Deputy Speaker, the National Credit Act, No 34 of 2005, was passed by Parliament, among other things, to regulate the manner in which credit is extended by credit providers. It provides for the monitoring of credit and credit marketing practices, as well as the investigation of unfair practices, and allows for the referral of unscrupulous practices to the National Consumer Tribunal, NCT.
The National Credit Regulator, NCR, which operates under the aegis of the Department of Trade and Industry, was established, among other things, to enforce the National Credit Act, NCA, and to take action against contravening credit providers. The NCR has enhanced its focus on enforcement and has been conducting proactive investigations into the activities of credit providers in the moneylending industry.
The primary focus of these investigations is to uncover illegal and undesirable practices. These include, for example, the charging of excessive interest and associated costs of credit, and the failure to conduct proper affordability assessments. Where evidence is found of such practices, appropriate enforcement action is taken in accordance with the Act without fear or favour.
Further, the NCR will apply to the NCT for orders to refund consumers who might have been overcharged, as well as seeking the possible deregistration of credit providers or other suitable punitive orders that the NCT is empowered to enforce in terms of the Act. Such refund orders will be preceded by an audit at the expense of the credit provider, to determine the full extent of overcharging.
With regard to the second part of the question, the NCR as the regulator of the credit industry does not at this point in time possess evidence to point to a direct correlation between wages that are not related to the cost of living, unsecured lending and labour unrest. But I should say that there are considerable amounts of anecdotal evidence suggesting that large parts of the wage incomes, including wages of workers on strike in various circumstances, are absorbed by servicing unsecured loans provided largely for consumption purposes.
As hon members may recall, a little while ago we held a press conference in regard to the fact that the NCR had been to Marikana and had found that there were 12 credit providers operating in that small community, 10 of which were in one way or another noncompliant with the provisions of the NCA. Thank you.
Deputy Speaker, I thank the hon Minister for clarifying those issues. What I would like to put to you, Minister, is this. Given the limitations of the NCR in being able to conduct research into the correlation between wages that are not related to the cost of living, unsecured lending and labour unrest, will the Minister consider requesting the research units in the Ministries of Trade and Industry, Labour, and Economic Development, and National Treasury to conduct such critical research? Thank you.
Deputy Speaker, I would just like to say that the NCR itself is conducting research into the broader question of unsecured lending and the impact of the unsecured lending particularly on people in low-income groups. That research is still ongoing.
Let me also say that I think the focus of attention at this point is the enforcement campaign, which is, in fact, being rolled out, particularly in low-income areas. That is the focus of the attention of the NCR.
Of course, if those doing the NCR research, or the research exercise does come to us saying that additional support and attention are needed, we will endeavour to provide such support so that we have a decent piece of research into the impact of unsecured lending on people in low-income groups. Thank you.
Madam Chair, the Minister is right to use the word "anecdotal" - in isiZulu we talk about "amahemuhemu" [hearsay]. I think it is important to do proper research. The NCR, to its credit, is doing good research, and they have visited not only Marikana but many other places around the country. They have found contraventions, but not necessarily anything special, in Marikana.
My question to the Minister is this. If he is going to ask the NCR to do the investigation, I think they ought to ask the people who borrow money whether they are pleased to borrow it, and whether they are pleased to be able to borrow it from reputable banks like Capitec, FNB, and African Bank instead of the "mashonisas" [illegal moneylenders], who are operating illegally?
Madam Deputy Speaker, as I said and as the hon member said, research and the campaign of rolling out enforcement are ongoing. I think that the National Credit Act is based on the premise that, in fact, there is an obligation on the credit provider in a very uneven and unequal transaction to ensure the affordability and sustainability of that credit extension to the credit consumer.
So, while it is, of course, obviously desirable that credit - normal credit - is available to people low-income groups at some kind of affordable rate, I think that what we have seen is a number of cases where credit is being extended at more than the legal maximum rates to people who are clearly unable to repay it, without adequate consideration of the creditworthiness of the people.
I also think that in a situation where 12 microlending enterprises are operating in one small community, Marikana, and 10 out of the 12 are not compliant with one or the other aspect of the Act, what that is telling us is that there is a story out there that needs the urgent attention of the NCR. Thank you.
Thank you very much, Deputy Speaker. Hon Minister, I think what the investigation in Marikana showed, and certainly this is what the NCR has told us, is that most of the big players in the industry do, in fact, try their best to obey the law, even if they push the law to its limits, and certainly we must address that. But it is the illegal operators, those "mashonisas" who hon McIntosh was talking about, who need serious and strong action. What we need is research, absolutely, but what we need a great deal more is enforcement.
So I want to ask you the following, Minister. Have you considered, firstly, a significant increase in the resources available to the NCR so that they can significantly upscale the number of investigations, prosecutions and raids that they can do? Secondly, what specific amendments to the NCA is your department considering? Thank you.
Well, when I used the words "without fear or favour", I meant we were saying that whoever - big or small - was involved in contravening the Credit Act, we would act. That is the mandate to the NCR. As the hon Hill-Lewis said, enforcement, improved enforcement, is the priority right now.
If and when the NCR does come to us and tell us that they have resource constraints and that there are issues around that, we will, of course, try to address that. However, the decisions are not necessarily ours; they are also made through the broad budgetary process.
We are also discussing with them possible amendments, because I know that the declaration of reckless lending, for example, is quite a drawn-out process, where you have to go through debt counselling and then have magistrates declaring the transaction to be a reckless lending transaction. We will be very open to discussing ways of improving the enforcement of the provisions against reckless lending. Thank you.
Thank you, Deputy Speaker. Hon Minister, I am glad that you sound quite firm in regard to reckless lending. Recent reports attributed to the NCR suggest that South African consumers' debt stands at R1,3 trillion. What is even more worrying to the head of the Unisa Personal Finance Research Unit, PFRU, Bernadene de Clercq, is that these borrowings are no longer for buying luxuries such as cars and so on, but for buying essentials such as food, and for paying for transport and kids' school fees. Does the Minister sense or believe that there is a debt bubble on the horizon?
Well, I think there are a number of pieces of research that are out there, telling us different figures for the levels of indebtedness and so on. The point about the research that is being conducted by the NCR is that we want an authoritative picture so that we can say, with certainty: This is the picture.
Let me say that the role of the NCR is in the area of consumer protection and enforcement of consumer rights. We are not responsible for prudential regulation and it is up to the prudential regulators to tell us whether there is a bubble there or not.
Clearly, within this expansion of unsecured lending that has been taking place in South Africa, there has been a proliferation of undesirable practices engaged in by small and large credit providers in the economy, and it is our mandate and responsibility as the Department of Trade and Industry, and as the NCR, to act strongly, without fear or favour, in that regard. That is our commitment.