Microlenders to blame for wage demands

[IanF]

This article rings true and is worrying Trevor Manuel blames Microlenders

UNSECURED lending is a significant factor in unprecedented demands for a 100% wage hike, Minister in the Presidency Trevor Manuel says.

Addressing a conference in Sandton on Thursday on business and transparency, Mr Manuel said unsecured lending also played a role in the deaths of 34 miners killed at Lonmin’s Marikana mine last year after a standoff over wages.

Mr Manuel blamed microlenders for the high wage demands issued by the Association of Mineworkers and Construction Union (Amcu).

Amcu is seeking increases of more than 100% for all unskilled and semiskilled employees in the gold sector. Its demands include a minimum entry-level wage of R11,500 for surface workers and R12,500 for underground workers.

At present, the minimum wage in the gold industry is about R5,000 and varies slightly according to mining houses.

"There were 13 microlenders operating in that small community," Mr Manuel said. "Many of the workers didn’t see up to about 40% of their income."

Mr Manuel said most employees had garnishee orders in place and never saw their salaries. He said one microlender had been charging interest of 30% a month.

Mr Manuel said unsecured lending was also a factor in corruption. The amount of borrowing needed to be reduced.

Analysts seem to concur with Mr Manuel’s sentiments.

Imara SP Reid research head Stephen Meintjes agreed, but said there were other factors as well.

"Yes, we believe it’s a significant factor but we must understand that unsecured lending took place in other sectors as well. But it is undoubtedly a factor," he said

South Africa has seen sharp growth in unsecured lending over the past five years, raising concern about a credit bubble consumers’ ability to repay their loans.

Figures from the National Credit Regulator show the total amount of unsecured lending has grown fourfold from R7bn to R29bn.

The annual growth rate has moderated since peaking at 67% in the first quarter of 2011.

The Reserve Bank said in its financial stability report in March that the banking sector’s total gross unsecured credit exposure rose to R441bn in the fourth quarter, from R398bn in the previous quarter.

It was against this background that Mr Manuel said microlenders had also become a huge problem for the country.

A senior analyst from Avior Research said: "It is possible, there are a lot of loan sharks out there who put the miners under pressure."

The South African Human Rights Commission (SAHRC) organised the conference, at which Mr Manuel was the keynote speaker.

The gathering brought together a number of businesspeople, academics and members of government to discuss the role and relevance of transparency in the business sector.

SAHRC deputy chairwoman Pregs Govender said there was a need for proper compliance and transparency in the business sector. She said the conference was aiming at best practice and, through engagement on issues related to corruption, ensuring business enjoyed the benefits of transparency.

I haven't had the pleasure of having garnishee orders for my staff but have seen how this lending screws up people's lives. What is worrying me is the one solution is to demand higher wages instead of educating the masses into a savings culture. Then the addon costs that these guys incur when lawyers phone and insurance and whatever is sickening.
The government is trying with the NCA but needs more education for the poor suckers who get caught in this. I just can't see how the people involved in this feel it is moral.
Anyway rant over.

[Dave A]

I haven't had the pleasure of having garnishee orders for my staff but have seen how this lending screws up people's lives. What is worrying me is the one solution is to demand higher wages instead of educating the masses into a savings culture. Then the addon costs that these guys incur when lawyers phone and insurance and whatever is sickening.
The government is trying with the NCA but needs more education for the poor suckers who get caught in this.

Teach everyone one thing to put the brakes on this - the in duplum rule. And it's an area where businesses can help when it comes to garnishee orders too.

[ians]

The bling is confusing people, the big TV, the fancy car, etc. The problem is not the bling, it the access to the HP for the bling. I agree that the micro lenders and banks are to blame, its a vicious circle. The bank gives the money to buy the house, the person can afford the house but not all the other commitments and bling which comes with owning a house, rates and taxes etc, so they go borrow money, now because they have a house they get credit and so the cycle begins, the more debt the more loans.

For people who have better salaries or jobs get credit cards and the same thing they roll credit cards, pretty much the same thing the micro lenders do to the less fortunate people.

[IanF]

Teach everyone one thing to put the brakes on this - the in duplum rule. And it's an area where businesses can help when it comes to garnishee orders too.

Dave I wonder why Trevor Manuel did not bring this up or maybe it was ignored by the reporter? Have you used this yet?

[polpak]

Always are those who offer more, without being clear of costs... Is there a need for more financial
education, perhaps simple budgeting mandatory ?

The difference between chaos and living, is managing debt repayments.

[Dave A]

Have you used this yet?

