Docstoc

Making Money from Nothing - LSE

Document Sample
Making Money from Nothing - LSE Powered By Docstoc
					                             Making Money from Nothing
                                   Deborah James, LSE

Paper for presentation at workshop on popular economies, LSE, 18th June 2009. NB Not
to be quoted without permission – names have not yet been anonymized!


The creditor-debtor relation becomes the basis of “class situations” first in the cities,
where a “credit market”, however primitive, with rates of interest increasing according to
the extent of dearth and factual monopolization of lending in the hands of a plutocracy
could develop. Therewith “class struggles” begin. (Weber 1946:928)


Introduction


When visiting South Africa in the early 2000s, I heard repeated lamentations on the radio
about the extent of the nation‟s indebtedness. Several years in advance of similar
concerns being aired in the rest of the world, South Africans were being enjoined not to
borrow. Even more urgently, those deemed “reckless” were being enjoined not to lend.
Unusually, and perhaps with prescience, Parliament debated and after many committee
hearings and representations finally passed the National Credit Act, which took effect in
2007. Its remit was to regulate credit, particularly to stop lenders from extending it
“recklessly”, and in the process to bring what were previously two types of
lending/borrowing into one single field. In effect, the aim was to turn a “dual economy of
credit” into a single one.


This seemed to be a way of tackling part of the problem (if there was a problem) but it
failed – as anthropologists classically complain – to perceive the way that credit and debt
might be (first) interrelated, and (second) embedded in a broader set of social practices. It
also appeared to ignore the continuities between earlier practices and those emerging in
the contemporary period. Was overindebtedness (as the phenomenon is being called) a
result of, or associated with, the advent of democracy, even of South Africa‟s liberation,
and/or the financial liberalization and market freedom that accompanied it? Was it, at the
very least, associated with “rapid social transition” of the kind being experienced in other
countries? A simplistic view seemed to be suggesting this. Or did it have longer-standing


                                                                                             1
roots in South African society? And whatever the answers to these questions, what was
the impact upon all these complex practices of the Act itself? Did it, like much seemingly
well-meaning legislation passed in South Africa since 1994 (particularly the Extension of
Security of Tenure Act, which arguably had the effect of narrowing tenure as numerous
white landlords sought to evict tenants before the Act came into force), simply produce
more of the behaviour it was designed to curb, and/or did it drive the non-compliant
underground?


Seen in its most negative light, and with a focus primarily on the “popular” aspects of the
South African economy, the situation appears as one in which a small, business-savvy
minority makes money by preying on a large majority. There are many aspects to this:
but in all of them the activities typically thought of as productive or value-producing have
been supplanted by those in which wealth is generated through “collecting people”. This
appears as a distorted version of the “wealth in people” described by Jane Guyer.


One aspect to this consists of money-making activities based on the solution of the “debt
problem”. When I started researching this topic, and phoned around to get some sense of
the government‟s policy responses to the problem of overindebtedness – and hence of the
rationale/s behind the National Credit Act - I found myself talking to a small network of
(mainly white) businessmen, each of whom had seemingly supplanted the other by
holding down one in a succession of jobs; there was clearly much repositioning and
shifting around. To them, the “problem” of overindebtedness, and its solution by the
passing of acts, the regulating of microlenders, the providing of credit advice, and the
establishment of debt counselling services, all seem to have represented business
opportunities. As in many other spheres, the government has insufficient capacity to do
these things so white consultant/businessmen do it for them, and make a packet in the
process. All in all, this parasitic response to the “debt problem” – and this way of making
money from others‟ indebtedness – somehow resembled those phenomena typically
described as “financialization” in other settings.


The Microfinance Industry in South Africa: using money to make money



                                                                                            2
Perhaps the key aspect of “reckless credit” that the Act aimed to curb, and some of the
institutions it established, were concentrated in one specific sector: that of
“microfinance”. (An indication of this can be seen in the fact that the National Credit
Register (NCA), which the Act established, was previously known as the Micro Finance
Regulatory Council (MFRC).) Microfinance in this context was not the same thing as the
more familiar and primarily development-oriented “microcredit” which aims to empower,
and draw on the savings potential of - and some claim exploit - groups of poor women. It
was quite a different animal: being “motivated purely by market concerns” rather than
ostensibly “development”-related ones.1


It was the early 1990s that saw the emergence of this new industry. A 1992 exemption
notice to the Usury Act legislated the removal of the interest rate cap on particular kinds
of loans: those valued at below R6000 and with a repayment period of shorter than 36
months. In short,“micro” loans. And it was this, according to Mark Seymour, Managing
Director of Thuthukani Financial Services, a business extending just such loans, that
opened the flood-gates. Intended mainly to facilitate small business finance, the measure
had the effect of enabling a “host of lower-income individuals in South Africa who
couldn‟t access formal credit from the banks” to borrow from a sector “that could price
for the perceived risk of granting credit to these people”. Thus, “from 1992, we started
off with 0, up to 2006 we ended up with about R34 billion worth of industry”. He showed
me a graph that illustrates the growth of the industry from 1992 to 2008, with the final
figure being “around R35 billion in terms of Gross loans outstanding and around R40
billion in terms of annual disbursements.”2




1
    Interview, Garth Whitford, Micro Finance South Africa, 1st August 2008.
2
    Interview, Mark Seymour, Thuthukani, 2nd September 2008.


                                                                                              3
                                                      Industry by R Value of Loans Disbursed
            40


            35


            30


            25
 In R (billion)




            20


            15


            10


                  5


                  0
                  1994    1995   1996   1997   1998      1999      2000      2001     2002     2003   2004   2005   2006   2007


Figure 1: Graph showing growth of microfinance industry in South Africa, 1994-2007
Source: Microfinance SA newsletter signed by Garth Whitford

An anecdotal account from someone who observed this process describes it in rather
more vivid terms:
                      A large number of unscrupulous lenders piled into the market. Later, an outfit called
                      ABIL (African Bank Investments Limited) bought out these and other small
                      microlenders. One young man, involved in ABIL, took a loan of R20 000 from his
                      father and started extending loans at a bus depot. He lost the first R20,000, then told
                      his father he had figured out how to do it properly and borrowed a further advance.
                      Within a short time he had made enough money to buy a house in Johannesburg‟s
                      up-market suburb of Sandton, for cash. (Fieldnotes 27th July 2008).

