Money-go-round: personal economies of wealth, aspiration and indebtedness
Deborah James, LSE
Paper for presentation at workshop on popular economies, LSE, 24-25th May 2010.
Please do not cite without permission
“…excess, the blurring of public office and private privilege, and mere mortals forced to
chase the dream by living on tick” John Harrisi
Introduction
“There is no such person as the ‘common man’ ” Richard Hoggart (1998:186)
Research projects conducted in particular societies can be beset by the problem of the
feedback loop. In South Africa, this has taken a very particular form. Businessmen and
capitalists in their many guises have become alert to the need to profile the consumer, so
as better to target him/her. This profiling, done in styles which range from the highly
sophisticated to the very crude, is intended to enable those in a wide range of settings to
be ‘reached’. It involves the use of income measures, but also of racial and ethnic
stereotypes. Ironically, where previously the state was the agent responsible for
categorising people so as better to govern them in the notoriously unequal manner for
which apartheid became known, it is now corporations and entrepreneurs who attempt to
pigeonhole people so as better to market their goods and services to them. Alongside this
class/race profiling, attempts are being made to bring people within the ambit of visibility
– or so, at any rate, consumers believe.
The moment of South Africa’s democracy was marked not only by the freedom to vote
and the extension of a range of services to those previously deprived of them; and not
only by the liberalisation of a market which saw the country drawn into a largely
neoliberal framework (with an attendant loss of jobs). It was also marked by the
liberalising of credit provision, and in particular the lifting of a clause in the Usury Act
that had previously placed a cap on the interest rate which could be charged for small
loans. These measures facilitated a range of aggressive credit-marketing strategies
alongside an attempt to extend financial services to as many consumers as possible. Large
banks invited consumers to apply for credit cards and/or personal loans, vehicle finance
1
companies tempted them to enter into credit agreements, clothing and food stores
advertised store cards. A separate source of credit, used in conjunction with these by
consumers, was the proliferation of micro-lending entrepreneurs who started businesses
extending small loans to poorer people (many of these businesses which later
consolidated to become larger corporations, while others masqueraded as small
enterprises but had always been branches of bigger firms). And in a sector largely
thought of as ‘informal’, illegal and unregistered lending practices, already in existence
for a century or more, became ubiquitous, but at much higher rates of interest than
previously.
The backdrop to this aggressive selling of credit and this herculean effort at incorporating
black people into formal financial markets is often framed in terms which homogenize
and simplify. The narrative of the upwardly mobile African, previously held back by his
entrapment in the second or informal economy but now free to pursue enrichment as his
white counterparts had previously been able to do, is a pervasive one. It is captured by the
description ‘black diamond’: a description of wealth and upward mobility about which
many of those alleged to be its members feel considerable ambivalence (Krige 2009). Yet
it is one which marketers and market research agencies have been quick to embrace,
while simultaneously slicing and dicing the category to yield a number of smaller ones,
each providing a more narrowly-defined target at which the weaponry devised by
advertisers could be aimed.
It would be easy to claim that the ‘black diamond’ is an illusory category which masks
harsher realities: that of a small and wealthy elite which has consolidated itself but is
separated by a great and growing gap from a large majority of the poor. The truth is more
complex. A ‘get rich quick’ ethos, and a sense that black people can now become
millionaires (Johnson 2009:164), is widespread. It fuels aspirations, new ideas on what
investments are necessary and what kinds of expenditure are essential. It is the very
ubiquity of this ethos, generating in turn some pressure to conform, to spend and hence
inevitably to borrow, that has created (in some cases) and exacerbated (in others) new
2
hardships. These - the problems and intricacies of indebtedness – are the primary concern
of this paper.
Here too a pervasive narrative can be found. There is great concern with the plight of the
overindebted, and great condemnation of, and stringent attempts to regulate, the
businesses which practice ‘reckless lending.’ Special opprobrium is reserved for the
practices of the loanshark or mashonisa. There is less recognition, however, that
borrowing and lending cannot be easily separated from each other, and that regulation of
both may generate further opportunities which in turn might require further regulation. In
a society with large-scale unemployment for the many twinned with employment in
industry and in the civil service (newly restaffed along racial lines) for proportionately
fewer, the interdependency of borrower and lender, and the ultimate dependence of both
on the state, leads to some great ironies. Every attempt to act on behalf of or protect the
poor and vulnerable made by those in the enlightened NGO sector or in state departments
such as the Department of Trade and Industry, while yielding a slightly adjusted
landscape of regulation, simultaneously provides new opportunities which those recently
deprived of more regular and waged job prospects easily seize hold of.
