South Africans borrow more money than anyone else in the world , and the country is falling further into a debt trap that numbers in the trillions.
The mining industry is one of the worst affected, with a long history of debt and internal strife, culminating in protracted strikes and disagreements over salaries.
Despite the infighting, the net result is the same: mineworkers remain in debt and simply spend their bigger salaries on paying back what they already owe.
One thing is clear: the industry needs help.
In the face of adversity, the mineworkers have found a surprising ally: their employers. Mineworkers and their managers have enjoyed an uneasy alliance in the past, but despite this, some of South Africa’s biggest mines have announced plans to educate their workers about handling money responsibly.
It’s not before time. Statistics report that in 2015, nearly a quarter of all the country’s mineworkers spent 75% of their monthly salaries on debt repayments. In 2014, after the latest miner’s strike, 88% of the country’s mining workforce were overdue on one account or another. And despite the fact that salaries have improved – at times averaging between ZAR10 000 to ZAR15 000, much of this money is going to micro lenders, or worse, not being repaid at all.
Paying off debt is nothing new in a country that lives on credit. Between 2013 and 2014, 86% of South Africa’s credit-active consumers borrowed money, compared to a worldwide average of 40%. But workers in the mining industry are facing a rising tide of interest rates and spiralling debt, and are often borrowing money from disreputable sources.
Glen Jordan, Director of Fintech firm IMB, hopes times of changing.
“Anyone can get into debt, but what pleases me is that the management at these big mining firms are looking to empower their mineworkers. It’s important to give people the tools to make informed decisions. There are many people out there looking to profit off of bad decisions.”
The source of the problem, Jordan says, is a term known as an unsecured loan.
“If you’re a miner who needs a cash injection, there are many institutions that will give you the money you need no problem. Except, there are no guarantees you can pay that money back. As a result, the lender sets unrealistic terms that guarantees they make a profit if you can’t pay back the money.
Microlender Ubank has recently been in the news for claims that it recklessly granted unsecured loans to people – many of whom are miners – in debt elsewhere or with a chequered credit history.
Ubank, for their part, denies any wrongdoing, but are being investigated by the National Credit Regulator, where the matter will be settled at the National Consumer Tribunal.
Whether at fault or not, Ubank is not alone in an arena where loans are handed out every day to people who routinely spend more money than they can afford to.
“Mineworkers work hard and face difficult working conditions. Understandably, they want to spend what money they have, but the obligation of supporting a family often forces these workers to borrow money they can’t pay back,” says Jordan.
The irony is clear as day.
Despite being paid better salaries, many miners won’t feel the difference in their quality of life.
Jordan believes it’s a crying shame.
There is reason for optimism, of course. As South Africa’s debt problem soars and the economy weakens, mining management is helping to promote education around the issue. Jordan hopes it will make a difference.
“It all comes down to education. If we can teach miners – and South Africans at large – the importance of borrowing money responsibly and managing one’s debt, these issues will be resolved naturally.”
For now, it’s one small step at a time.