These two accounts of the same industry give some idea of the wide disparity between
the view of lending as legitimate - as performing an essential service to the public - and
those who see micro-lenders as leeches, parasites and exploiters. What enabled the
entrepreneur described above to “do it properly” was his recognition of the high interest
rates that could – or perhaps needed to – be charged if one was to make money in this
sector. The difference between the idea that high interest could and that it needed to be
charged here establishes the dichotomous terms of this often morally and ideologically-
charged debate. Making money from the poor and/or (relatively) deprived is always
problematic, especially in a setting like South Africa where the initial promises were so
great, but when micro-lenders argue that this is the only way to safeguard themselves




                                                                                                                                  4
against the risks involved the enterprise appears more legitimate: as Mark Seymour put it
they “could price for the perceived risk of granting credit” – and so they did!


There is a distinct economic rationale behind the offering of small loans at relatively high
interest, as was explained to me by Garth Whitford, Managing Director of Microfinance
SA:

         Small micro loans are the most expensive of all. The cost of processing a small loan
         - what we call a cash loan - is very high. The amount could be R200: a typical
         example is R550. To process such a loan at normal interest rate - without an
         initiation or administration fee - would make this uneconomic. But there would still
         be a demand for micro loans, and the vacuum would be filled with illegal micro
         lenders. In fact there is a complaint that the number of illegal micro lenders has
         increased – for the reasons I mentioned earlier, the onerous demands, the restriction
         on fees, etc.3

The NCA, through its regulatory body the NCR, had attempted to control two related
matters. One was the question of to whom loans were to be extended in the first place.
The second, mentioned in the quote above, was to regulate the levels of interest charged
to those who did succeed in getting loans. While both were targeted at protecting (often
poor) consumers, the first was more paternalistic in its attempt to prevent (poor) people
from incurring debt they could not afford, while the second was somewhat aggressively
aimed at preventing money-lending sharks from benefiting from consumers‟ inability to
self-police.


It can be seen from Garth Whitford‟s point, above, that those involved in the industry,
responding to the Act‟s attempts to reduce the interest rates charged, justify these rates
with reference to the costs involved in administering small loans to low-income people. A
further justification that has been advanced concerns the risk of extending such loans.
Many may scoff at the idea that moneylenders incur risks of any kind, given their
depiction - as using violent means to enforce repayment - in the popular press and in
fictional representations (starting with Shakespeare‟s Shylock in Merchant of Venice and
extending most recently to Monica Ali‟s Brick Lane and Ken Loach‟s film Raining

3
    Interview, Garth Whitford, Micro Finance South Africa, 1st August 2008.



                                                                                             5
Stones). But there have been various sophisticated studies by economists and debates
which query or dispel some of these stereotypes. In a useful summary of these debates,
Jimmy Roth‟s PhD shows that “the administrative costs of lending … have been shown
to be significant”. He points out that “interest rates may not be as unreasonable as they
seem”, and that
       Moneylenders need to charge to compensate themselves for the risk of
       default and delinquency. Instruments and practices that help reduce the risk
       premium are frequently either not available, ineffective or costly to employ.
       … There are a variety of motivations for moneylender practices … other
       than a desire to exploit borrowers. Finally, a study of borrower transaction
       costs suggests that for loans of small sizes it is often cheaper to obtain loans
       from moneylenders than from formal lenders. Borrowers may thus in some cases
       prefer the services of moneylenders to formal lenders (Roth 2004:52).

The conclusion is similar to a point made by Detlev Krige in his thesis: informal
moneylenders are often the cheapest and most available option.


The points discussed above, especially the justification for high costs/interest rates (in
terms of both risk and administration), constitute part of the armoury used by MFSA in
its struggle against the NCA‟s attempts to regulate its members by capping the interest
rate and curbing “reckless credit”. [there has been a pendulum swing here – state
regulation to market freedom back to state regulation, all in the space of less than twenty
years. Again, SA seems like a rather cruder version of the world economy writ large …
and one in which broader trends are anticipated] Their argument is that greater regulation
will make it difficult for poorer and hence high risk borrowers to find a loan within the
licensed sector. This will drive them into the arms of the loan sharks or mashonisas.
Asked why this would be problematic, Garth Whitford responded that mashonisas

     do not register with the regulator, they do not comply with good business practices,
     they don't issue loan agreements, nor do they give full disclosure of the terms and
     rates of interest. The rate could be anything. And they have terrible recovery
     methods ... one thinks of stories of baseball bats and the like (ibid.)

It can thus be seen that, while these “formal” microlenders fight a battle on one side
against attempts at state regulation by arguing that they fill a necessary niche in respect of
the poor, they simultaneously fight a battle against their chief rivals, the mashonisas, on



                                                                                              6
the other, who arguably fill just such a niche but who do so using allegedly unsavoury
practices similar to those - already outlined – which predominate in popular
representations of loan sharks. But does this representation accord with the way
mashonisas are – and are seen – in local contexts? And do those who borrow from them
eschew all other forms of credit, such as those offered by these formal micro-lenders,
even banks?


Informal money-lending at village level

After spending some time interviewing in the lowveld settlement of Impalahoek,
Mpumalanga - well known from the work of Niehaus (2001, 2002, 2006) - I have
tentatively concluded that although this word is used as a noun by all and sundry,
apparently to denote a specific group of people, it would be more appropriate to use the
verb ukushonisa (to lend), since the practice is one undertaken by different people – even
sometimes groups of people – at different times. It is also best seen as a relational
category, in that one becomes a moneylender in relation to a borrower who is in need of
money. The mistake made by those who passed the Credit Act is to see these as
constituting a distinct category of individuals rather than recognizing that the practice is
pervasive in society. This practice can be discerned to different extents and in different
measures, in a range of social types, stretching from the classic loanshark, through small-
time lenders, to savings clubs which offer loans as part of their money-saving activities.
The practice is pervasive, not simply because there is a chronic shortage of money in
relatively poor rural areas. Lending is differentiated: this mirrors the fact that, as shown
in the second half of the paper, borrowers have a range of needs which vary between
genders and over time, depending in part upon the life course of families and households.

The classic loanshark
The practice of borrowing is referred to locally by means of a proverb which also
provides a warning: unamêla kamêla (the camel will kick you). It is easy to climb on a
camel (get into debt) but also easy to fall off and be kicked.