In sum, then, one well-known narrative has it that everyone is aspiring to be upwardly
mobile, everyone wants to buy, and thus everyone needs credit. This is the tenet of the
research that has generated the category of ‘black diamond’. Its darker counterpart states
that all these people are overindebted.
This paper will take the form of a critical exploration of both sides of this stereotype. It
will assess the factors which facilitate the emergence of the upwardly mobile – and
simultaneously overindebted – person, and those which obstruct it. As part of its critical
analysis of the stereotype, it will show 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
3
consumption, while outsourcing the means whereby such regulation is attempted to
market-oriented mechanisms. Ultimately, it aims to place the responsibility to ‘self
discipline’ on the borrower herself. Further contradictions are to be found within the
realm of regulation and law. As one arm of the state puts in place legislation to curb
reckless lending – via the National Credit Act - another – governed by the earlier
Magistrates Court Act – proves itself unable to deal with this.1
Competitiveness, status and secrecy
The stereotypes, perhaps in part because of the ‘feedback loop’ described earlier, were
reiterated by informants, but their actual life circumstances often disproved them. One of
the points most commonly reiterated was that African people get into trouble with debt
because of ‘competition’. The word was used repeatedly in some interviews conducted
in a section of the Soweto neighbourhood of Doornkop, many of whose menfolk are
employed by Spoornet, but was echoed elsewhere. As one man put it ‘people are
pressurized by competition in the township, if someone has something, someone else will
want to have, without considering the cost’; another pointed out that ‘some people want
to be equal with other people’, while a third stated that ‘people are challenged by other
people, the pressure comes from society’.
These pressures were said to be the reason why people would relinquish their view of the
longer term, would abandon prudence and frugality, and would spend money they had
not earned and did not possess. ‘People cannot wait and budget, they are in a hurry for
everything’, said one. Another observed that the advantage of credit is ‘you can
immediately get what you need without any delays’ while the disadvantage is that ‘you
are working backwards instead of progressing. … People are just quick to get things
without calculating the cost.’ These local perceptions – unsurprisingly, since they echo
perceptions everywhere - endorse Hart’s point about the time dimension of credit
(2000:200). What distinguishes debt from exchange is a time lapse between the moment
of acquisition and the moment of repayment. The delay, the time after the purchase has
1
Regrettably I have not had space/time to address this in the current paper.
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been made, is when one might regret one’s action in buying the longed-for item. These
musings seem to echo the truism in the proverb ‘act in haste, repent at leisure’.
An informant who holds a well-paid position in a government department echoed these
points, endorsing – perhaps surprisingly – a cultural essentialist view. He puts these
consumerist aspirations down to something about ‘African culture’: to the fact that people
want to be seen to have the same things as other people. ‘Some of us are too inclined to
worry about what others think’, he says.
Upward mobility, alongside ‘competition’ arising out of status anxiety and a fear of
gossip is not new. It has a complex history.
Mosotho’s novel The Tikieline Yuppie gives some insight into these processes as they
were experienced in the 1980s. Its protagonist is the upwardly mobile Sowetan Tseke, the
university-educated son of a lowly domestic worker mother, who has a job as a salesman
in a cleaning products corporation. He spends some of his earnings on upgrading his
matchbox house, and buys on hire purchase a ‘TV, a music system and carpets for the
lounge and the two bedrooms’. As a result his mother decided she could at last invite the
members of her savings club back to the house:
I know these women used to speak me bad, nudging each other whenever they came
here, saying ‘look at her, this thing with dirty feet that look like the ground they
walk on, how can she call us to a house full of furniture that white people threw out
for chickens to roost in?’ I want them to see that my son has made me to be like
other people. Let them see that the sun rises even for orphans like me ….
In his heart, Tseke rejoiced that his mother was going to show those women and
shut up the mouths that never stop going up and down like that of an old woman
who sells snuff. (Mosotho 1998:66).
His impending marriage to a woman he’d met while at university puts him under
immense pressure. His future in-laws have niceties of behaviour and rules about good
manners which alert him to the fact that they claim to be of superior status to his own
family. This sense of inadequacy makes him vulnerable when he takes his fiancée
5
shopping and she insists on buying shoes and a dress which are inordinately expensive.
When he objects, she clinches the argument by saying ‘I won’t allow you to shame me on
my wedding day. I don’t want township gossips to cure their boredom with my name.’
Experiencing a sense of panic, and against his better judgement, he nonetheless agrees to
the purchases, using both the credit card which he had just been granted, and the year-end
bonus he’d deposited in an account ‘and vowed not to touch it until he really needed it’,
to cover these expenses.
