By Doug Mattushek - 19 August 2019Views : 2569
The debt relief being offered by the National Credit Amendment Bill is likely to force financial institutions to make it more difficult for the public to borrow money.
Business Tech reports that President Cyril Ramaphosa approved the National Credit Amendment Bill last week and while it still has to be gazetted, the picture is worrysome for South African consumers.
The act allows certain applicants to have their debt suspended in part or full for up to two years, or even written off entirely. While the criteria for such a result include instances such as the debt being less than R50 000 and the person having not earned over R7500 a month for the previous six months, it does add up to billions of Rands.
"...the ANC government is fiddling with the financial system by condoning the write-off of anywhere between R13 billion and R20 billion (according to the National Treasury) of debt belonging to banks and other financial institutions," said Dawie Roodt, chief economist at the Efficient Group.
"These loans are as much property as anything else, and is supposedly protected by article 25 of the constitution. What kind of message is this sending to the ratings agencies such as Moody’s and Standard & Poor's?"
So while the Act will release the poor of their debt, the payoff is that banks and lending institutions will likely make it more difficult to borrow money in the future, or even outright deny lower-earning customers of loans altogether.
"The very group that the debt forgiveness programme is allegedly aimed at according to the Department of Trade and Industry (ie, retrenched workers and low wage earners) will be the very people who will not be able to source a line of credit when this policy (is implemented)," said Neil Roets, CEO of Debt Rescue.