The rising levels of indebtedness in the Marikana community is believed to be a contributing factor to the soaring wage increases demanded by miners, igniting violent labour unrest in the platinum mining belt, which has spread to other regions and sectors of the economy in recent weeks.
The National Credit Regulator (NCR) has been conducting raids in the region and identified a number of instances of non-compliance with the National Credit Act, the regulator's chief executive, Nomsa Motshegare, said on Thursday.
These included the illegal retention of consumers' bank cards and identity documents, excessive interest rate charges, illegal fees charged, a lack of – or inadequate – affordability assessments, reckless lending, failure to disclose the cost of credit and the signing of blank process documents by consumers that allowed lenders to implement unlawful deductions directly from consumers' salaries.
The regulator would be referring these cases to the National Consumer Tribunal to impose administration fines on credit providers found in contravention of the law and secure refunds for customers.
Under the Act, interest rates on unsecured credit is capped at 31%.
The problems identified represented the "outright preying on the vulnerabilities of low income and working people in this country", Trade and Industry Minister Rob Davies told a press briefing on Thursday.
Struggling with debt
The rise of unsecured lending to consumers, already struggling with debt, has come under the spotlight in recent months.
Unsecured lending only makes up 9% of the total R1.3-trillion in loans extended by credit providers. The rate of growth in this sector has sparked worry from regulators and government policy makers.
According to the NCR's latest figures, unsecured credit had grown by 36% year-on-year as of June.
Many working families and migrant miners have high levels of debt which has been incurred through micro-lenders or "mashonisas", according to Davies.
"Much of that is at levels which make this unsustainable, which erode deeply into the incomes of those communities and which also fuel the high demands for salary increases by those workers," said Davies.
Aggressive, irresponsible lending and subsequent indebtedness of miners in the region was not the primary cause of the violent strike action Davies stressed. The judicial commission of inquiry into the events at Marikana would be looking into the myriad of factors that led to the violence.
But authorities identified the particular problem of high levels of indebtedness in this particular mining community, which needed to be addressed, he said.
The Marikana region was home to a total of 13 credit providers. The NCR inspected 12 of these businesses and only found two that were fully compliant with the law.
"We are seeing practises at the very least verging on being highly reckless. People are being enticed into taking loans under difficult circumstances. Those loans don't solve those financial problems they only worsen them," said Davies.
The problem is not confined to Marikana and the NCR will be conducting investigations in other mining towns in coming months.
Consumers being targeted for unsecured credit predominantly earned between R7 000 and R15 000 per month according to Motshegare.
She warned the wider credit health of consumers was deteriorating with consumer credit impairment rates rising to 49%.
The problem was exacerbated by the fact that as consumers grew increasingly indebted additional credit was being extended to them.
"When we refer to credit health we are not just referring to credit. You have got issues around fact that electricity costs have gone up, food prices have gone up, fuel prices have gone up and in the event that interest rates start going up, these are the same people who are going to start falling off a cliff," she said.