These experiences of ‘peer pressure’ are intensified by the insidious and ubiquitous
strategies of advertisers. When The Tikieline Yuppie was published these were less farreaching than they are currently. Factors which have brought consumers into the direct
line of fire of advertisers include, most notably, the fact that all of them have mobile
phones, and big stores have no compunction about giving out the numbers to other
marketers.2
The ready availability of credit has been the grease which oils the wheels of consumer
purchase. Before the recent ‘credit crunch’, borrowing to enable house purchase was
viewed as something which underpinned stable and hence desirable investment. Getting
into debt in order to buy property, then, was seen as a form of ‘good debt’, one
commensurate with respectability rather than indicative of profligacy, since it pointed
towards a stable place in the middle class. But even before the problems with the US
housing market became evident, there was a sense that too much credit had been offered
too freely by South African financial institutions. I asked Frank Pule, a Sowetan involved
in property sales, whether he agreed that ‘in SA, firms have been “throwing credit” at
people…’
Yes. When we bought our house, we then qualified for R500 000. But we took a
house of R130 000. The bank, what they used to say to you was, ‘here is R500 000,
it’s up to you how you use it’. Ours is that we want it paid back. But you have a
credit of R300 000 – if you want to buy a car a house, this and that, or if you want
to go on holiday, or go to the World Cup – they will give it to you. Yes, they were, I
think they were.
2
More detail to be provided!
6
But, while acknowledging the very real sense of pressure which these various examples
suggest, and while recognizing the temptations offered by ready loans, one should be
careful about overemphasising the effects of all this. Several interviewees in Doornkop,
while decrying in abstract terms the horrors of indebtedness that consumerism could
bring, displayed sage and prudent financial acumen in particular cases. If they had taken
out personal loans, these were often to pay for their own or their children’s education
rather than because of yielding to the pressures of ‘competition’ over possession of sofas
or shoes with brand names.
The case of Doornkop resident Mrs Magubane is a good example. She, like her husband,
is a waged employee of the parastatal transport corporation Spoornet, and mother of a
several children of schoolgoing age and one who was studying at university. She spoke
with frustration of the way she had been bombarded with offers of store cards, insurance
deals and ‘free’ airtime by a variety of companies. She had not, however, fallen prey to
any of these (except inasmuch as she often felt unaware of her consumer rights, and
especially ignorant of how to take action to uphold these in the face of unfair and frankly
preposterous behaviour by advertisers). On the contrary, she was aware of the dangers of
rampant consumerism and by the credit required to sustain it.
At my work place, there are people who have wallets full of cards – Foschini,
Truworths – and it is a problem when the end of the month comes. People are mad.
People must wait for credit, take it and get it again. They only earn R3 000 a month.
Go to Truworths, they wear nice clothes, fashions … now, it is summer, there are
winter sales. You will be buying things for R3 000. After, when you look at it, there
will be summer sales. One person in Truworths has R5 000 credit, at Foschini
another R3 000. When they count, they will owe R50 000. When it comes to
groceries, it is the 15th, 16th, they will have no money.
She had observed people’s readiness – here expressed as ‘I’ but meant by way of an
abstract example - to ‘swipe the card’ even for the smallest thing:
I need peanut butter. I will go to Shoprite, and swipe the card – even for bread.
In contrast, she endorsed the correctness of buying such items for cash:
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If we have no bread, I tell the children they’ll have to eat soft porridge and morogo,
I have no money for bread until I get paid. But if I have a credit card I will go and
get the littlest thing, and swipe it. I see a lot of women, they are crazy ... they must
pay this, pay that. The shops will phone you, ‘ma’am, you know that you must
come and pay us R850. You owe it, you did not pay last month’.
She had chosen to pursue a prudent strategy of investing in the education of her children
above all else.
My first priority is that ‘you must go to school. I want to be proud of you’. They
criticize me for what I wear. But when I have given you something I feel better – I
have given you something. Some at my workplace have shoes for R1 000, but their
children don’t even have shoes. I want to be proud of my children. I try by all
means to pay the little money I can.
But even such priorities could carry the danger of landing one in debt. At one point, keen
to help educate the children, she had been persuaded by a salesman to buy a series of
books on Maths Literacy on hire purchase. After almost completing their installments, the
debit orders mysteriously ceased, only to recommence some years later:
we paid until there was only R800 to pay. Then they no longer took installments. …
after about 4 or 5 years, people came, saying ‘you owe the company for the book’.
We said, ‘yes, but we have not heard about you, what you were doing, what was
going on?’
In our pay slip at the bank … they dropped it, for 4 years, we don’t know why.
When he came back, it said we owe again R5 000.
There is clear evidence here of level-headed opposition to the whirlwind of attractive
branded items, and to the pressures to buy these. At the same time, even the more farsighted expenditures – on school or university fees or educational books – had the very
real potential to land people in debt. In their attempts to rectify the situation, they were
often forced into further indebtedness at the hands of loansharks.
