of a gradual movement from nonmonetized to monetized transactions, it is more accurate to think of people as converting
between different registers. Commoditized exchanges which appear to be simply ‘market
based’, involving short-term relationships between buyer and seller, are indeed to be
thought of in that way. But people may strive to convert short-term exchanges into longer
term relationships associated with things that are more difficult to measure. Under
pressure, they may also be forced to convert in the opposite direction.
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