Debt finds a way around the law
I am in the small Knysna office of the Black Sash, South Africa’s premier human rights organisation. I am talking to Xolela May, a consumer rights activist and lawyer.
He is one of a small network of people spread across South Africa whose indignation about the credit conundrum, and whose commitment to the cause of the indebted, have driven him to play a key role in designing and implementing arrangements to help alleviate their plight and to regulate the activities of creditors.
He gives me some of the background, recalling the origins of his activism.
He grew up in the black township of Langa and it was a daily occurrence for neighbours, having got themselves into debt, to be taken to court by their creditors.
He would observe the sheriff of the court arriving and doing an inventory of the family’s possessions prior to confiscating them, while they stood by helplessly.
Although Cape Town was host to several law clinics and human rights law organisations, Langa residents had no idea how to contact them: their plight was an “issue of powerlessness”.
May later studied law, worked for a while at the advice organisation Legalwise and eventually joined the Black Sash. At the time, he tells me, a wide variety of providers were feverishly extending credit to people formerly denied it.
Debtors were being taken to court in record numbers and repossessions were being carried out to an even greater extent than May had seen in his youth.
What he noticed, in particular, was how legal practitioners acting on behalf of creditors were routinely ignoring particular sections of the relevant legislation – the Magistrates’ Court Act of 1944 – which might have afforded some protection to debtors: these lawyers were “likely to go to the last stage, so they can have profit”.
On the basis of his experiences with indebted people in Knysna, May applied in 2001 to the department of justice to house a help desk in their offices on behalf of the Black Sash. He mostly concerned himself with section 65 of the Act: the legal framework governing garnishee or emoluments attachment orders, by means of which outstanding debts were being collected directly from a debtor’s salary.
This framework, he says, provided debtors with greater rights than were normally recognised: it makes a provision that, before any court order can be made in respect of the financial attachment of the emoluments – which is the wages of the debtor – the court has to make sure that debtor has sufficient means in order to maintain himself and his family.
May’s aim was to monitor and advise consumers who were ignorant of their rights. He found that debtors – because “it was their first time to go to court” – were being intimidated into agreeing to unsustainable debt repayments. For example, a debtor who has a monthly income of R800, ought to have “sufficient money left over” after repaying creditors to meet his needs. Instead, a debtor would agree to give up half his income to repay his debts.
As a result of the help desk programme, May and other Black Sash officers built up cordial relationships with attorneys, who counselled creditors against the illogical pursuit of debtors unable to fulfil their obligations.
While still operating the Black Sash help desk at the department of justice, he was also playing an important role in the consultations that were underway to draft, consult and eventually pass the key piece of legislation that was intended to remedy many of these ills: the National Credit Act, with its new debt counselling scheme.
He gives a frank account of both the advantages of the Act and its unexpected, and undesirable, outcomes. With great canniness, many lawyers, less able than previously to earn money from pursuing penniless debtors on behalf of creditors, “have changed their hats to own … debt counselling agencies”.
Others doing a similar switch of role are those who previously acted as debt collectors or debt administrators. The earlier arrangements had been governed by the Magistrates’ Court Act. Its flaw was that, for amounts less than R50?000, the size of debt incurred by most of the debtors whose cases May dealt with, bankruptcy or sequestration was excluded.
The intention of the new Act was to provide a system more affordable to those in this category and to stop harassment by creditors, allowing debtors to reschedule debts and giving them some breathing space to make payments while also preventing further indebtedness.
But debt administrators were often “unscrupulous individuals who wanted to benefit” by exploiting the desperation of poor people.
Spotting the possible end of the old and the onset of the new, they too have entered the debt counselling profession, which they see as a new business opportunity, alongside or replacing that of debt administrator.
My encounter with May illuminates a number of matters that have puzzled me. It explains something of the dedicated reforming zeal that motivates a number of activists, who might, in a previous era, have concerned themselves with what appear to be more fundamental human rights abuses. In the current era, they have homed in on consumer rights – and, in particular, the rights of those in debt – as a key issue of concern.
It provides insight into the character of the legal arrangements governing indebtedness that prevailed during apartheid and shows which aspects of these arrangements seem to require reform or abolition.
But simultaneously it illustrates the difficulties of replacing the old with the new. It illuminates the personalised, entrepreneurial, episodic and often piecemeal character of the steps taken to put these new arrangements in place. These often generated unintended consequences, producing new problems, which in turn required fresh legislative arrangements to remedy.