Elsewhere on the social spectrum one can see the same paradoxical combination. General
profligacy is acknowledged and condemned, but is disavowed in particular cases.
Statements of this kind were made not only by members of lower-middle class waged
families in the township, but also by those in the class of more rapidly upwardly mobile
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people now living in the suburbs: that is, ‘black diamonds’ in the more commonly
understood sense of the word. Several people recently employed in high-ranking
positions (director and just below) in government departments spoke to me disparagingly
of the bad borrowing habits of their peers, and of the pressure brought to bear upon them
by such peers, while pointing to their own prudence and intention or ability to withstand
these pressures.
Christine Setoaba admitted to having an inconstant response. The discrepancies in timescale mentioned earlier featured in her remarks:
it depends on my mindset whether I give in … You find yourself really wanting to
… keep up with the Joneses. So you find yourself going for expensive things,
furniture, because, when they visit me, I want them to see these couches … So
you start using your credit card, and at the end of the day it is to your detriment.
Because they come and see those couches, and it’s only at that point in time they
will say ‘it’s nice’ and then forget about it - and you are the one that’s left with
the debt … Giving in is just not on.
Her friend Jonathan later spoke of what he saw as a skewed value system that led his
cousins to spend huge amounts on prestige items like expensive cars while continuing to
live crammed together in cramped township houses. He claimed to prefer a more modest
style of living, despite his important position in a government department. His friends
had mocked him for continuing to drive an old Toyota rather than buying a Mercedes.
Echoing Tseke in The Tikieline Yuppie, he wistfully pointed out, however, that particular
pressure to spend was most intensely exerted by prospective marriage partners. He had
more or less resigned himself to steering clear, at least in the short term, of marriage for
precisely this reason.
Remaining solvent, then, appears to be linked to remaining single: a theme to be explored
in a future paper!
A correlative to the intense ‘competition’, of which many speak even if not all give in to
it, is the secrecy and stigma that accompanies indebtedness itself. The same pride and
desire for respectability that motivated Tseke’s mother at last to invite her club members
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to the house once it had decent furniture, means that those who find themselves ‘in over
their heads’ are reluctant to talk about it or to establish – in conversation with others – a
commonality of experience. Getting into debt, the flip side of consumption and
competition, is regarded as a matter of intense shame and a sign of personal failure which
must be experienced in private. This is one reason why various extraordinarily
unscrupulous practices by those glossed as ‘credit providers’ go unchallenged.
It also correlates with the fact that the remedy most commonly advocated is learning
‘financial literacy’ or ‘how to budget’. There have been numerous attempts made from a
number of quarters, to ameliorate the situation. On the one hand there are state-enforced
regulators, advice bureaus, consumer rights organizations and NGOs, on the other hand
help is offered by more mystical means. Some attempts are made to challenge the
impunity of these lenders, but most proposed remedies have a less ambitious aim and a
narrower remit. Their efforts are directed at the borrower/consumer herself. NGOs and
regulators offer budget advice, ‘financial literacy’ education and the like. Church pastors
give sermons advising against slavishness to brands, and enjoining people to ‘think about
tomorrow’. (Traditional healers are more fatalistic. Consulted about problems of debt,
one pointed out to me that a propensity to have money problems is inborn and hence
inevitable.) The general tenor of these intervention strategies involves telling consumers
to tighten their belts, rather than enforcing restrictions on reckless lending. In prioritizing
the self-discipline of the profligate, such strategies also fail to acknowledge or recognize
the range of expenditures now regarded as essential rather than optative. These go beyond
‘frivolous’ items like luxury cars and furniture; they include other expenditures incurred
at particular moments in the life-cycle. Some, such as one’s children’s secondary or
higher education mentioned earlier, are widely regarded as ‘sensible’ and forwardlooking investments. Others, particularly the cost of brideprice and of an appropriately
expensive wedding, are more controversial and disputed, but usually seen as inevitable
nonetheless. Both can end up landing people in debt.
Obstacles to upward mobility
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There are a number of reasons why it is difficult to achieve, and maintain, the stereotypestatus of upwardly mobile, get-rich-quick, yuppie described earlier.
Several potential income sources are notoriously tenuous. Most tenuous of all are those
which rely on sale of, and the willingness of the upwardly mobile to buy, precisely the
goods, services and credit products which are the topic of this paper. The case of
insurance salesmen is a good illustration (see Baehre, various dates). While many
township dwellers have shown themselves willing to move into the market for formal
insurance, they are also likely to cancel their policies at a moment’s notice when times
are tough, as was the case during the recession. Some also cancel policies more
strategically when they need a lump sum. This inconstancy has disastrous effects on the
economic situation of the middleman – the insurance broker. Several people who had
recently approached Magda Sekiba, a debt counsellor, for advice, were insurance
salesmen. The reason why they had fallen into arrears with their payments on cars,
houses and the like was because their clients had cancelled policies in droves, especially
during the recent recession, thus wiping out this commission-based source of livelihood.