                                                                                               7
Sekgobela, the best-known loanshark in the area, started lending money around 1988,
having previously earned a living as a teacher. People initially accused him of
bloodsucking. Later they became habituated to borrowing from him, especially air force
employees working at the nearby air force base in Hoedspruit. When he loans them
money, he takes their ATM cards and ID books. When they get paid on the 15th, he goes
to the ATM and withdraws their salary. Each will come in turn to collect whatever is left
of their pay – often a trifling amount - from him. Each will then require a further loan in
order to make it through to the following payday, Sekgobela will retain their ATM and
ID cards to secure that further loan, and so the cycle continues; yielding the characteristic
description of these and other government employees as “working for mashonisa”.


There is a local explanation about how Sekgobela consolidates his power, one which
seems to fly in the face of the more “market” related – and perhaps more obvious -
explanation. It is thought that he and others like him put medicines (muti) on the money
they lend, in order to trap their debtors into an endless cycle of debt. Proof offered in
support of this claim is that although he collects about R40 000 on any given payday, he
is unwilling to lend out money on the same day, but rather asks his prospective clients to
come back the next day. This gives him time to treat the money with muti, in order to
make sure that his customers “will be addicted to borrowing, borrowing … working for
him for the rest of your life. It is like being a zombie.”


Loansharks like Sekgobela employ techniques well known in other settings. He will not
lend indiscriminately, but only to those who are salaried or have a regular source of
income, failing this he ensures either that the client owns some movable property which
might be repossessed in the event of default, or brings along a witness (who in effect
stands surety) or both. In effect, “local people also know your background” and a person
who is well-known to be indigent or unemployed will not be granted a loan.


People get into trouble with mashonisas – indeed feeling as though they are “working
for” these people, whether their dependence was magically ensured or not. As one female
teacher told me about her younger brother, also a teacher



                                                                                              8
         He comes to me after one week, his salary is all gone – to the mashonisas. … Once
         or twice I tried to sit down with him, I say “let‟s pay all the debts so you can be out
         from the mashonisas”. I told him to sell that car, and to go to school on foot,
         because it is not far. He has a Polo. But he did not sell it. Next week the car will be
         at home, he will go to school on foot, because he will have no petrol.4

Teachers often resort to drastic measures to “get out” from working for the mashonisas,
One tried – presumably with some ineptitude - to rob a filling station and the security
guard shot him dead. Another cashed in his pension in order to pay his debts. (This is not
a practice reserved for those in debt: others resign from their teaching jobs and cash in
their pensions in order to get a lump sum, in order to build a house or buy a car. And
some end up reapplying for, and getting back, their original jobs.)


On enquiring further, it emerged that moneylending in the area had been practised –
either before or perhaps in parallel - by a white farmer, Martiens, in the late 1980s. One
informant told me that his sisters who worked on the farms, when they had problems,
would approach Martiens, via his agent (a farm foreman or induna), to lend them money.
These loans were initially interest-free, until one of these indunas “taught” Martiens to
charge interest: at the rate of 20% per month. (The suggestion here was that this practice
had already taken root amongst township African communities, and that it was now being
exported to the countryside, at the same time crossing the racial barrier.) The foreman‟s
suggestion was not made out of altruism however: it was a short step to inserting himself
as a broker or agent, and charging for the service.
         Their aim was just to get something from the money because he will give them the
         money so they will lend to other fellow workers. At first they used to pay R20
         interest for R100 but when time went on they paid R50 – so the other R30 was for
         the agent.

The rate of interest, in other words, went up to 50% per month, which is where it still
remains for loansharks of this type. The agent pocketed the difference.




4
    Interview, Livia Chiloane, Impalahoek 18th August 2008.




                                                                                               9
Whether wholly or partially true, this is a truly South African story: of intricate
interrelations of reciprocal interdependency which temper an inherent yet continually
reenacted and gradually modified racial inequality until it is finally overturned to yield
the basis of a new, deracialized inequality. It tells of the initial benevolent (or possibly
stupid?) paternalism and non-market-mindedness of the white farmer and its correlative:
the classic dependency of his underpaid employees. It also tells of a wily middleman with
little real power, who uses his ability to manipulate smart township practice and to dupe
his overlord, making it the basis of a new autonomy. No longer dependent upon his
employer, the white farmer, he acquires an entrepreneurial independence which is
increasingly validated by - and parallels the liberatory character of - the new democracy.
In a manner uncannily reminiscent of Anton Blok‟s account of the emergence of the
Sicilian mafia (1988), this middleman uses his knowledge and his connection to both
worlds to establish the basis for a new realm of illegality. He makes money on the backs
of the poor, and creates a multitude of new dependencies.

Brokering money: agents’ fees as start-up capital
A range of further anecdotes reveal how such agents, initially deriving power from their
in-between position, then become moneylenders in turn (Sekgobela is said to have been
one of these). The black moneylender later acquires agents in turn, as his business
expands and becomes unwieldy, and they likewise utilize their savvy about the intricacies
of pay-day timings and the like to generate yet more profit, as the following case shows.


Abiot, an employee of the Air Force at Hoedspruit, was in urgent need of money to pay
for the funeral of his wife. The amounts were such that he exhausted the possibilities with
one mashonisa, and was forced to approach Sekgobela for a further loan. He borrowed
R10,000, and it took him six years – from 1999 to 2005 – to pay off the loan. During this
time he was “working for” Sekgobela, who kept his ATM card throughout. At the end of
this period he approached Sekgobela, who according to this description was in some
sense his “employer”, and asked him for a job, saying




                                                                                               10
         people know that I‟m a regular customer, they know that I owed you a lot of
         money. There are other people who want to borrow from you but they are scared
         because you‟ll think they won‟t be faithful to you.5

He assured Sekgobela that, having a better connection with these people, he would
reassure them of Sekgobela‟s willingness to take them on as clients, and would also be in
a good position to follow up unpaid loans.


Sekgobela agreed, gave Abiota R50,000 and instructed him to lend it to his work mates.
At this point Abiota, with great ingenuity, put to use his knowledge of the differentiated
timing of government salary payments. He lent money to his fellow employees of the
airforce from the 1st up to their payday on the 15th. He then collected their debts from the
ATM, and re-lent the money, from the 16th up to the 22nd, to the teachers, who are paid
on the 22nd. On the 22nd he collected debts from the teachers, and from the 23rd he re-lent
the money to the police, paid at month-end. For more than 2 years he used this scheme to
make extra money. After Sekgobela found him out and dismissed him, he set up as a
mashonisa on his own. The business was so successful that it enabled him to buy a car, to
build an expensive house, and to send his children to Model C [semi-private] schools in
Nelspruit.