I have one staff member with a garnishee order, and the time for me to declare the debt satisfied (by virtue of in duplum) is drawing close. It's going to be interesting moment, I'm sure.

[ians]

The other problem is you have these people visiting sites where we work, then they start harassing my staff and threatening them, which in turn causing a loss of production, staff with problems are non productive.

It is not the micro lenders at fault, it is like pointing finger at a hooker, who is really to blame, you create the market, someone will make the services available. The people using the hookers should be named and shamed not the hooker.

I had to laugh at the police the other day, they made a big appearance guns out, cleaning up the streets, throwing the hookers into the van, big deal, the joke was as they were loading them into the van, so more where appearing further back down the road. I started taking pictures of the cars collecting the hookers, then you see a reaction, once they realised I was filming the people collecting the hookers, so business slowed down and the cars where no longer stopping. As soon as they notice the camera they speed off.

[Miro Bagrov]

What's the difference between micro lenders and macro lenders? Why bash the small guy?
Small guys, do small damage.


Banks these days are desperate to sell a loan to any person who walks into their branches.


According to SARB, 69% of South Africans are in debt.

[IanF]

Macro lenders lend to the financially savvy clients. Micro lenders to the smaller uneducated clients who don't have the savvy. BTW this is also a problem in the UK

Clampdown on payday loan firms as complaints rocket
Kate Devlin and Martin Williams
Tuesday 2 July 2013
MORE than 100 Scots a week are lodging complaints about payday loan companies.LINK

What gets me is the lenders and the whole "industry" that knowingly rip off these guys. I heard that banks then add on admin fees insurance etc. then when the lawyers get hold of the account they charge for every phonecall. This is were the President needs to restart the moral regeneration campaign he was supposed to head when he was Deputy President.
Will it happen?

[msmoorad]

The bling is confusing people, the big TV, the fancy car, etc. The problem is not the bling, it the access to the HP for the bling. I agree that the micro lenders and banks are to blame, its a vicious circle. The bank gives the money to buy the house, the person can afford the house but not all the other commitments and bling which comes with owning a house, rates and taxes etc, so they go borrow money, now because they have a house they get credit and so the cycle begins, the more debt the more loans.

For people who have better salaries or jobs get credit cards and the same thing they roll credit cards, pretty much the same thing the micro lenders do to the less fortunate people.

you are correct

and then when any programme is launched to teach people how to manage their money, its almost laways the banks or other lending institutes that sponsor it.
talk of a conflict of interest
their advice is not really the soundest cos they still make it seem as if borrowing from the bank etc or buying on HP is OK but they "teach" people not to borrow more than they can afford to make payments on monthy.

the best advice is to only buy for cash
until u can afford it, do without it

and we know how difficult it is for those who have been deprived for so long & suddenly have access to everything to control themselves.

[Dave A]

What's the difference between micro lenders and macro lenders? Why bash the small guy?
Small guys, do small damage.

Micro lenders aren't necessarily small operations - they just specialise in small, short term loans - typically at very high interest rates.

The effect on disposable income of pay day loan operators in the UK has also come under fire in the past week or so - a very similar issue. (EDIT: I see IanF has also brought up this point while I was drafting this response.)

Also, the individual operators may be small by comparison to the big banks, but do not underestimate the size of this sector as a whole, and its ability to significantly affect the shape of our economy - especially in the low income bracket.

Dave I wonder why Trevor Manuel did not bring this up or maybe it was ignored by the reporter?

I've been chewing over that, and on reflection I suspect "in duplum" and pretty much the rest of the NCA is near worthless as a measure to control damaging credit provision in the micro loan market. These are aggressive operators not averse to risk and stretching the law past its limits, both in credit extension and collection.

It's a problem that is definitely going to need a multi-faceted response.

[adrianh]

There is an additional problem. When I was down and out I owed a dentist R1,500. They eventually handed me over to their lawyers. The lawyer phoned me a day later and told me that I now owe the lawyer R2,100. So, the lawyer makes one phone call and he feels that it is worth R600. I told the collection lady exactly what i think of her, her boss, her boss's dog and where they can all go jump off. I paid the dentist R1,500 directly and zero to the lawyer. We wait and see whether the lawyer is going to try to get the R600 from me.

Ok, so why do I tell you this story; simply because the people who are already in the crap because the owe money and pushed deeper into the crap by lawyers, debt collectors etc. The problem is far bigger than micro lenders, the problem goes across board, the only difference between a macro and a micro lender is that the oe takes your house and the other takes your kneecaps.

