of loan sharks
The moneylending and debt collection industry is booming in the coastal town of Knysna, reports Marianne Merten
Geoff Jeku goes to one of many moneylenders in Knysna every month to put food on the table. Two years ago he borrowed a couple of hundred rands, and he is now so indebted that he has to borrow more cash just to live and support his mother, brother, sister and her children.
“The moneylender takes all my money, I can’t get something to eat. He takes R400,” whispers Jeku. “I don’t know what to say. It’s not our idea to make these loans. When we have a problem, there’s no other place to go.”
Knysna, one of the Cape’s most picturesque towns, is renowned for its oysters and rich pleasure seekers and as a place of retirement. But underneath the hustle and bustle of the main road and its cafs, craft stores and restaurants, another industry is booming – moneylending and debt collecting.
Jeku is just one of hundreds of working people caught in the vicious circle of borrowing money to repay money.
The Black Sash started probing moneylending after people asked for help when faced with legal action. Sometimes the Black Sash managed to halt what it calls “ruthless debt collections” or fraudulent practices, and in four cases the organisation has arranged for a lawyer to take matters to court.
Black Sash representative Duncan Marsh says it is disappointing that the government has promised to deal with unscrupulous moneylenders, but has not invested resources to help people like Jeku. “People in Knysna and elsewhere are stuck in a debt trap which is reinforcing poverty.”
Several Knysna borrowers could lose their homes after signing over their title deeds – sometimes because of pressure by debt collectors, sometimes out of ignorance. Everyone who has borrowed cash from the 13 or so moneylenders in the town handed over their bank cards and secret personal identification numbers as “security”.
In many cases borrowers do not even know how much money the lenders remove from the bank accounts each month. Borrowers say they never receive receipts. Says one who was too scared to be named: “I always took him [the moneylender] as a person you could trust.”
Many are afraid of the moneylenders and their debt collectors. Several people did not want their stories published because they fear what may be done to them afterwards.
In 1997, Jeku borrowed R200 from a company called Seven Minute Finance to help tide him over a rough patch. This debt was settled through a garnishee order – a court order allowing another party to deduct money from a person’s salary.
“He [the moneylender] told me I could now come to make another loan,” Jeku says. Last December Jeku borrowed R800 from the same moneylender with R240 interest over three months and left behind his bank card. R1 500 was deducted from his bank account, yet he still owed money.
“When I asked how much we owe him, he didn’t want to say,” Jeku explains. “I have to borrow more money.”
Over two weeks in March Jeku earned a gross income of R633,24. He was left with R19,08 after the moneylender deducted money from his bank account. A total of R443,75 was paid straight from his wages to three moneylenders or their debt collectors.
Another R115 was taken off his salary to repay a loan from the municipality’s social club where municipal workers can borrow up to R500 at an interest of 13%.
Zimizele Xalibi, the father of a nine- month-old boy went to the same moneylender as Jeku.
About two-thirds of Xalibi’s wages for two weeks’ work in May were deducted to pay moneylenders. Of the R125,40 he received, he had to pay half to another moneylender.
Waiting to speak to the woman in charge of one of the branches of Moneywise, which won a recent Knysna business of the year award, it became clear how easy getting into debt can be.
Surrounded by brightly coloured posters of smiling black women and men declaring, “Great Success” and “Great Security”, a couple paid and borrowed money in less than 15 minutes. The woman paid R50, but asked for R5 back for taxi fare. She did not get a receipt for the money, but her husband later had to sign a blank form for the R5.
Negotiations started over how much money the couple could get. Initially they asked for R850. But this was not possible after the Moneywise official saw the man’s salary advice and explained she could only give them the equivalent of half his pay, or R730.
Obviously familiar with the couple’s financial status, she asked if there have been new deductions to his pay; he now only takes home R600 of his R1 400 salary. She then told him to bring in his salary advice on the 15th of the month so she could “see if we can give you some more money”.
A blank blue form was signed, and the man had to initial against another of many loans recorded in a personal file. A quick peek revealed the couple had been borrowing amounts averaging R800 for at least six months. Then the R730 was paid over.
When the couple was asked why they borrowed money, the woman said “we are struggling” before becoming angry at the questioning.
Mcoseleli Zondeka is one of the lucky few who have managed to escape the debt trap. The Black Sash is now trying to help him retrieve the money he apparently overpaid the moneylender Cashfriends. He borrowed R800 to attend a funeral in King William’s Town in April last year.
Zondeka signed four forms, which he says, were never explained to him. Money was deducted from his bank account. In June he asked the moneylender to deduct the capital of the loan because he had received a special bonus from his employer. According to him only R200 was still outstanding.
Yet when he spoke to Johan Kolbe at Cashfriends, he was given a computer printout saying he still owed R800 – or around R1 200 with interest. Through a garnishee order, a further R1 047 was deducted from his salary.
The moneylending business in Knysna is complex. Often several members of one family run different “shops”. For example, Seven Minute Finance is run by Kolbe senior and Cashfriends by his daughter Michelle. J&M is run by Annelize Groenewald and her mother Debbie Naud, whose other daughter is the deputy manager of National Finance. Many of the lenders use debt collectors Soft But Sure.
Although Kolbe spoke freely about the moneylending business and her reasons for setting up an office, she refused to be quoted unless it was vetted by the lawyers for the Micro Lenders Association, which, according to her, was a requirement of the association. Others were less concerned.
The moneylenders say they check the payslips of potential borrowers to find out it they owe money to other lenders. If there are more than three or four deductions to local lenders or their debt collecting agencies, the applicant will be turned down. If they approve a potential borrower, they are prepared to give loans of up to half the applicant’s salary.
Unofficially, some moneylenders acknowledged there are those who overcharge interest, make borrowers sign blank forms and hand over money without the mandatory three-day cooling off period.
The owner of Nettcash is overseas, but his nephew Jacques Dreyer was prepared to explain how the operation works. Sitting at a table in a local antique shop where money is loaned, he says borrowers leave behind their identity documents – “They can come use them anytime” – but not their bank cards.
On application, everyone signs a garnishee order. Dreyer says loans are seldom more than R300.
Groenewald says retaining bank cards as security “is the way all the moneylenders operate”. She says little will change “until the government gives us another way to get the money out of these people”. Aware of the pending new laws, she says the company will continue to charge 30% interest until amendments are in force.
But she dismisses the often negative perception of moneylending. “You people don’t understand. The people come in and they want more money. They sit and sit there until we give them money.”
For Jeku and hundreds of others in Knysna, where employment is scarce, it is a life of permanent spiralling debt.
“I’m trying to get out, but I can’t. I’m in already. I want to get proper money. I want to pay all the people I owe,” Jeku says.