[miningmx.com] – IT is said that if you owe a bank a hundred dollars, you have a problem. But if you owe a bank a hundred thousand dollars, the bank has a problem. And as we have seen from history, if banks have problems, so do we.
Since the National Credit Act was signed into law in 2007, unsecured consumer debt in South Africa has increased at an annual compound rate of 30%. By 2014, it amounted to some R1.5 trillion or 75% of South Africans’ disposable incomes; nearly 40% of the gross domestic product.
Sure, when African Bank collapsed last year it did appear that the bank was the one carrying the problem. But the bank had to be bailed out by the South African government – ultimately, the taxpayer.
A growing number of people in South Africa are struggling with crippling debt, a symptom of the fact that South Africans are ranked as the world’s biggest borrowers according to the World Bank’s 2014 Global Findex Database study.
The issue is that over indebtedness not only has a negative effect on the economy, but also on the state of mind for employees as it could lead to immense stress and depression.
As part of the wage agreement that brought an end to the 2014 platinum strike, unions and the platinum mining companies committed to examine the employee indebtedness problem in depth, and see what could be done to provide some level of relief.
At Anglo American Platinum, for example, audits revealed that about 26% of the workforce are heavily indebted.
Most of the overspending was due to other factors including additional and extended families, repatriating money, and funerals, with the most common cause of indebtedness in our platinum business being child maintenance.
The opening up of the unsecured lending industry through the relaxation of credit requirements has meant it has become all too easy for salaried employees to secure loans.
At a deeper level, it is the business practices of many of the credit providers and administrators who ensure that the debts themselves are both excessive in the context of employees’ ability to repay, as well as subject to extortionate, and in some cases illegal terms and conditions.
It was the extent of these excesses and exploitation that were the greatest surprise from the audit we conducted.
As a result, we have also introduced a financial wellness programme which is now available to all Anglo American employees comprising a financial literacy debt relief component.
In the platinum business for example, the programme has to date saved and refunded over R3m by auditing administration and garnishee orders for irregularities and tackling collectors and lenders on these.
There are however still some key challenges, most obviously the take-up of these services by employees. We estimate that to reach our R7m monthly target we need to bring 30% of our employees into the programme. At present we are only at 5%.
With the economy getting tougher by the day, it is not a problem that will be solved by growth and unfortunately there is no standard quick solution.
As businesses, we have a major responsibility and a large role to play when it comes to both the wellbeing of the people in South Africa as well as the stability and wellbeing of our country’s economy.
Andile Sangqu is executive head of Anglo American in South Africa.