[bjsteyn]

There is an additional problem. When I was down and out I owed a dentist R1,500. They eventually handed me over to their lawyers. The lawyer phoned me a day later and told me that I now owe the lawyer R2,100. So, the lawyer makes one phone call and he feels that it is worth R600. I told the collection lady exactly what i think of her, her boss, her boss's dog and where they can all go jump off. I paid the dentist R1,500 directly and zero to the lawyer. We wait and see whether the lawyer is going to try to get the R600 from me.

Ok, so why do I tell you this story; simply because the people who are already in the crap because the owe money and pushed deeper into the crap by lawyers, debt collectors etc. The problem is far bigger than micro lenders, the problem goes across board, the only difference between a macro and a micro lender is that the oe takes your house and the other takes your kneecaps.

Hey @AdrianH, i feel your sentiments. About a 2 years back, i was earning about R3500 (doing computer programming, believe it or not). I was working at the company for about 3 months, yet FNB gave me a lone for R25000 and I had to pay back R50000 over 3 years.. That was my first real permanent job, up until that point i was working for myself and i was not getting by because it is hard to work for yourself if you don't have transport. So i said OK ill take the job, it is something to put on my CV and thought they are just gonna look if i can do the job and raise my salary and they will relise that i know what i am doing. Didn't have transport and took out the loan, so i can get my own business going partime, doing IT stuff. I baught a new bike and after 6 months i was only earning R3800. I realised, im gonna go nowere at that company, as they want quantity not quality and was getting behind on my loan repayments. So i decided to quit the job, hell i could earn more working for debonairs. Neways, had to sell the bike, but still sat with the debt of about R42000.

I couldn't pay for a while and they handed me over to the lawyers. I have a solid job now, and have gotten what i ow down to R20000. But in March this year I made a payment for R1400, that 3 months later still hasn't been deducted off my fnb loan account, that i have paid interest on for 3 months that i shouldn't have. I have emailed the lawyers about 7 times about it and everytime i receive a return receipt that someone has read my mail (actually several per email, they definitly read it more than once) , but yet they do not respond to me.

I have also spoken to them on the phone about it about 3 times (When they make their monthly curtisy call, haha) and every time they say, they will look into it, yet nothing is done. So emailed them again and said i will not pay again until they sort it out.

Well today they phone me again (yes, i didn't make a payment this month. Took the money i normally paid them and invested as an short term investment to make back the interest i shouldn't have paid), and they threatend me that i will have to pay lawyers fees if i don't make a payment this month, yet i mention the missing money again. Again they said they will look into it today and get back to me, although that was second priority to them wanting a payment from me, and again they did not get back to me. They expect me to make a payment to them, yet R1400 of my money paid to them has gone missing and i have paid interest i shouldn't have.

I feel like taking them (fnb lawyers) to the lawyers and fnb as-well as a matter of fact. The lawyers for the R1400 that has gone missing, the interest i paid and all the stress they put me threw phoning 2 times, sometimes 3 times a month.(Haha, while im suing them why not add that!) . FNB because i was bound to fail on loan repayment on the salary i was earning, and they shouldn't have loaned me that money. I have no idee how they approved that loan. I wanted it, but they shouldn't have given it to me (now looking back)

If i could go back i would have never taken the loan in the place i was, but that is how you learn from your mistakes!

[bjsteyn]

Microlenders like wonga, definitely can help you when you need some urgent cash flow, but then again it is to easy to take a loan and you get into monthly habit of taking a loan. Yet your salary is actually going down every time you take a loan. I used them to get some cash flow (over 5 months) for paying of a new laptop and samsung galaxy note i baught threw the company i work at, to be more productive, yet i new i was losing money. My reasoning was that i know i am losing money, but with the right tools i will be more productive and earn the money back twice, as i am a entrepeneur always looking online and offline of ways making money. My cash flow is almost right again.

Eg. of how a monthly loan can get deteriarate:
Jan i take a loan for R750 i pay back a R1000 month end
Feb comes i am short some money so i am still short what i was last month, but an extra R250 as-well so i take another loan for a R1000 and pay back R1300 month end,
Mar comes and i take a loan again, what i was short last month, plus my interest on my loan, so total R1300. I pay back R1600 month end.
See where i'm going with this?

A micro loan will not sort out your money problems, it will make it worse. It is a temporary solution, which you should only use if
you have already formed a real solution to sort your money problems or if it is a once off thing.

Anyways, i hope i have a real solution, i believe i have and am woking on it every day, the light is near!

[Blurock]

Cash is king! One can only be free if you have no debt, morally or financially.