Doctoral study highlights ineffectiveness of National Credit Act (2006) in dealing with over-indebtedness of SA Households

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Policy intervention through the National Credit Act (2006) has been ineffective in dealing with the over-indebtedness of South African households – this according to Mope Mabitle who will be graduating with a Doctor of Commerce degree from the University of Fort Hare today, 19 May.

Mabitle (49) is currently working as an Area Manager for popular fast food outlet McDonalds South Africa.  He oversees a team of 200.   He matriculated in Lesotho, and completed an undergraduate degree from Rhodes University in 2001, and then proceeded to the University of Fort Hare where he obtained both his Honors and Master’s qualifications. In between his studies, he worked at Eskom as a Management Accountant, as a Bussiness Consultant at Business Partners and as Sales Manager at Capitec.

Mabitle’s thesis investigated factors that influence South African household debt at the macro level and micro level, explored the impact of the National Credit Act on household debt in South Africa, investigated various components of household debt at the micro-level, and examined the movement of household in and out of debt.

Experiencing first-hand the levels of debt entrapment by South African households while working in the banking sector inspired Mabitle to academically dig deeper into an issue affecting South African livelihoods.

“What intrigued me about this household behaviour was how the poorest segment of the population are the ones that are persistently borrowing to meet their basic needs”, he said.

“The findings of my study were that household debt was mainly driven by consumption smoothing, and that the level of interest rate was not necessarily a deterrent for the household to borrow.  Counterintuitively it was found that households tend to borrow more as the interest rate increases suggesting that they borrow to keep up with repayments,” said Mabitle.

The results also showed that the policy intervention through the National Credit Act (2006) has been ineffective in dealing with over-indebtedness, he said.

“The study also found a higher transition frequency in and out of debt on loans that are normally accessed by the poorer households suggesting higher levels of debt entrapment and the persistence of debt at lower-income levels.”

Mabitle said both the ordinary South Africans and financial institutions stand to benefit from his research.

“Ordinary South Africans can learn to be vigilant about the pit holes of debt entrapment that they can avoid if they are informed on all dynamics of household debt.

Mabitle strongly spoke against the banking sector.

“Financial institutions continue to find loopholes in NCA in pursuit of profit. They will not only cause financial harm to households, but high debt levels have a negative effect on the economic growth of this country,” he said.

Mabitle advises people to save more.

“The general South African public need basic understanding of the nature and evolution of cases where debt can lead to problems as it will increase their understanding of why this can happen and so inform responses which seek to alleviate or prevent ’problem debt’.”

Mabitle said studying and working at the same time was challenging and a balancing act.

“The environment of fast food retail demands time. Managing a team of over 200 staff is also demanding. Discipline and consistency helped to complete my studies.”

Commenting on studying at UFH, Mabitle said: “The PHD output that the institution produced in the past years is very impressive. The accessibility to your promoter at all times is a huge advantage.”