“He started as a borrower, now he is a lender”, said Sputla Thobela, who told me this
story. But the transition from borrower to lender, or from borrower via agent to lender, is
not a quick or straightforward one. Rather it is one of people owing for years who then
become aware – through a process of slow and perhaps painful socialisation – how
effective a strategy “making money from money” can be. Even these may not be in a
position to turn to money lending themselves (as did Abiota) but may have to resort (as in
the story of another aspirant loanshark that was told to me) to “investing” their money
with the established mashonisas who have existing reputations - better equipped to screen
clients, enforce repayment, and the like – and will know best how to “make it grow”.




5
    Interview, Sputla Thobela, Impalahoek 16th August 2008.


                                                                                          11
These stories are illustrative of some characteristic features of popular economy in this
area. Borrowing/lending, once started, are perpetual and cyclical, and one feeds upon and
reciprocally shapes the other. But it is also possible for a person who does one to end up
doing the other. Being able to newly position oneself on the right side of the
borrower/lender divide can be hugely advantageous and profitable, but – as with a
pyramid scheme - it is a route open to only a very few, mainly because it relies upon a
huge catchment of people on whom to “prey”. Relationships of dependency go in both
directions. Borrowers need lenders, and vice versa: but a smaller number of lenders
generates and requires a large number of lenders. In this sense, whatever reciprocity is
engendered is tempered by the resulting overall inequalities.


Indians, schoolteachers and nurses: further opportunities
Not all lending/borrowing happens through moneylenders recognized as mashonisa (the
noun). Various other activities in which people make money by adding commission are
likewise glossed through the use of the verb ukushonisa. A first example is that of a local
Indian businessmen who charged a fee for cashing cheques, and more recently for paying
out child-, disability- and other government grants at his store, as Eliazaar Mohlala told
me:

       Teachers used to be paid by cheques. And around here we only had Standard
       Bank in Hoedspruit. There used to be a mobile agent or depots where they would
       come at 9 o‟clock. Teachers would go to their nearby shops to go and cash their
       cheques there. Now what happens there at Linida‟s Wholesalers is that you buy
       whatever you want to buy, but on top of that they will deduct R40 from your
       cheque. That R40 is just a commission or interest ... They are doing you a favour
       in a way because you should be going to the bank in Hoedspruit to go and cash
       your cheque.

       Even now it is still happening because people are desperate. They need money
       urgently. Then they will go to anyone who can help them – especially these
       Indians around here. They will go with their cheques or children‟s grant or social
       grant card. The card has R230. Instead of queuing at the correct place where they
       will get R230 they will go to the Indian shops, and there they will pay R30 or R40
       for nothing. Then they will get the R200 and they can buy whatever they want.
       What is that R40 for? It‟s the same as the mashonisa because they have helped
       you. You were in need of money at that moment.




                                                                                             12
This account, from one who has often used the service, is similar to others already
mentioned in that it emphasizes the benevolence and altruism of those who practice
ukushonisa.


A second example is that of workplace-based savings clubs; these yield further
opportunities to charge interest for lending, and are classified as doing ukushonisa. These
types of clubs, termed ASCRAs (Accumulated Savings and Credit Associations) in the
literature, have been documented by Bahre (2007; see also Bouman 1994), who points
out that their practice of loaning the accumulated money to members for interest has been
little documented.


After spending some time interviewing local schoolteachers and nurses, I realized that
my respondents in these government-paid jobs were divided between borrowers and
lenders. The lenders – groups rather than individuals – were described as practising
ukushonisa. In a range of new savings or rotating credit clubs run by (mostly female)
government employees in both sectors, the moneys collected on the monthly payday from
each member, instead of being simply disbursed as a lump sum to each in turn on a
rotating basis, were being loaned out – either to members or their friends, colleagues or
relatives – at interest of 20-30%.


One such club member/founder, Manganyi Zulu, untypically a male teacher, explained
the system of his club Thiakene Machaka (Build Yourselves, Relatives):

     We are 9 members. Every month we contribute R1000. Then, if a member does not
     pay, or skips a month, this member has loaned the money to him or herself. Next
     month, he‟ll pay R2000 plus 30% interest.

Defaulting members, in other words, were being charged as though they had borrowed
the outstanding amount.

     We also loan money to other people – to the public. If someone needs money we
     loan it to them, we also charge 30% interest.




                                                                                            13
Probed about his reasons for having started the group, he said that it (like several others)
had begun as a non-interest, non-loan-oriented savings club, but that members were keen
to escape from the clutches of stores that sell furniture on hire-purchase, such as
Ellerines, Bradlows and the like:
     When we started it was just a stokvel, then the idea of investing the money came
     from me. I recruited the other members and we formed this group. I wanted to
     prevent members from buying goods on credit. At the end of the year, you can buy
     what you want with cash.

He spoke from personal experience, having been wronged by a furniture store. His bank
account had been garnished - at a cost of R2000 - for allegedly missing a monthly
repayment. Complaints to the store credit manager and requests for repayment had been
useless. To avoid such situations in future, he and other members were now aiming to put
together a sizeable cash sum on the annual date when their turn came, so as to be able to
buy items of furniture, electrical appliances; or (in his case) building materials for his
house back in Tzaneen and later a car; or (in the case of other members, and reflecting the
aspirational character of the times) to pay for summer holidays at beach resorts. The club
had tried a range of banks, and later the Post Office, as a means to pursue their new
investment strategy, but never succeeded in being paid the advertised interest on their
savings. At this point they started lending to members, and - in turn - to relatives or
friends of those members.

