South African parliament passes bill that will see some citizens forgiven their debts

South Africa’s National Assembly has passed the National Credit Amendment Bill as a debt intervention measure for the citizens of the country plagued by recession.

The Credit Amendment Bill passed on Wednesday aims to provide a capped debt intervention that would encourage a change in the borrowing and spending habits of South Africans, as well as provide debt relief to those who are heavily indebted and have no other efficient and effective means of extricating themselves.

Simply put, the bill plans to give South Africa’s National Consumer Tribunal the power to nullify debt under certain circumstances. The conditions under which debtors are eligible for debt relief are when they as individuals earn less than R7‚500 monthly and they have no readily realisable assets or investments that can be sold quickly to recover the money owed. Others eligible are individuals who are not subject to debt review and individuals who have less than R50,000 debt outstanding.

The bill also aims to further limit the widespread abuse of consumers by unscrupulous lenders. It will also make enforcement of the Act more rigorous as well as provide criminal prosecutions of those that have plans to abuse and take advantage of consumers.

According to the country’s treasury estimates, this bill could write-off between R13 billion and R20 billion during the 48 months debt extinguishing implementation period. The Minister, under the bill, would be empowered to adjust the maximum gross monthly income of a debt relief applicant and adjust the total qualifying unsecured debt.

Debt relief or depreciation may seem like a narrow way out of overly indebted South Africa and it may come at the expense of consumers and retailers especially Small and Medium-sized Enterprises (SMEs). Concerns are that it has the propensity to damage loan agreements, restrict access to loans in South Africa and threaten the stability of both consumers and the lending sector in the country.

Statistics show that in South Africa, out of the 23 million credit-active consumers, over 42 percent are considered impaired, thanks to mounting debt. Majority of these credit-active consumers owe arrears in form of vehicle asset finance, fixed-term agreements, credit/store card for close to four months and some even have judgments against them.

In addition to the National Credit Amendment Bill, the country passed the Protection and Promotion of Indigenous Knowledge Bill to enable access to indigenous knowledge, the establishment of indigenous knowledge register, accreditation of assessors, certification of indigenous knowledge practitioners and coordination of indigenous knowledge-based innovations.