Reforms were always thus but there is something about the character of the state and the law in South Africa that marks them as particular, even exceptional.
There is a great readiness to produce innovative policies in the name of social justice and equality, often on the basis of lessons learnt from elsewhere.
But entrenched interests find new ways to assert themselves or dress up in new clothes, dodging the potential restrictions that reforming initiatives threaten, and taking advantage of these to create new opportunities. What eventually results is a mismatch between creditors (who operate with the backing of states and global finance) and powerless debtors.
I am vividly reminded of my conversation with May when, four years later, I read with horror about the massacre of miners at the Marikana platinum mine. South Africa found itself on the front pages of the world’s press in 2012 when police shot and killed 34 miners during a strike by rock drillers at the mine.
Horror was expressed at the authorities’ use of lethal force and at how this echoed earlier killings in the apartheid era, most notably those at Sharpeville 52 years earlier.
But underpinning the episode was an opposition rather different from the earlier one, in which the politically disenfranchised were faced down by officers of an authoritarian state.
The initial condemnation was followed by a spate of analyses. Among these was the revelation by several newspapers that the miners, not necessarily in the lowest pay bracket, had unsustainable levels of debt.
An additional feature making this doubly burdensome, indeed intolerable, was the manner in which the numerous creditors were ensuring repayments.
Miners’ pay, automatically transferred into their bank accounts at month-end, was being transferred out of these again with equal ease by those to whom they owed money.
Shortly after payday, exactly as May had described, many of them simply had nothing left to live on.
The Marikana killings, then, involved a disenfranchisement apparently more economic than political in character.
Until then, the problem of indebtedness had tended to be framed in terms that isolate people and call them to account as consumers, rather than uniting and leading them to group action or solidarity as citizens. This suggests that there is something characteristically individual about the phenomenon of indebtedness in the current era.
But in the Marikana worker protest, it ended up translating into terms that involved confrontational solidarity.
There had in fact been strongly political aspects about the way the debt problem was framed from the start. Trenchant criticism of creditors and financed lending have not been lacking among those who hold office in South Africa’s ANC government. The minister of trade and industry, Rob Davies, spoke at a press briefing soon after the shootings about credit providers’ “outright preying on the vulnerabilities of low-income and working people”, and undertook to implement more controls in order to check such activities.
One illustration of the deeply political character of the credit problem and its proposed solution was the fact that numerous groups of actors from across the board had been consulted in successive drafts of the Bill that eventually passed into law. Broadly speaking, those consulted could be divided into lenders and borrowers, corresponding more or less with the classic Marxist division between the sphere of capital on the one hand and labour on the other.
Perhaps not quite as clearly aligned, but tending overall to represent borrowers (and labour) more than the other, there was input from the Black Sash.
There is a further important dimension. The story of a struggle between capital and labour, though certainly true, needs some qualifying. South Africa’s economy came to be dominated during the 20th century by well-established sectors of Afrikaner capitalism and English capitalism.
Having participated differentially in the processes of proletarianisation that created a cheap black labour force, the two then had a decades-long struggle over which would have preferential access to that force. (Both are now being in part replaced by a more ethnically hybrid if still mostly white/English-speaker dominated, capitalist financial sector.)
At the same time, a succession of governments with nationalist agendas, first Afrikaner (post-1948) and later black African (post-1994) have needed to keep themselves close to, and to ensure the upliftment of, other less easily definable parts of the electorate.
Alongside the clientelistic distribution of jobs, and the distribution of social grants, intermittent attempts have also been made, particularly since 1994, to encourage and accommodate the needs of that increasingly large section of the electorate bent on making a living in the cracks and interstices of the system.
Marking the advent of liberalisation, these operators are framed, and encouraged, as small- to medium-sized entrepreneurs.
Their activities, not always strictly legal, have long been tacitly tolerated in a dual economy, in which brokers and commission-based agents mediate between mostly white-dominated capitalist enterprise on the one hand and the largely black world of workers, the unemployed, the poor (and, more recently, the swelling ranks of salaried public servants), on the other.
Deborah James is professor of anthropology at the London School of Economics. This is an edited extract from chapter four of her book Money From Nothing: Indebtedness and Aspiration in South Africa (Wits University Press).