capitec
(Capitec)
  • Over the past two years, Capitec has been preparing for the controversial new Credit Amendment Bill.
  • The new law could write off the unsecured debt of millions of South Africans who earn less than R7,500 a month.
  • Capitec has been reducing its exposure to this group of people, to only 5% of its lending book. 
  • For more stories, go to Business Insider SA.


The new Credit Amendment Bill, signed into law by president Cyril Ramaphosa last week, could clear debts owed by some 9.5 million South Africans.

Anyone who is overindebted, earns less than R7,500 a month, and has R50,000 in unsecured debt (not car finance or home loans) can apply to get their debts written off.

Read: Millions of South Africans may have their debts cleared — thanks to a new law. Here’s how it will work

This should be enough to unnerve any creditor – and the Banking Association South Africa (BASA) was outraged by the new bill.

But one of the banks which should be hit hardest, Capitec, says it has been preparing for this day.

“During the two years leading to the amendment, Capitec Bank planned and managed our exposure to the consumer market earning less than R7,500 per month, being well aware of the regulatory development,” says its CEO Gerrie Fourie.

“We did this to such an extent that we can confidently say that we have sufficiently prepared for this. Our current exposure is less than 5% of our book.”

This means that less than 5% of its outstanding loans are extended to people who earn less than R7,500 a month.

Banks have been warning that writing off debts – which could cost them up to R20 billion, according to some estimates - will discourage them from lending to low-income clients again.

“Banks cannot extend other people’s money as loans – for education and entrepreneurship – if they cannot be sure these loans can be repaid. By making provision for the arbitrarily expunging of debt, the Act effectively prevents banks from extending responsible credit, particularly to those in low-income households, who often need it most.” BASA said in a statement.

If your debts are written off, you may not apply for credit for up to a year.

Your credit record will probably reflect the information that your debts were extinguished. This may affect your ability to get credit in the future.

But government says the new bill is vital: many people who earn less than R,7500 a month don’t have any other way of getting out of debt. Debt counsellors don’t want to help them with debt reviews, because it won’t bring enough money, while the debt administration process (for those who don’t qualify for debt review) costs up to 12.5%  of the value of their debt repayments in administration costs, “making it an unaffordable mechanism for any consumer with a low income”.

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