[miningmx.com] – AN enormous debt spiral arising from the increase in unsecured debt over the past three years is behind the labour unrest at mines and on farms.
An index compiled by Unisa’s Bureau of Market Research and MBD Credit Solutions to measure consumers’ financial vulnerability shows that especially miners are the victims of unsecured debt which month after month is swallowing up an increasingly larger part of their income through collection orders and other enforcement measures.
“It’s very clear that unsecured debt was one of the major driving forces behind the labour unrest in recent months,’ said Professor Carel van Aardt, head of the bureau.
It has reached a saturation point where the disposable income of people in lower income groups is falling sharply every month.
It’s not only microlenders and smaller moneylenders who are guilty of this reckless lending – at least three of the country’s biggest banks are involved in this up to their necks, Sake24 has learned from other sources.
Nor is this only applicable to mineworkers. It extends right through the labour market – affecting all workers in the income group of R60 000 and R150 000 per year.
Unsecured debt (debt that is not backed by assets) in this income group increased from 28% of the total debt portfolio in 2009 to 55% in the second quarter of this year.
“These figures, which we received from the National Credit Regulator stunned us,’ Van Aardt says.
The nominal figures show even more clearly how this income group’s exposure to ruthless moneylenders has increased.
In the second quarter of 2009, secured debt granted to this group stood at R2, 4bn. By the second quarter of this year the figure was unchanged.
Unsecured debt to this income group stood at R2,3bn in 2009, but by the second quarter of this year it had risen to a staggering R8,4bn.
“That’s a dramatic change over a short period. In addition, there is a lot of information available pointing to rapid growth in the number of credit providers – including informal credit providers.
The bureau researched the spending patterns of this income group over the past three years.
“It’s clear that a growing number began to default on their debt over this period,
“There was also a large growth in the numbers of stop orders and attachment orders to the employers of these people in this period,’ Van Aardt said.
Gavin Hartford, an industrial sociologist and director of the Esop Shop that is doing a great deal of research on mineworkers, said he discovered on the basis of the analysis of the payrolls at some shafts at platinum mines that up to 10% of the workforce receive no compensation on payday because their whole wage goes to collection orders.
“However, there are indications that informal sector moneylenders take an even bigger part of mineworkers’ wages than banks and microlenders. They literally stand at the shaft gates on paydays and wait for the mineworkers to come out with their wages.
“Another method of collection is simply to demand the debit card of a worker who has a bank account as security for a loan and then to return the card when the money has been recovered,’ Hartford says.
The bureau’s research also shows that mineworkers live far beyond their income capacity and own expensive assets that they could not have obtained in any other way than with unsecured debt.
Van Aardt says this also explains the difference between what the mining companies say they pay and the wages that workers say they get.
“There is a big difference, but one of the main reasons for this is the wage attachment orders,’ he says.
The bureau’s research also shows that mineworkers live beyond their income. At least 90% of the general mineworkers earn, according AMPS figures, less than R10 000 per month, but 58% of them are in the lifestyle group LSM 6 – for which the criteria are a house with a TV, DVD players, hi-fi systems, a refrigerator, a newspaper, magazines, books, cellphones and access to movie tickets.
Among underground machine operators, including rockdrill operators, 73,3% of them are in the LSM6 group.
“That’s definitely not the LSM profile you expect for lower income groups. It becomes quite fascinating when you look at the expensive goods they owned according to the AMPS surveys.
“According to that, 100% own TV sets, 100% own refrigerators, 85% own microwave ovens, 85% also have hi-fi systems and 100% have electric stoves in their homes,’ Van Aardt says.
The profile of mineworkers in other regions, for example in Asian countries, is quite different.
“Those workers’ income is lower, but they save up to 50% of their income, while asset acquisition is clearly very high here in South Africa,’ Van Aardt says.
It’s clearly a debt spiral – people who had good credit records and were able to borrow at favourable rates.
As defaults increased, the debt became more expensive and the danger of collection orders increased more and more, so that the price paid for durable goods is eventually very high. Consequently in the end they have very little on which to live.