A further income generating strategy which recently became available to aspirant
entrepreneurs hoping to better themselves is that of buying and selling property: on
auction or otherwise. Frank Pule was one such. He got into the business when a number
of houses were being auctioned 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. As an example, he gave the following, imagining an exchange between a
customer and himself:
OK, I have just started working, and I am new, and I am buying my first property.
Next time, if I am upgrading, if I am going to town – ‘do you also sell town?’ ‘Yes,
I do’. ‘OK, I will come to you if I want to buy something in town, and you will sell
this one for me, and then you’ll get me something in town. Because you know me, I
am sure you’ll give me a good price’. So, people don’t know what it is like buying a
house. They think ‘because I am working at SABC, I will afford this house’
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Echoing similar accusations globally, he mentioned the ready availability of credit as
having been a factor inclining people to buy houses without giving it much thought.
…the banks, of course, are the greatest culprits: ‘We can give you so much more
now, because it is worth so much more than when you bought it’.
While this enterprise had originally seemed to have considerable promise, he found
himself running into various problems. While the indebtedness of house buyers had
originally meant the ready availability of repossessed townhouses, problems of debt had
now worked their way through the system. As a result, there were now fewer potential
buyers looking for houses.
Frank’s idea of 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 though the use of such houses as
surety for loans had put many owners in a vulnerable situation. People did not need to
take out mortgages to buy the old-style state-built township houses in Soweto, like other
townships, since these had been given over to the families that had occupied them during
the apartheid era. The basis of this arrangement was a 99 year lease rental which later
transformed, enabling tenant to claim full titled ownership of the property (by which time
the total purchase price was reckoned to have been paid off.) ‘Those were not bonded
[mortgaged], people did not owe anything,’ he said. But some people, here too, had overreached themselves, as Frank explained. They either used their houses as surety to get
loans from the bank … you say ‘Mum, we can get so much with that house’. You take the title deed to
the bank, and the bank comes, and they value the house. And then they give you the
money.
- or they had secured bank loans in order to build rooms on to these houses. In either
event, defaulting on the loan from the bank would end in tears.
like the old Soweto. There might be a four-roomed house, a kitchen, dining room
and two bedrooms. What would happen … when one starts working, then, when the
banks were still light on giving money, a child would say ‘Ma, I have started
12
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.
While this would, in theory, have been traumatic for the occupants of the house, in
practice it spelt 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.
I don’t buy those properties, because they’ve got a history. [People’s] great great
grandmother was there, their grandmother was there, their mother. When you buy
such houses in townships, the history of that house keeps you out. Yes, you can buy
it, but then there are a few obstacles, because they won’t want to leave. People
around … are so secretive about their problems, they don’t tell the neighbour that
“I’ve taken out a bond on my house”. 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”. But only the owner and the bank know that he owes the bank.
For a speculator or agent to buy such a house was to invite the wrath of local vigilantes,
as I was told by one woman whose husband’s family narrowly missed having their house
repossessed by the bank, precisely because of just such a loan given for the formulaic
‘two rooms and a garage’ extension. Even had the bank taken action, however, the house
would have proved impossible to sell on to an auction
the vigilantes in the townships don’t allow that.
What do the vigilantes do?
They toyi-toyi next to the house. Nobody is going to get into the house. Just like
in Protea Glen, there are street committees, and they won’t allow anybody new.
You’ll lose out if you buy such a house. It has to be an extreme case when they’ll
allow you to buy such a house. They have this idea ‘an injury to one is an injury
to all’.
Further forms of income generation that profit from other’s loss relate directly to the state
of being indebted itself. They are discussed in the section below.
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In contrast, there are sources of income that are regular and reliable – waged employment
in the private sector, state employment, and access to state welfare grants. But these
entail another catch, which ultimately can make such regular employment in the formal
economy, in some cases, merely a conduit through which money is channelled to the
advantage of others – either in the informal one or working for companies. Waged
employment necessarily requires that one has a bank account. But it is through the use of
such an account that one is rendered vulnerable to regular ‘plunder’. This plunder is
conducted through means that (though often avowedly fraudulent and illegal) are
sanctioned by the state. It is often done by those who, since they lack a direct link to the
coffers of the state/capital, are forced instead to route their parasitic money-sucking via
state employees. These are strong words, but they capture the sense of outrage I picked
up both when talking to those who are active in the field of consumer rights and
consumer protection, and to those who are being ‘bled dry’.
