Prioritise debt relief for the poorest of the poor - Treasury | Fin24
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Prioritise debt relief for the poorest of the poor - Treasury

Aug 02 2017 20:30
Liesl Peyper

Cape Town – Although a large number of people in South Africa are over-indebted it does not mean their debt needs to be extinguished as they have assets and earn an income in many instances, said Katherine Gibson of National Treasury.

Briefing Parliament’s portfolio committee on trade and industry on indebtedness in South Africa, Gibson said there should be a distinction between indebted people who are truly not managing and those who still receive salaries.

The portfolio committee is in the process drafting a legislation to give effect to the Department of Trade and Industry’s (DTI) policy to provide debt relief to over-indebted consumers.

On Wednesday, Gibson told members of Parliament that Treasury is still busy ascertaining exactly how debt extinguishing would impact the fiscus. “There will be costs associated and we need to determine who will bear that cost. It’s important to maintain stability of the system.”

She pointed out that preliminary evidence suggests that the debt of people with a regular income can be restructured in under five years, which doesn’t require refinancing. “Over 90% of these cases can be remedied through a debt counselling process and there are mechanisms in place to help these people get back onto their feet.”

Gibson repeated Treasury’s stance during a previous engagement with Parliament that the borrowing behaviour of consumers needs to be changed as opposed to merely focusing on the cycle of debt relief.

“When considering debt extinguishing we need to look at our priorities. Do you do it for the poorest of the poor, or is it more critical for the economic stability of the country to focus on people who contribute to the economy, such as teachers or miners, for example?” Gibson said.

During public hearings on the feasibility of debt forgiveness that were held late last year, a number of stakeholders, including Cas Coovadia, managing director of the Banking Association of South Africa (BASA), cautioned that debt forgiveness would accelerate irresponsible borrowing.

Coovadia at the time pointed out that banks already provide extensive debt relief measures through its Debt Counselling Rules System, which includes payment “holidays”. These provide consumers with an opportunity to temporarily suspend payments, restructuring and consolidation of debt, bespoke arrangements for repayment and settlement campaigns. 

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national treasury  |  cas coovadia  |  parliament  |  debt


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