NCR’s probe into African Bank’s reckless lending is a victory  

15 June 2016

We are pleased that the National Credit Regulator (NCR) has now acceded to the DA’s request to investigate African Bank’s “bad book” (now called RDS) for evidence of reckless lending, and will apply to have all loans that were granted recklessly written off, as is provided for by the National Credit Act. 

This is a victory many over-indebted South Africans who, if the loans are successfully written off, will no longer have to bear the burden of paying for a loan they cannot afford. 

For over a year the NCR and the South African Reserve Bank have avoided answering the DA’s questions about reckless lending at African Bank, and have refused to commit themselves to a full-scale audit of African Bank’s “bad book” to search for reckless loans. 

Many poor South Africans were granted loans recklessly by African Bank, particularly in the 18 months before its collapse. Many of these consumers could not afford the loans they were given, and had little idea about the debt trap they were signing themselves into. Now, these South Africans can look forward to the possibility that their loans could be written off, if they are found to have been reckless. We encourage all African Bank customers who feel they may have been given a reckless loan by the Bank prior to August 2014, to come forward and submit the details of these loans to the NCR. 

Over the past year, the SARB has dodged my questions about this matter, even arguing that an investigation into reckless lending would jeopardise the SARB’s purchase of African Bank’s “bad book” for R7 billion. This means that the SARB considers what may be many billions of rands in reckless loans, made to poor, financially vulnerable South Africans, as collateral on its investment in African Bank. This is an unacceptable argument. It is unacceptable to hold these South Africans liable for the reckless business practices of African Bank, and to expect them to continue to pay back the interest and fees on these loans for years to come, when the loans should not have been made in the first place. 

In fact, SARB should have audited the “bad book” for reckless lending before it made the decision to buy the entire book. It cannot hold over-indebted South Africans responsible for this failure. This would compound the culture of impunity for corporate malfeasance in South Africa. African Bank’s shareholders and bond holders must be financially responsible, not the recipients of reckless loans. 

The NCR must now proceed as quickly as possible to audit the whole African Bank book to search for cases of reckless lending, and must then apply to have these loans written off. This will be a time-consuming, arduous process, but it must be done thoroughly and quickly, to ensure that consumers are given relief as soon as possible, and so that those responsible can be held accountable. 

Issued by Geordin Hill Lewis, DA Shadow Minister of Trade and Industry, 15 June 2016