How the ratings downgrade affects your debt: a legal perspective

[Featured image sourced from BusinessTech]

As of today, 07 April 2017, both Standard and Poor’s (S&P) and Fitch, two of the three international ratings agencies alongside Moody’s, have downgraded South Africa’s credit rating to sub-investment grade, or “junk status”. There has been a lot of discussion about how this could affect the exchange rate, international investment, taxes and government spending. But how does it affect the average person and what, from a legal standpoint, should you be aware of?

Before we start, it is important to note that there is no need to panic. Economic changes don’t usually happen too drastically, or overnight. Nonetheless, there are things that you should do to prepare yourself so that you are not caught financially off-guard by changes as they happen.

So what can the average person expect? The average person could be affected in five ways: taxes may increase, interest rates may increase, inflation may increase, job security may decrease and returns on your pension, provident and retirement funds will probably decrease. What this boils down to is more pressure on your pocket. That pressure will make it harder to save, invest, and – more critically – make it harder to repay debt and cover your day-to-day expenses. In this post we are going to focus on what happens when you can’t pay back your debt.

First of all, what is debt? Debt is when you have effectively borrowed someone else’s money that you need to pay back. Debt can take a number of forms. Home loans, vehicle finance, credit card debt, personal loans, store cards, cell phone contracts, and instalment sales are all forms of debt. With the pressure of interest rate increases and rising costs of expenses, it becomes harder to make your monthly repayments. If you don’t or can’t pay your monthly instalments, your credit provider can take a number of legal steps against you depending on you contract with them and the nature of the debt.

Ultimately, the law recognises a creditor’s right to be paid for what they have lent you. So if you stop paying, you don’t simply get to walk away without repercussions The law provides a number of ways for creditors to get their money back. Ultimately, each way puts your belongings and, sometimes, your livelihood and home at risk. Common legal routes to recoup unpaid debt are as follows:

  • Bonds over your immovable property (mortgage bonds) allow credit providers to sell off that immovable property to repay themselves. You might have a home loan secured by a mortgage bond over your house for instance.  If you default, the bond would allow the bank to sell your home.
  • Writs of execution allow creditors to sell your movable property (for example your car or furniture), and or your immovable property to pay themselves back.
  • Garnishee orders / emolument attachment orders allow a creditor to deduct money straight off your salary.
  • Orders of insolvency allow creditors to sell off your assets to repay themselves.

Over and above all of this, defaulting means that you run the risk of being black listed. If you are black listed you won’t be able to get credit in future. If you avoid black listing, you may run the risk of having your own personal credit rating downgraded. Just like the S&P downgrade, this will make credit institutions less inclined to lend you money, and if they are willing to lend you money, it will more than likely be at interest higher rates.

So basically, you need to avoid defaulting on your debt.

What you as a consumer and a debt holder can do to avoid default is to first and foremost “know your debt”. In other words, know exactly how much you have borrowed, and exactly how much you have to pay back on a monthly basis.

Secondly, “know your interest rates”. You need to know which of your interest rates are flexible and take steps to understand what an increase in the repo rate will mean for each of your repayments. Most debt is granted on a flexible interest rate. What this means is that if the reserve bank chooses to increase the repo or “prime” lending rate (which is likely to happen following a downgrade) your interest rate will also be increased.

Thirdly, “have a plan to reduce your debt”. Have a plan of how you are going to repay your debt. The best place to start to reduce debt is try to reduce your expenses and to use any extra money you have – after paying off your monthly repayments – to pay off your debt starting with the debt with highest interest rate.

Fourth, “try to avoid more debt”. Particularly avoid debt on medium-sized purchases and purchases you don’t need. That new TV may only cost you “R199 per month!!!” But that is adding to your debt burden, your risk of default, and usually, you will end up paying more for that TV over the long run than you will if you save up and buy it in a lump sum. Yes, this means you may not have as many nice things. But if interest rates increase you will be grateful that you are not drowning in debt.

Fifth, “downsize if necessary”. Do you really need that expensive car, that expensive house, or that fancy cellphone? Think about going simpler, smaller and cheaper. When it comes to debt, every little bit counts.

I hope this basic overview has been helpful. Over the weeks to come, we are going to run a number of articles on our “Realising Rights blog” to unpack the concepts set out in this article with the aim of helping you take control of your debt.

By Alexandra Ashton

Alexandra Ashton is an attorney heading up the LRC Johannesburg’s debt and housing department. She holds a BCom and an LLB with distinction from Wits.

Alex, with thanks to the continued financial support of Legal Aid South Africa, is currently working on assisting people who lost their homes as a result of the fraudulent Brusson Finance lending scheme to be restored with ownership of their properties.

Disclaimer: The opinions expressed by the Realising Rights bloggers and those providing comments are theirs alone, and do not reflect the opinions of the Legal Resources Centre. The Legal Resources Centre is not responsible for the accuracy of any of the information supplied by the bloggers.