‘Taking money the way they want’: the garnishee order
It is difficult to convey the sense of helpless yet indignant victimhood expressed by South
African waged employees of relatively modest means in the face of perhaps the most
vicious weapon that capitalism – with the tacit sanction of the state - has it in its power to
wield: the ‘garnishee’ or emoluments attachment order. Such an order is granted by a
magistrate and allows a creditor to take a monthly repayment directly from a debtor’s
account (at a 5% charge). It was about the garnishee order that low-wage people
attending a financial literacy workshop complained most bitterly to Daphney Smith, a
community education officer working for the development organization Kagiso Trust.
Some had been driven simply to abandon their bank accounts and to open new ones: a
practice that had become endemic and was often repeated as creditors continued to
pursue them from one account to the next.3
3
"We have 1.2 million to 1.3 million public servants at the national and provincial level. We found that
210 000 public servants are now affected by garnishee orders." Low savings 'a concern'.
http://www.fin24.com/articles/default/display_article.aspx?ArticleId=1518-2386-2432_2541289
2009/07/23 03:40:00 PM accessed 7 August 2010
14
At a different level entirely, it was to investigate the corrosive practice of garnishee
orders that GTZ, the German development agency, had funded an investigation into
problems affecting workers on the BMW assembly line as part of its ‘employee wellness’
programme.
Before going into technical detail, it is perhaps best to start with the personal story of
Jeanie, a Sowetan divorcee who had lost her job as a nurse and had returned to live with
her family, upon whom she was currently dependent. She was an enthusiastic person who
was rebuilding her life as a single woman, had become a committed ‘born again’
Christian and was studying for a degree through correspondence. Her earlier life had been
somewhat blighted by indebtedness. In particular, an order was made on her salary as a
nurse, after she and her husband had split up. She was held liable for the loan:
You are forced to pay it. You don’t have any choice. They contact your employer.
They give him the garnishee order and the amount. They discuss it and say ‘she
earns this much – take this much’. … They used to take R700 and something from
my salary in garnishee. It depends on how much you earn.
What finally happened?
When you are not working the garnishee stops but as soon as you get work [it
resumes] .. because your ID, it sticks. The UIF [Unemployment Insurance Fund]
says ‘this nurse is working’ then they garnish your accounts again. I do hope I will
find a job and I will contact the credit bureau and make arrangements to pay every
month. I don’t want garnishee orders again.
This and similar stories capture the experience of low-income families everywhere. What
this single account does not convey, however, is the epidemic proportions of this
problem. It also fails to capture the unsavoury and illegal practices which were being
carried out by corporations with impunity. Complaints about some of these were picked
up by Frantz Haupt and his fellow case workers at the University of Pretoria Law Clinic
when they were training social workers on the National Credit Act and debt counselling.
They conducted some systematic research on the problem, looking at a sample of about
86,000 employee salary records in various sectors, as well as interviewing clerks of the
[Magistrates] Court in different provinces.
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The study revealed ‘terrible irregularities’. An employee must sign a ‘consent to
judgement’ before a clerk of the court will allow a garnishee order to be put on an
account. But legally and financially illiterate consumers ‘will sign anything’, especially if
they are harassed at work. In other instances, the study uncovered the forging of
signatures by employees.
Frans Haupt put forward the following scenario as an example:
I am now a debt collector. I employ, especially in the rural areas, 10 or 12 field
agents who must approach the debtor to get this ‘consent to judgment’ … to an
emolument attachment order. And I pay these guys …a commission on the
amount of money that they collect …
We came across cases where it was obvious that I must collect from Mr. Jones,
and if I bring back the consent signed by him, then nobody can check if that is
Mr. Jones’ signature. And you actually had cases where a person would say
‘that’s not my signature’, then he’d show us other documents he’d signed, and it
was obviously not the same signature. You do not need to be a handwriting expert
to see this. Or people who say, ‘I never signed this document’. You’d trace the
witnesses. It would turn out that the document had been signed by a witness, but
not by the person in question. …
There were, as he put it, ‘lots of irregularities’. Another of these was for debt collectors
employed by companies to obtain consent to judgment ‘in a different court, often in a
different province or hundreds of kilometers from where either the employer or the
employee is based.’ In one case, an employee living in KwaZulu Natal was garnished in
the Magistrates Court in Bloemfontein, about 800 kilometers away. This makes it
extremely difficult, even if the employer wishes to, to have this order rescinded,
because it must be rescinded in the court where it was given. So I obtain my
orders in Johannesburg and the guys are working in the Cape, and costs will just
prevent them from getting to Johannesburg. Or if they go see an attorney in Cape
Town, he has to appoint a correspondent attorney in Johannesburg. So it
immediately doubles the costs.