How does this type of borrowing/lending operation compare, in rational/economic terms,
with that of the full-blown mashonisa? It was cheaper: the going interest rate was 20-
30%, only about half of what mashonisas were charging. Borrowers were easier to screen
but repayment was more difficult to enforce. Club members were able to monitor
potential debtors through closer-knit social networks than were mashonisas; as one told
me “It‟s only teachers, and the non-teaching staff. Like cleaners. We won‟t have trouble
collecting the money because we are working with them”. But they ran a greater risk of
non-repayment nevertheless. They did not, for example, keep debtors‟ ATM cards or ID
books. As a means to counter this risk, one group had come up with the innovative idea
of keeping a record of debtors‟ birthday months, thus being able to counteract the usual
plea – “I don‟t have money” - and demand full repayment on the date that each debtor‟s


                                                                                             14
government annual birthday bonus was paid out. Another group, which had operated
successfully for two years, had now foundered because of non-repayment by 3 borrowers,
one of whom owed R1400 before interest; its founder reported that other such clubs,
formerly plentiful, were dissolving because of similar non-payment problems. In
addition, certain life-course events, most typically and upsettingly the death of a
borrower/debtor, disrupted any such attempts at securing loans. “Someone died owing us
R400”, said the male teacher who started Thiakene Machaka. “There is no way we can
reclaim the money – to do so would be to lack respect.”6 His words were echoed by the
member/founders of several other clubs. (I was unable to discover what a mashonisa
would do in such circumstances).


What puzzled me was where the line between borrowing and lending was drawn in the
case of these savings clubs, in which members – either all in the pay of the government or
recipients of state grants - were in roughly the same kinds of economic circumstances.
When I asked what might make one a borrower and another a lender, I was given
explanations that referred to the personal qualities and characteristics of the latter: their
alleged profligacy, inability to budget or plan ahead, and the like. But it became clear that
certain life-course events made people, even those apparently on a par in terms of the size
of pay packet, particularly vulnerable and hence more likely to fall on the borrower than
on the lender side of the dividing line. I return to these circumstances later in the paper.




6
    Manganyi Zulu, RDP houses, 26th March 2009.


                                                                                                15
The small-time loanshark
Access to loans from the kinds of clubs described above is restricted to a fairly closed
circle: either club members themselves or those, personally known to them, who receive
a regular income (usually from the state). In both cases, it is the certainty arising from
regular payment that forms the core of, and stable/secure basis for, the viability of the
operation. In this respect, there is no substantial difference between loans from registered
local microlenders (like Lohen and Rainbow Loans: all members of the micro-lenders‟
association mentioned earlier), from mashonisas, and from ASCRAs. For those falling
below the radar of state employment (that is, the majority), however, recourse must be
made to moneylenders of a different sort. But even here, the money trickling downwards
- and causing small and uncertain amounts of interest to filter upwards on its way -
ultimately comes “from the government”.


Koti Ngobeni began a small-scale lending operation on the basis of a disability grant he
was awarded after suffering from TB. He represents his activities as a direct – and
benevolent - response to need: “I saw that many people are poor/suffering, when they go
to the bank or the mashonisa to borrow money, they refuse them.” He claimed to be
“helping poor, poorest people – like myself. The sources of the money he lends are
diverse (following the typical “multiple livelihoods” pattern observed in many recent
studies) although none – apart from his grant - is completely stable. His money-lending
activities began with his successful upward trajectory first as a gambler in, and later as
the “owner” of, one of the small-scale dice-board gambling operations which jostle with
other micro-businesses in the helter-skelter of enterprises that surrounds the paypoint on
pension day. He loaned people money with which to gamble or, when they borrowed
from big mashonisas in order to play dice and were unable to pay back, he would lend
them small amounts to help get them out of trouble.
     They‟ll say “give us R50”. If I say “no, I won‟t manage” they would say, “I will
     give you extra”. I would refuse, but people will see I have a lot of money. So they
     will force me to do that. I started to charge them a certain percentage

The loans are typically lower than R300 and the “certain percentage” is 15% interest. If
someone fails to pay back the loan at the end of the month, he adds on a further 5%, but


                                                                                             16
does not expect the amount to rise each month as other mashonisas do. Repayment dates
are not calculated, recorded or taken advantage of as in the other cases mentioned above,
so “It is hard to calculate how much I earn”:
     The money does not come in at one time. Somebody will come and give me R150
     and say “here, Godfrey”. People do not get paid on the same day. Some people are
     herding cattle… Some don‟t work, they will ask for money. They will do piece
     jobs, building, making bricks. Those will come to me and I will lend them. Others,
     who work, don‟t get paid on the same date. Some on 15th, some 25th, some month
     end. Some are herdsmen, looking after cattle for pensioners. After pension day,
     they‟ll come to the kraal, and will get their pay, then they‟ll pay me. I don‟t have a
     specific amount of income. …I can‟t predict.

When his disability grant provided an additional source of income in 2007, a complex
livelihood strategy emerged, constituted out of a series of small sequential steps separated
from each other in time. After receiving the grant, Koti buys chicken feet to barbecue by
the roadside and sell as “chicken dust”, this generates some money for loaning, after
which he buys more chicken feet. His ownership of the dice game is a further source of
money which depends upon but also helps to fund these other income streams. His
inability to calculate profit comes from the fact that all this happens sequentially, bit by
bit. Nevertheless, there is a certain logic in his separating of “capital” from “interest”: “I
gain. And my gains, I just put in my pocket, and the original money that I lent them, I
lend again”.


By distinguishing his area of operation – and his “market” - from that of larger
moneylenders, Koti fills a certain moneylending niche. His terms are more flexible, his
interest tends to be a one-off charge with a slight penalty for defaulting, rather than
accruing month by month. More importantly, he does not trespass on the terrain occupied
by these larger lenders; the amounts he lends are lower than R300 and those to whom he
lends have more irregular employment (or none at all).

Discussion

One could look at, and compare, all these examples of moneylending from a relatively
“market-oriented” point of view. All have in common with formal micro – and not-so-
micro – lenders their claim that they perform a benevolent service; fulfill a particular



                                                                                               17
social need. Borrowers agreed with this point, responding to questions about the
apparently exorbitant interest rates (ranging from 50% per month in the case of
mashonisas, through more flexible terms for the savings clubs, to a once-off charge of 15-
20% for the small-time lender) by saying it would be inappropriate to criticize “because
you are a beggar. You have asked for help so you can‟t argue.” Indeed, compared to the
interest rates charged by furniture stores, some felt the terms offered by mashonisas were
positively benign: and they were!


