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Sassa to explain loans which trap grant recipients in 'vicious cycle'

Feb 15 2018 12:29
Lameez Omarjee

Cape Town – The portfolio committee on trade and industry intends to ask the South African Social Services Agency (Sassa) to make submissions on how loans are granted to social grant recipients without any affordability tests being conducted. 

This will be part of the committee's public hearings for the National Credit Amendment Bill, and comes after the committee received input from the Black Sash organisation on Tuesday.

One of the issues raised by Black Sash was that deductions from social grant payments contribute to the indebtedness of social grant recipients. This is then exacerbated by loan repayments, which are deducted from their Sassa accounts by money lenders. 

“Providing social assistance includes providing social protection. This means protecting and securing accounts of social grant recipients from unlawful deductions,” said Hoodah Abrahams-Fayker, national advocacy manager for Black Sash.

'Onus on state to ringfence grants'

“The onus is on the state to enact legislation by ensuring payment of social grants in full is ringfenced from unlawful deductions through reckless lending.” Abrahams-Fayker explained that social grant recipients are “easy targets” for money lenders or loan sharks, because they receive guaranteed income from the state.

Through Sassa bank cards, provided by Cash Paymaster Services (CPS), a subsidiary of Net1, money lenders make deductions from recipients’ accounts via debit orders to repay the loans.

Social grant holders often apply for loans because the grant monies are not sufficient for basic living, explained Lynette Maart, national director of Black Sash. Maart added that clear and due process should be followed when issuing loans, including an affordability test.

The grant holders take on loans without understanding the terms and conditions, explained Abrahams-Fayker. She said no affordability test is conducted to determine if the grant holders can pay back the loans.

“Grant beneficiaries are trapped in a vicious cycle. They use debt to pay debt, for food and basic living needs,” she said. This raises the question whether grants should be increased, she suggested. 

Committee chair Joanmaraie Fubbs raised issue with the fact that no affordability test is taken, and decided that Sassa should appear before the committee to make its submissions on the matter. Another committee member proposed that Net1 also be invited to make submissions, as its “card technology” is used.

“It is important that we nail it,” Fubbs said of the issue.



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