One of the conclusions of the study was that ‘the higher the salary the more the tendency
you have to have garnishee orders’. But poorer people, even though often ineligible to
enter into largescale formal credit agreements with large retailers and banks (that might
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end up garnishing their accounts) experienced an equivalent sense of entrapment. They
usually took out micro-loans from registered or unregistered lenders, mostly termed
mashonisa (loanshark) irrespective of whether or not they were formally registered.
These lenders often took client’s ATM cards and ID books as a means to secure the loan.
When wages or grants are paid at month end, the loanshark withdraws the money. The
borrower comes to collect whatever is left of her pay – usually a trifling amount. She will
then require a further loan in order to make it through to the following payday, the lender
will retain their ATM and ID cards to secure that further loan, and so the cycle continues.
This crude yet effective method requires no signatures (fake or otherwise), intermediary
debt collectors or Magistrates Courts. It is different in many respects from the garnishee
order. Yet at least one woman who had borrowed from a loanshark used the term
‘garnish’ to describe it. Law clinic attorney Mareesa Erasmus summed up the matter thus:
‘there are so many trying to take advantage of these poor people’.
Debt-go-round: borrowers, lenders, and attempted regulation
Part of the paradox is that, as mentioned earlier, borrowing and lending cannot be easily
separated from each other. Where unemployment for the many is twinned with
employment for the few, regulation – weirdly combined with outsourcing - yields new
chances to make money.
This is most obviously the case with debt counselling itself. The passing of the National
Credit Act, effective from June 2007, aimed to curb ‘reckless lending’. It established the
basis for consumers, instead of going through the existing processes of administration or
insolvency, to enter ‘debt review’. This would give them a grace period of 60 days during
which they could enter debt counselling, and during which their counsellor, having
assessed what they needed to live on, could contact their various creditors asking
permission for them to reduce their rates of repayment to each. This process has met with
numerous obstacles, including its conflict with earlier forms of legislation (especially the
Magistrate’s Court Act); Magistrates’ lack of education in how to apply this new Act; and
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the failure so far to take cases to the High Court so that precedents might be set and the
new legislation become effective within the mainstream legal system.
Apart from these obstacles, the process has thrown up other inconsistencies as well. Most
notable among these is that debt counselling, intended to provide relief, has been a
process outsourced to small entrepreneurs, and charged for. In its first incarnation it was
designed to be run by ‘paralegals in NGOs’ and people such as those who ‘have a
background of working as a communist activist’, as I was told by Xolela May, a trained
lawyer who was raised in the township of Langa, Cape Town and who played a key role
in bringing in the new arrangements. But the ‘job creation’ opportunities were spotted
early on when the Bill was being debated in Parliament, and various constituencies
insisted that ‘debt counselling’ be envisaged in such a way that it would provide
employment for the numerous unemployed. In the end, the process was left to the tender
mercies of the market rather than being undertaken by the state which had initially put the
regulatory framework into place.
The only qualifications required to be a debt counsellor are a matric certificate and
attendance at a short (two week long) training process: qualifications roughly similar to
or only marginally more than those required of an ‘administrator’ under the previous
regime of indebtedness control. The possibilities of an undignified free-for-all were
unbounded. Xolela May pointed out that administrators had been ‘unscrupulous
individuals who wanted to benefit’ from the problems of ‘the poor’. The Law Reform
Commission of South Africa, he said, had picked up that these administrators were
transgressing the provisions of the relevant section of the Magistrates Court Act, which as
a result had been under review since 2004. But as it turned out, these same ‘unscrupulous
people who used to be debt administrators and collectors …just changed their hats’ and
became debt counsellors instead.
The situation was summed up succinctly by Frans Haupt, director of the law clinic at the
University of Pretoria, when he said
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you must also be careful … many of these people assisting consumers – your
administrators, some debt counsellors – they come up with all sorts of claims of
how bad the situation is – they frighten the hell out of you - but their motive is not
so much to assist but to make money out of it.
The vicious cycle of debt
A second opportunity provided by the situation in which money flows regularly into the
bank accounts of state employees, thus providing opportunities for those who are not in
state employ, is that of moneylending. To gain an insight into the complex character of
debt and the reciprocal interdependence that exists between borrowers and lenders, it is
first necessary to return to the realm of ‘the stereotype’ and in particular to look at
characterizations of the vicious cycle which indebtedness involves.
