A growing number of people in this country are struggling with crippling debt, a symptom of the fact that South Africans are ranked as the world’s biggest borrowers, according to the World Bank’s 2014 Global Findex Database study.
The issue is that over indebtedness not only has a negative effect on the economy, but also on the state of mind for employees as it could lead to immense stress and depression, says Anglo American South Africa executive head Andile Sangqu.
“At Anglo American, we are committed to the wellbeing of our people and are particularly concerned about the effects of excessive individual indebtedness. And, without being paternalistic, we feel we have a responsibility to help our people free themselves from debt and to avoid the snares and consequences of unscrupulous lending,” he notes.
As part of the wage agreement that brought an end to the 2014 platinum strike, states Sangqu, unions and the platinum mining companies committed to examine the employee indebtedness problem in depth, and see what could be done to provide some level of relief.
At Anglo American Platinum, for example, audits revealed that about 26% of the workforce are heavily indebted.
He points out that the audit also highlighted that it was not only loose overspending that was the cause of this financial distress.
“Most of the overspending can be attributed to other factors, including additional and extended families, repatriating money, and funerals, with the most common cause of indebtedness in our platinum business being child maintenance,” he states.
He points out that it is the level and nature of the debt, which has made the problem become more intense in recent years.
Sangqu says the opening of the unsecured lending industry through the relaxation of credit requirements has meant it has become all too easy for salaried employees to secure loans – both formal and informal.
He adds that borrowers sign contracts unaware of the implications for their future cash flows. At a deeper level, it is the business practices of many of the credit providers and administrators that ensure that the debts themselves are both excessive in the context of employees’ ability to repay, as well as extortionate, and, in some cases, entered into under illegal terms and conditions.
“It was the extent of these excesses and exploitation that were the greatest surprise from the audit we conducted. As a result, we have intensified our ongoing investigation of every claim that is made against an employee’s monthly earnings.
“We have also introduced a financial wellness programme, which is now available to all Anglo American employees. This programme comprises a financial literacy debt relief component with specific targets to improve employees’ disposable income, and also includes a challenge to the fees charged by lawyers when acting as debt administrators.”
He notes that, in the platinum business, for example, the programme has, to date, saved and refunded over R3-million by auditing administration.
“This programme forms a part of a larger undertaking by Anglo American to address the indebtedness of its employees and similar or related programmes are planned at some of its other businesses in South Africa,” he says.