Despite certain similarities, these different kinds of moneylending are distinguished by
the fact that each appeals to or is utilized by specific groups, which could be
conceptualized as “targets”. Although it is possible for one type of operation to gradually
transform into another – as in the case of the agent who succeeded in becoming a
loanshark himself – it is necessary to exercise caution rather than competing outrightly
with an established operator. In the cases discussed, one opted instead to give money to
an established mashonisa to invest on his behalf, while another offered a lower interest
rate and smaller loans.


From all this, one might conclude that a version of financialisation has taken root in local
contexts like this Lowveld village: that - as in so many parts of the world economy - the
few who make money there rely to an unhealthy extent on the scant earnings of others.
But what social factors are constitutive of borrowing/lending and how are these processes
– particularly borrowing, since I was unable to interview practitioners of only two of the
four types of lending outlined above - reflective of broader processes of life in South
Africa? In other words, how do we view these practices through an emphasis on the
embeddedness of this “popular economy”?

Constituting borrowing: domesticity, the life-course, and time

The cases outlined above give some indication that simply attempting to regulate
informal or small(ish) scale moneylending, as the National Credit Act attempted to do, is
unlikely to have an effect on the pervasiveness of this practice. To gain further insight
into why this is the case, one needs to examine the diverse factors which cause people to



                                                                                            18
become – or to remain – borrowers. That is, one needs to ask why it is that borrowers,
rather than seizing upon the opportunity to become lenders, or simply “formalizing” their
financial arrangements and relying instead on bankloans and credit cards as many in
South Africa are now said to do, remain in a dependent position in this unequal and
usually parasitic relationship.


The broader situation of social transition in post-apartheid South Africa is relevant here.
The setting has been typified as one of a “crisis of social reproduction” (Cock and Fakier
2007) in which older modes of livelihood no longer function; in which, to counter this,
“material and symbolic entrepreneurial activities have become pervasive” (McNeill
2007); but in which in which there is nevertheless a “desire for continuity in social,
political and economic process” (ibid.). Such phenomena, although mainly now described
as characteristic of neoliberalism, have earlier been noted as relating to social
transition/modernity in a more general sense (Berman 1982; Burawoy and Verdery
1999).


In this as in many other settings, the terms of reference are set – discursively and in
concrete terms - by the fact that marital bonds and families are in dissolution; that the
HIV/Aids epidemic and an associated public health crisis have made the threat of
imminent death a very real possibility; and therefore that futures need to be secured with
greater urgency. But the means of doing so appear to have become more individualized,
with people often enjoined to better themselves and their own particular nuclear families.
One aspect of this “self improvement” ideology involves aspirations – often unrealizable
- to superior social and material status, signaled both by consumption of commodities and
by the urgent necessity to acquire for one‟s children not just a state-provided
primary/secondary education, largely perceived as inadequate, but to invest in private
secondary and, ultimately, in tertiary education.


Fragmented domesticity and the pervasiveness of death
Informants questioned about what separates borrowers from lenders, in the context of
school- or hospital-based savings-club lending, were inclined to blame individuals for



                                                                                            19
their failings: their profligacy and lack of insight into budgeting. But close observation
yielded a story more embedded in gender roles within domestic contexts.


Here we must be careful to distinguish between two registers. One is a rhetoric relating to
expected and designated roles, and the other is a reality which emerges in the context of
gender role change. Asked in the abstract about borrowing as practiced by men and
women respectively, the answers were normative: men would not want their wives to
approach mashonisas. If a woman were granted a loan, since she herself is not a wage-
earner, the only means of repayment would be through sexual favours. That this currency
is, in fact, in circulation was testified to by a young woman who claimed that her mother
was overindebted. When her mother was unable to pay back or even to service her many
debts, she took out a further loan under the daughter‟s name, with predictable results
(albeit not in the end as sinister as they might have been: he appears to have “written off”
the debt):
       …the mashonisa was always hounding me asking for his money. He would say if
       you can‟t pay me my money maybe I should take you as one of my wives because
       he has 3 wives. I would say “I can‟t be your wife …”

       So what eventually happened?

       The money was never paid. … He stopped asking me a long time ago.


If unemployed married women do not borrow from mashonisas, this is more because of
their probable defaulting than for any other reason. It is also likely that women who do
have a source of income – from teachers and nurses to various petty traders, fruit- and
clothes-sellers, or social grant recipients – will belong to savings clubs, or know someone
who does, and would thus be more likely to take out a loan based upon this particular and
close-knit social network than one from a mashonisa.


The alleged decorum of women, unmarried or otherwise, proves to be illusory however
when it comes to those with a regular government salary. Many of these dangerously
independent creatures are said to traverse the bounds of acceptable behaviour by not only
borrowing from loansharks but becoming loansharks in their own right. In addition to the



                                                                                             20
ASCRA savings club-style lending mentioned earlier, several have started mashonisa
businesses. Rumour spoke of a female schoolteacher, a mashonisa, allegedly as strong as
a man, who managed to enforce her own payments without the help of agents. When her
house was broken into one night, she overcame the robbers singlehandedly. She was
murdered, and rumour had it that those who killed her were her indebted clients. What
alerted suspicions was that one of these men came and asked her for her cellphone
number shortly before the murder took place. He must have used this, arranged to see her,
and then killed her.


So much for the disparity between the actual and normative versions of female roles.
Perhaps more compelling a gendered script is that concerning male identity and the male
urges which are imagined to drive the economy in this area. The narrative has it that the
reason for male debt is female dependency, the effects of which are multiplied because of
men‟s propensity for multiple partnerships (legitimated as “polygyny”). To paraphrase
Niehaus (personal communication), this is a micro-political economy fuelled by an
ideology of male lust, which is said to lead men into relationships with women who then
– especially if they have children - constitute a major drain on these men‟s resources. It is
said to be for this reason that men are forever getting into debt. Specifically in the case of
government employees, state salaries are one of the few local sources of income. While
these are not exclusively paid to men, since as already mentioned the ranks of nurses and
teachers contain both men and women, the male ratio of access to such salaries is skewed
by the fact that police and the air force employ mainly men. In a situation of scarcity
where there are few alternative sources of money, government salaries represent one of
the main resources. The redistribution of these salaries occurs via the girlfriends who
cluster around the recipients of these salaries. The larger the number of girlfriends, the
greater the drain on this one single resource – but the more effective the redistribution
downwards. The “trickle down” effect occurs in two directions. On the one hand it is for
others – furniture stores, self-employed traders, dressmakers, etc.- to gain access to the
money these women receive from their lovers. On the other it is for mashonisas and other
lenders (now including salaried female teachers) to replenish the male coffers which are




                                                                                             21
continually being re-emptied by the demands of their female companions – with a 50%
mark-up.7


It is around this (admittedly crudely) modeled – and gendered – set of circuits that the
money is thought to travel in this village. Gender thus plays some part in structuring and
perpetuating the status of borrower, but in very complex ways.