This cycle can be found in the case of both salaried civil servants/company employees,
and recipients of government grants. Speaking of the former, Mary Tsakane, a pastor,
told me about her church’s attempts to instruct people in financial responsibility. She
described the kinds of predicaments in which her parishioners sometimes find
themselves:
it’s very bad for a person who says ‘I have worked for the whole time, and I’ve
got X amount of money, and this X amount of money is going to go to all this
debt I have. And I don’t have anything for myself for the next month.’ … All the
money they get paid is not enough to sustain them. So the only alternative is for
them to go and borrow money so that they can take care of what they need in the
home. But imagine someone not earning a lot, borrowing money, and then the
little they get they still have to go and pay it back. You never get to a place to get
the things you want. Unfortunately a number of people have jobs like that – our
teachers, nurses - and that is how they live.
Likewise expressing concern were members of the legal profession. Frans Haupt, the
University of Pretoria law clinic director who had played a key role in training debt
counsellors, described the debt-go-round in vivid terms. He spoke of
old age pensioners getting only R800 pension per month,4 so all the micro-lender
needs to do is get her to borrow [R500] once, and from there on …
4
This was before the pension went up to its present rate of R1080.
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And we actually come across this type of thing, where the lender/debt collector,
on pension day, would arrive there, he would take the R875, ‘That is as payment
for the R500 you borrowed last month’. So now you have paid the R500. But of
course you are stuck without any money, now what do you do? You borrow
another R500. Next month you have to pay back R875. So effectively all that guy
does is, he goes once a month to the pension pay-out point and collects all the
R875s from these pensioners, and gives them R500. No risk…
Personnel in charge of Makhulong a Matala, the community development wing of a
housing company in Johannesburg, had similar concerns. The organization is not
primarily market-driven, but does find itself forced to extract rental owed in arrears from
defaulting tenants. They spoke of how
a person will go and pay a loan shark, or a micro-lender. And immediately there is
a queue for taking it back, and then immediately go back to this other queue to
borrow the money again.
All these accounts describe the sense of entrapment, the inability to get off the carousel
once one has boarded it. The situation is widely known, by borrowers, as one of ‘working
for mashonisa’ (the loan shark).
The embroiled, entangled and convoluted character of the arrangement, however, is
exacerbated when one recognizes that that low-level informal moneylending is an
ubiquitous part of township life; and that borrowers are also lenders, and lenders
borrowers (see James 2009). Such a realization has many ramifications. Any attempts to
teach self-discipline to consumers/prospective lenders are vastly complicated and
problematized.
I was alerted to this on a number of occasions. The first was when I heard of the
existence of ASCRAs (Accumulated Savings and Credit Associations), documented by
Bahre (2007; see also Bouman 1994) but not widely known. (Rotating credit associations,
even without the ‘Accumulated Savings and Credit’ are of course credit-granting, but
since the credit they offer is interest-free and since their annual-cyclical character is
intended to cancel out any long-term imbalance of indebtedness, I will not consider them
here.) A large number of the stokvels I came across are designed not simply to save
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money but to generate interest, either by forcing members to take it in turns to borrow the
float (at 20-30% interest per month) or by loaning it at similar rates to friends, relatives or
neighbours. Members of such clubs, especially in the first case, are both lenders and
borrowers at once – or in turn.
A second occasion was when I spoke to Daphney Smith at Kagiso Trust. Part of her job is
to offer workshops to low-paid workers, the unemployed, and pensioners. The workshops
cover financial literacy, especially the advisability of banking one’s money and the
inadvisability of borrowing money from informal lenders. Daphney pointed out that
many of those low-paid people attending her workshops are, in fact, moneylenders
anxious to seek advice. They need the security of a bank account, but are anxious. In
putting the proceeds of their moneylending activities into the bank, they wonder, do they
run the risk of making themselves visible to the state and vulnerable to its regulatory
attempts? They are aware of the National Credit Act and its insistence that all microlenders be registered, are ineligible for registration, and are afraid of being found out.
Conclusion
The partly self-fulfilling categories invented by market researchers and advertisers are
problematic. They cannot be assumed to reflect the nuanced reality of consumer
experience or the problematic character of indebtedness. Many who are assumed to have
been plunged into debt with the advent of democracy had been involved in relationships
of debt over several generations of family history; many who have achieved rapid
mobility (and many who have not) have a sober and prudent attitude to matters of
investment and are all too aware of the need to save money where possible. Rather than
requiring ‘financial literacy’ classes, they know about the kinds of things which might
bring returns in the longer term. At the same time, however, the obstacles to moving up
the ladder at a slow and steady pace are often insurmountable. Property relationships
continue to be ringfenced. Most attempts to earn an income involve the kinds of
strategies most commonly described as ‘rent-seeking’. Lending is one such strategy often
resorted to, but many lenders are borrowers too – all are scrabbling to access the small
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but steady trickle of funds that come from secure employment in the state or business.
Under such circumstances it is difficult to get off the money-go-round.
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i
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