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

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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.