Aspirations, life-course emergencies, and marriage
Local people‟s involvement in consumer credit had not – contrary to popular
representations - commenced only recently. Despite an assertion by Posel (2009) that the
onset of commodity consumption in its most extreme guise was linked to the moment of
political liberation, most Impalahoek inhabitants and their families, like their counterparts
interviewed in urban areas, had been buying items of furniture over a generation or more.
Later, after electricity had been provided to most areas after 1994, electrical appliances
such as fridges and TVs were added to the list of essentials. To buy these items, they had
relied on credit from furniture stores: precisely those whose exorbitant terms had
eventually prompted Manganyi Zulu and his fellow club members to start their savings
clubs (see above). For those already engaging in consumption of commodities and using
consumer credit in order to do so, it was typically the further exorbitant demands entailed
in one specific moment in the life-course of the newly upwardly mobile South African
that “broke the camel‟s back” – or rather what caused them to “fall off the camel” and be
subjected to its vicious kicks. It was the need to educate one‟s children to higher level.


Mrs Madumo is a case in point. A nurse who receives a regular state salary, she had
managed - her daughter told me – to keep all previous expenses, such as clothes bought
using store cards and furniture bought on terms, within her monthly budget. It was
sending a child to university to study law that had proved one expense too far. Although
the daughter received a state loan, she needed further money towards tuition fees, and
approached a range of lenders, including a registered microlender and a mashonisa. In


7
 I acknowledge Sakkie Niehaus‟ input here – and indeed for introducing me to various contacts in
Impalahoek more generally. I apologize if I have mangled his idea!


                                                                                                   22
order to send a second child for further education, she later got herself further into debt
with a second mashonisa. Unable to service both the loans, she found herself with
amounts that accrued at an exorbitant rate: something which drove her to borrow from yet
another mashonisa. Here was a classic case to which a phrase often repeated to me – it is
impossible to “get out from” the mashonisa – applied perfectly. But being in this
situation had not caused her to cut back on other aspects of the life-style of the new
middle classes: she had recently been given a bank loan (on the strength of her salaried
status) and bought a car.

(Although this situation caused the daughter to comment critically upon her mother‟s
apparent addiction to borrowing, she offered no negative comment on the lending habits
of mashonisas. Indeed, as the story was being recounted to me, her friend, listening in,
commented that she, too, had once lent money for interest, and that it could be a good
source of income. Her only mistake, she said, had been to fail to secure the loan. She
planned to lend money again, but this time she would make sure to take the borrower‟s
ATM and ID cards.)


Besides the costs of further/higher education, what were the other reasons given for
borrowing money? Discussions with member/founders of ASCRA-type savings clubs
yielded a range of needs whose fulfillment led their aspirant borrowers to request loans.
These ranged from the basic necessities of life, like food, through paying school fees, to
covering considerable ritual expenses – another and different kind of educational
payment: “My son is going to initiation, I need money to pay the owner, or to buy food
for the ceremony”.8 But many requests were rejected as frivolous: “Passersby will say „I
want money‟, they have many funny stories. „I have a lay-bye somewhere and want to
take out that thing [pay off the outstanding amount]‟. But we can‟t give you money with
a funny story.” (ibid.)


One request that is taken more seriously, however, is that – whether bogus or genuine -
concerning the expenses associated with death: “ „there‟s a funeral – I don‟t have money‟


8
    Manganyi Zulu, RDP houses, 26th March 2009


                                                                                              23
And they know if they use a funeral we are going to give them the money”. (ibid.) But
there is one expense for which, I was told, one would never request a loan: that of
manyalo (bridewealth), more commonly described now by using the Zulu term lobola.
This is something to plan for, to work for, to budget for, not something one would do in a
hurry or recklessly. The protracted and delayed transfer of wealth which, in the classics,
is said to occur in the event of marriage in such a society (EJ and JD Krige 1943) in many
ways provides an archetype of debt, as one informant recounted to me:


        People have been in debt since time immemorial. There were lots of different kinds.
        … In marriage, when I pay lobola, I don‟t pay the whole amount. This will either be
        8 cattle (the minimum) or 12 to 15 cattle (the maximum), depending on the culture.
        That means I am in debt - I am still owing the family of my wife 6 cattle. They have
        the right to follow me up, and send people, even to send the chief to collect the
        debt. He will come and say “do you know that you owe so-and-so?” There are
        procedures for how to claim what you are owing them. With marriage, it is done in
        a very harmonious manner, they are not impatient, don‟t shout, don‟t mock you
        when you fail to pay. … The procedure is, they will make beer, send people. They
        will not give you a specific time, when you must settle your debt, but they will
        remind you – it‟s a reminder. They expect you to respond by sending other people
        to pay up, this amount that is owing.

        They might even allow you, to have children, and when your first daughter, when
        she gets married, you are paid lobola for your daughter. …9

This account of delayed reciprocity is one which Sahlins (1965) would immediately have
recognized. It may have an idealized ring about it. But it rings true nevertheless. In real
life, too swift a payment of bridewealth can upset the fine balance which would otherwise
be sustained by its more measured, or endlessly delayed payment (as happened in the
case of this informant, whose son-in-law paid off his debt with a huge lump sum which
the informant then spent too quickly and with unseeming profligacy).


The matter of this delayed debt and its associated uncertainty becomes problematic,
however, in particular circumstances: that is, where terminal illness and the multiple
partnerships mentioned earlier combine. In the event of such a death, not being fully
married, or living with a temporary partner without establishing any legal rights through
9
    Eliazaar Mohale, Impalahoek, 16th August 2008



                                                                                              24
marriage payments, leads to a social-structural crisis - and can drive people into further
debt.


