Mediating Indebtedness in South Africa

Deborah James 2018

● This paper discusses how brokers, who add interest at every point in the value chain in South
Africa’s credit/debt landscape (which expanded in the 90s), complicates the polarised arguments
that argue whether credit/debt has led to more inclusion or exclusion in a ‘credit apartheid’.
● Such presence of intermediaries makes it difficult to allocate blame and separate bad/good
protagonists or perpetrators from victims.

Introduction
● First case: how agents who work for furniture and appliance retailers act as brokers who assemble
formality and social embeddedness. -818
● Second case: illegal money-lending
● Third case: state attempts to cut out these small-scale agents. The article analyses contestations
over the attempted regulation of creditors’ ‘reckless lending’.

Context - The New Lending

● Indebtedness and aspiration often are twinned. Indebtedness rose in SA from 90s

● “Forces of state and market intertwine. Intermediaries, their patrons and their clients, using free-
market style savvy, divert state resources such as civil servant salaries and welfare grants or use
these as security in their lending operations, thus enabling them to make ‘money from nothing’
(James 2015a) in a redistributive version of neoliberalism.3 Put differently, ‘neoliberal means …
ensure the ever wider spread of redistribution’ (James 2012: 37).” - 819

Assembling Credit Scams in the Furniture Retail Trade

● 20th century africa - loans unavailable to black people - system evolved of selling them furniture
and applicants
● Agents from black townships facilitated sales
● 80 years later, black people still rely on furniture retail sector for credit
● Although this business is characterised as formal, there’s still lots of personal relationships and
trust involved.
 ● But scams are common bc of commission nature of agent’s work

Loansharks and their intermediaries

● “Blurred boundaries exist between informal moneylending (sector 3, Figure 1) and its recently
regularised and regulated counterpart, ‘micro-lending’ (sector 2), with borrowers frequently
confusing the two and using the same term – mashonisa – to describe them both.” -822
● Borrowers and lenders aren’t easily distinguishable because in sector 3, there are people like
salaried civil servants and social grant recipients who lend money alongside other livelihoods but
also borrow money from rotating credit savings clubs.
● Moneylenders operate outside of legality but aim at greater economic formality themselves.
● Lenders’ businesses arose from black people’s inability to access credit except by buying
furniture on instalment. Lenders had personal connection to borrowers. Community
embeddedness caps interest rate - lender can't insist on full repayment otherwise they’d get a rep
for unfairness. The local mashonisa’s desire to stay in business controls the terms under which he
seeks repayment.
● Agents and intermediaries have taken hold of bigger moneylenders - who charge 50% interest
monthly.
● Liberalisation allowed SA’s credit/debt revolution and allowed all types of lenders to extend
loads with immunity.
● Regulation turned lenders more explicitly into outlaws - they were more in informal domain
where community embeddedness had previously been key. Mashonisas, previously involved
(often via their agents) in relationships of trust, became beings where unlimited cash flow (by
ATMS-linked bank accounts etc) enabled ready payment and formalised things.
● For agents, this might have limited their opportunities to craft personal client relationships but
also could help them assemble a livelihood by combining formalised and bureaucratic
arrangements with ever more informal and trust-based ones.

Credit ‘Post-Apartheid’: Reformers and Small-Time Creditors

● Reformers, conscious of moral transgressions in credit apartheid, suggested new lending systems
to reduce need for black people to depend on HP agreements. New systems to promote trust in
the public good rather than relying on informal and violent relationships with intermediaries
● Reforms didn’t work as well as designers intended
● National Credit Act - 2007 - tackle problems of ‘reckless lending’ p825
● Negative consequences of debt were being intensified by illegal and unregulated collection
practices
● “As reforms aimed at curbing these excesses, and as related practices of ‘reckless lending’, were
debated in parliament, assorted micro-lenders in sector 2 energetically contested these to protect
their innovative lending assemblages. An organisation representing their interests, Balboa, argued
that to curb the activities of lenders would be to outlaw the livelihoods of many low-income
people (including financial intermediaries)” -826
● The organisation Balboa which offered unsecured loans at high rates of interest, defended seller’s
rights. It obscured moral ambivalences about borrowing and lending
● Little seems to stand in the way of lenders having loans repaid. Disadvantages eg calculating
rates of non-repayments/risks from depending on ages, are outweighed by freedom to recoup
 loans by techniques like garnishee orders + by prevalence of intermediaries, debt administrators,
and collectors willing to facilitate loan collection.
● However, contradictory reforms meant that protection for borrowers was at the expense of semi-
formal income-generating opportunities embraced by brokers inhabiting marginal spaces.

Conclusion
● Redistributive neoliberalism has made individuals in South Africa come up with creative
innovative arrangements to create new socio-economic position for themselves (brokers, petty
entrepreneurs, repossession agents, moneylender etc) that are dynamic and challenge the
restrictions of formal inclusion in initiatives.
● They use personal relationships and draw on trust + intimacy.