As South Africans struggle to put food on the table during lockdown, mashonisas fill a crucial gap.
‘Business has been booming since this lockdown. People have expenses, but they don’t have money. That’s where I come in.”
These are the sentiments of B Dlamini (as he likes to be known), a 70-year-old unregistered credit provider – commonly referred to as a loan shark – from Pietermaritzburg, KwaZulu-Natal.
Dlamini, a pensioner who also receives a social grant, told City Press that he had been lending people amounts of money of between R100 and R1 000, at an interest rate of 30%, for the past seven years.
This rate is defined as “excessive” by National Credit Regulator spokesperson Lebogang Selibi. “The interest rates are linked to the repo rate and these change when the repo rate changes. Loan sharks charge excessive rates not prescribed in the National Credit Act.
“They use unlawful tactics, such as retaining consumers’ IDs, Sassa [SA Social Security Agency] cards and bank cards as a collection method, and usually resort to bullying tactics and threats to enforce payment from consumers,” Selibi said.
With similar findings in its May 2020 Household Affordability Index report, the Pietermaritzburg Economic Justice and Dignity (PMBEJD) group said “bashing in kneecaps with a hammer and the gentle touch of a knife’s edge against the neck” were not unknown, as “fear and intimidation” were part of the tactics used by loan sharks to get their loan repayments.
However, Dlamini, who runs his business based on trust, said that, unlike other loan sharks, he relied on karma rather than force to ensure his clients paid him back.
“I lend money to about 60 to 70 people a month. Sometimes you lend someone money and they don’t repay it. I don’t fight with anyone. I know that one day that person will be needing money again and by then I won’t be able to help because I wouldn’t be able to trust them. I often hear about loan sharks beating people up if they don’t repay their debts. I think it’s wrong. People come to us because they’re struggling,” he said.
INCREASED SPENDING ON FOOD
According the diginity group’s report, “families living on low incomes may be spending 30% more on food than they did in March”.
The group said that, while its data was limited to Pietermaritzburg and its calculations were “not absolute”, its findings revealed new insight into the situation facing low-income families.
The group also attributed increased expenses to children and workers being at home during the Covid-19 coronavirus lockdown.
“The PMBEJD household food basket – which includes maize, cooking oil, chicken and sugar beans, and includes average prices of over five supermarkets and four butcheries – cost R3 470.92 in May.
“However, with additional food bought and the inability to seek out cheaper prices, the more realistic cost of the food baskets of households living on low incomes might be R4 194.93.
“This means that from March 2020 (prelockdown, when a basket cost R3 221) to May 2020, with food prices increasing 7.8%, the additional spend on food and not being able to shop around for food suggest that households may be spending 30% (R973.93) more on food.”
The group also found that “with income having been suspended for many workers and insufficient top-ups on social grants, women with no saving buffers have to take on higher levels of debt”.
“Loan sharks who used to charge 30% interest on loans now charge 40%. This is consistent with a higher demand for the money they have available to loan, and profiteering off a crisis.
“Spaza shop cash loans typically carry a 30% interest rate and work the same as mashonisa [loan shark] loans. The problem, though, is that if you fail to settle your debt, you also lose access to the spaza shop. Because of this, mashonisas are preferred,” the group found.
NOT ALL LOAN SHARKS BENEFIT
City Press also spoke to a loan shark from KwaThema who did not want to disclose his identity.
With a similar approach to Dlamini, he also charges a 30% interest rate to clients and “lets people be” if they don’t repay their debts.
“I lend money to people I know and trust, that’s how I know they’ll pay me back,” he said.
However, unlike Dlamini, his business has taken a knock.
“It’s not like before. People are not working, so the risk of their not repaying the loan is high.
“It’s hard for me to believe them when they say they’ll pay me back. That is why I’ve resorted to giving out loans only to those who have working permits during the lockdown. Business has been slow because I lend money to fewer people,” he said.
Manakhe Chiya, a researcher and facilitator at the Pietermaritzburg group, said that, while loan sharks were often portrayed in a negative light, they played a crucial role during lockdown.
“Unlike banks, loan sharks can lend people money any time as long as it’s paid back according to the agreement. With banks, you have to pay back an entire loan before you can get another one.
“In this time of the Covid-19 coronavirus they play a big role because many people are at home and things like food run out fast in many households. A person can go to a loan shark, borrow money and be able to buy what is needed,” she said.
“Retaining a client’s documents casts a negative light on loan sharks and is never a good idea. What would happen if the client passes on? The family will be left behind to figure out where everything is and that may cause strain,” she said.
- Not understanding their personal financial position;
- Not budgeting and not sticking to their budgets;
- Taking up credit and using credit recklessly;
- Taking out credit from unregistered credit providers;
- Paying an “upfront payment” for loans before the full loan amount is paid out;
- Taking out loans without understanding the credit agreement (contract);
- Taking out loans on behalf of friends and family without fully understanding the risks and consequences associated with this; and
- Hiding from credit providers when battling to make payments. Consumers should approach their credit providers for assistance and not hide.