In two cases I observed this was seen – or certainly predicted – to be a major problem. In
one, a man had been living with his girlfriend at his place. She became ill with suspected
TB, and moved back home to stay with her mother. I asked why he did not bring her to
stay with him at his place, since he lives much closer to the hospital which she was
having to visit frequently. Given that he has paid no lobola, he answered, there is a
danger of her dying at his place, which will lead to a row over whether the
right/obligation to bury her lies with him and his family, or her mother. This anxiety
resonated with that expressed in other similar stories.


In a further case, this anxiety led to serious indebtedness. This was the case of Abiot, the
moneylender‟s agent/apprentice discussed earlier. The reason why he had to approach
Sekgobela for a further loan beyond his debt already incurred with a first moneylender,
arose at the moment when his wife died, and related to the problem of jural uncertainty,
combined with a bureaucratic problem of record-keeping at the air force:
        In 1999 he got married. … Then he fell in love with another lady. …he married
        the girlfriend, so the girlfriend was now his second wife. And they were staying
        in the same house – same yard but different rooms. … His first wife … was very
        upset that her husband married another woman while she is inside the yard. [She
        committed suicide]. After her death her husband - who is working for the
        government in the air force - went there, and he wanted them to give him money
        to assist him in burying her. They said “it‟s fine, we will assist you, we will give
        you the money”. So they told him to come on Thursday, and they would give him
        the money. So he went there on Thursday. The tent was being built in his place so
        that the following day – Friday - there must be a night vigil. His wife will be
        buried on Friday. Unfortunately on his arrival on Thursday they looked into his
        files only to find that the beneficiary was the second wife, and a certain
        percentage for his mother. So they couldn‟t help him. They refused because the
        wife was not in his files. She was not in the will.

        The first wife - he didn‟t pay the full amount of lobola. He was running short of
        some thousands. … So they said “you must pay us R15,000 before you can bury
        our child”. That was his in-laws. … So he went to mashonisa, and borrowed
        R15,000. He took the R15,000, together with his uncles, to his in-laws and paid
        the R15,000 from mashonisa. [But still] they had the problem, how to bury her?
        He went back to the air force, and they said “we are not allowed to help you,


                                                                                             25
       because that is not your wife – because she is not on the list”. So R15,000 was
       already gone, because he has paid the lobola. So he went back to mashonisa, and
       mashonisa refused. He asked “how much do you want?” He said R10,000, to
       make it R25,000. Mashonisa refused. He said “I can‟t afford to give you
       R25,000. R15,000 I can understand because your wife is dead”. He said “I have
       the money, but you will not be able to pay me that money back.” So he went to
       another mashonisa. He borrowed R10,000. They gave it to him. He buried his
       wife. After burying his wife, his card was now with mashonisa. So he was
       working for mashonisa from 1999 up until 2005. Mashonisa had his card.

The various examples provided here demonstrate the relevance of a complex range of
factors. It can be seen from them that the three aspects discussed in this section of the
paper – gender, domesticity, the life-course, and time - are intricately interconnected. Put
together with the pervasiveness of illness and death, they produce an overdetermination
of the status of borrower for certain people.


Conclusion


The rhetoric of those in the formal micro-lending sector fails to acknowledge that most of
those borrowing from their members and from illegal loansharks, being reliant on
government salaries, are members of the real or aspirant black middle class rather than
being drawn from among “the poor”, since it is only those with salaries and grants who
are in a position to borrow at all. The market-oriented analysis of those in this sector, and
of those attempting to regulate it, does have some use. I have shown how there can be
said to be a segmented “market” made up of many “target” groups. However, this kind of
analysis must be qualified, since a number of people borrow money from several sources,
including banks, micro-lenders, mashonisas and others.


The attempted state regulation embodied in the National Credit Act, while forcing a range
of micro-lenders into compliance with a strict regime of interest-rates and bureaucracy,
was not reaching down to the pervasive practice of ukushonisa. And what those who
designed and debated this Act fail to understand is that, instead of the object of regulation
being distinct (and demonised) individuals called mashonisas, lending is a practice which
is pervasive in society, which relies upon the existence of “willing borrowers” (albeit



                                                                                            26
ones whose status has been somewhat predetermined by structural factors), and which is
implicated in a variety of roles, subject positions, relationalities and (real or imagined)
interdependencies.


References


Bähre, Erik 2007 Money and violence: financial self-help groups in a South African
township, Leiden, Brill

Berman 1982 All that is solid melts into air, Harmondsworth, Penguin.

Blok, Anton 1988 The Mafia of a Sicilian Village 1860-1960; a study of violent peasant
entrepreneurs, Oxford, Oxford University Press.

Burawoy, Michael and Katherine Verdery 1999, Uncertain transition: ethnographies of
change in the postsocialist world Rowman and Littlefield

Cock, J and K Fakier 2007 “A Gendered Analysis of the Crisis of Social Reproduction in
Contemporary South Africa” paper presented at Sociological Association of South Africa
Congress.

Krige, E.J. and J.D. 1943 The Realm of a Rain Queen, London, International African
Institute.

McNeill, F 2007 “An Ethnographic Analysis of HIV/AIDS in the Venda Region of South
Africa: Politics, Peer Education and Music” PhD thesis, LSE.

Niehaus, Isak 2001Witchcraft, Power and Politics: Exploring the Occult in the South
African Lowveld, London: Pluto Press.

_____2006: Doing Politics in Bushbuckridge: Work, Welfare and the South African
Elections of 2004. Africa 76(4)

_____2006: Biographical Lessons: Life Stories, Sex and Culture in Bushbuckridge,
South Africa. Cahiers d’Etudes Africaines XLVI (1), 51-73.

_____2002: Perversions of Power: Witchcraft and the Sexuality of Evil in the South
African Lowveld. Journal of Religion in Africa 32 (3), 1-31.

Posel, Deborah 2009 “Race, Consumption and the Idea of Freedom: Revisiting South
Africas Racial History”, talk at City University, London.



                                                                                              27
Roth Jimmy 2004 “Spoilt for Choice: Financial Services in an African Township” Phd
thesis, Cambridge

Sahlins, M 1965 “On the sociology of primitive exchange” in The Relevance of Models
for Social Anthropology ASA Monographs 1

Weber, M. 1948 „Class, status, party‟, vol. 2, pt. 2, ch. 9 (6) in Economy and society,




                                                                                          28

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:3
posted:10/25/2011
language:English
pages:28
gjmpzlaezgx gjmpzlaezgx
About