The Democratic Alliance can finally reveal that our long held view that the recently passed ‘Debt Relief Bill’ will be a devastating blow to low income South Africans, is entirely correct after the Department of Trade & Industry (DTI) finally released the 112 page Socio-Economic Impact Assessment Study (SEIAS) into the Bill.
The DA maintains that the biggest winner from this Bill will be loan sharks as South Africans will now be forced into their open and waiting arms.
The SEIAS was commissioned by the DTI during the formulation of the National Credit Amendment Bill, also known as the ‘Debt Relief Bill’. This study was done to look at what the cost to the economy and the state of the Bill would be and how this would affect the credit market for low income South Africans.
In the ANC’s rush to pass the Bill before the 5th Parliament rose, they stubbornly refused to wait for the SEIAS. We now also know that President Cyril Ramaphosa chose to ignore the many red flags that the report raised and chose to sign it into law in the dead of night on 13 August 2019. It is unthinkable that President Ramaphosa ‘applied his mind’ to this report before he signed the Bill into law.
The big question that the President needs to answer, is why do they believe that the many warnings and hazards raised by the study were not worth considering before the Bill was signed into law?
Some of the more serious findings that the report raises resulting from the Bill are:
- There is a net negative impact for South African society and the economy
- The formal credit will increase the cost of credit and restrict R12.8 billion worth of credit to low income South Africans which will have consequences for the entire credit market.
- Loan sharks will see a massive increase in R7.7 billion worth of business as people turn to them for loans, without protection or regulation
- The Bill diminishes the Governments attempts to broaden financial inclusion
- It will cost Government, at least R407 million to implement the bill. All unbudgeted and 275% more than the National Credit Regulator told Parliament it would cost them
The truth is that it didnt have to be this way. Throughout the legislative process, the DA proposed many more sensible solutions to over-indebtedness which the study finds in our favour.
- a subsidy to make debt counselling more available to low income South African’s which would allow them to remain in the credit system
- Improve the ability of the NCR to prosecute illegal and reckless lenders, especially loan sharks in township and rural communities
- Mandatory credit life insurance against consumers which would mitigate the losses of those that genuinely need their debts written off
The DA will continue to advocate for credit legislation that protects consumers from debt traps and illegal lending whilst ensuring the sustainability of the credit markets. In contrast, the President has signed into law legislation in an information vacuum which will now have disastrous consequences for consumers, the cost of credit and the restriction of credit for low income South African’s.