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Women’s Month 2016: Child marriages in South Africa

Child marriage affects girls in more ways than one. They are neither physically nor emotionally ready to become wives and mothers at the age that they get married. Child marriage results in girls being disempowered, dependent on their husbands and deprived of their fundamental rights to health, education and safety.

The health of a child bride diminishes from the date of her marriage, as she “becomes a woman” before her body has been allowed to develop naturally. As a result of her age, she is less able to negotiate and articulate her rights to bodily autonomy. Access to healthcare and sexual reproductive healthcare, in particular, is difficult in the rural context and is exacerbated within the context of a rural girl child.

She stands a greater risk of experiencing dangerous complications in pregnancy and during childbirth. Her exposure to HIV/AIDS infection, as well as other sexually transmitted diseases, increases. In the context of poverty, where she is reliant on her husband and her in-laws to care for her, she is at greater risk of having her rights to healthcare denied.

Many girls suffer domestic violence from their husbands and even from their in-laws. Her ability to protect herself and to have her bodily integrity respected is ignored. In instances where her own family has consented to the marriage, it becomes increasingly difficult to leave her abusive husband.

Child marriage usually means the end of a girl’s formal education. Once married, girls are burdened with their new responsibilities as wives and mothers and often stay at home as a result. A girl child’s husband or in-laws may not be supportive of her education and burden her with new adult responsibilities, leaving her no time to attend school. She may become entrenched in the cycle of poverty because, with little access to education, her opportunities to seek employment outside of the home diminish.

What can be done?

Government should set clear and consistent legislation that establishes 18 as the minimum age of marriage and remove any laws which allow for parental consent, for the following reasons:

  • Setting the legal age for marriage at 18 provides an objective, rather than subjective, standard of maturity, which safeguards a child from being married when they are not physically, mentally or emotionally ready.
  • The existence of laws which prohibit child marriage is an important tool to help those working to dissuade families and communities from marrying off their daughters as children.
  • It is imperative that children are recognised in the law as being children and are afforded the full protection of the law. When a child does not have the right to vote or enter into other contracts before 18, why is marriage allowed?
  • Ending child marriage is not only the right thing to do, but is also an economically practical decision for empowering young female leaders who can support themselves and uplift their communities.

This post was developed as an informative tool for women. Please visit your nearest LRC office for further advice and assistance. Written by Naushina Rahim

The Day Human Rights Became Immoral

On 3 March 2015, the Portfolio Committee for Justice began the public consultation process on the Criminal Law (Sexual Offences and Related Matters) Amendment Act Amendment Bill 18 of 2014. The Legal Resources Centre attended Parliament and presented oral submissions which were based upon our written submissions of 4 March 2015.

The Amendment Bill seeks to implement two Constitutional Court judgments which have become known as the Teddy Bear Clinic case and J v the NDPP case. Both of these cases dealt with aspects of the constitutionality of certain provisions of the “Sexual Offences Act”. The Teddy Bear Clinic matter dealt with the constitutionality of criminalising consensual sexual behaviour of adolescents between the ages of 12 years and 16 years, and J dealt with the automatic recording of the details of minors convicted of sexual offences on the National Register of Sex Offenders. The amendment that will address the constitutional concerns raised in the Teddy Bear Clinic case has received much more media attention than the issue of recording minors’ details.

It seems that the reason for this was on full display during the public consultation process this past week, when a number of religious organisations, churches and institutions came to Parliament to object to the amendment which, in essence, seeks to recognise normal sexual behaviour between consenting adolescents. The Constitutional Court has recognised adolescence as a difficult period in a person’s growth and that adolescents require support and not prosecution. These particular amendments will give adolescents the ability to experience their normal sexual exploration and development by not criminalising this behaviour.

Those who attended on behalf of the religious community did not afford the same recognition to sexual behaviour between adolescents. This apparently normal period in the development of human beings became “episodes of consensual abuse”, “unnatural urges and needs” and “immoral and sinful”.

Repeatedly, those of us who believe in human rights and the Constitution where told that we hold no moral compass. At one point in the presentations, it was stated that civil society organisations funded by the west have become “agents of Satan”. They referred to a Constitution in which “the moral values of the majority were not reflected in the liberties contained in the Constitution”. One could almost forget that the Constitution, in fact, recognises rights for South Africans and instead begin to believe that they were in fact liberties; liberties that we can either be deprived of or which we are happy to give up, if only government would allow us to do so.

We recognise and acknowledge that, as South Africans, we have a wonderful opportunity and right to participate and engage in the process of enacting legislation. This is a right that was hard won and we continue to struggle for its realisation.

But we further recognise that we need to ensure that the values in the Constitution and the rights enshrined therein are protected by taking a proactive stance in engaging at the parliamentary level in order to ensure that legislation that is passed within its halls are indeed in compliance with the Constitution. If we do not, we run the risk of parliamentarians only hearing the voices of those who are too eager to give up rights on our behalf.

The amendments to the Sexual Offences Act will, in all likelihood, be adopted by Parliament; there is, after all, a Constitutional Court order mandating them to do so. We ask that Parliament implement the tolerant and accepting nature of the Constitutional Court in both its recognition of the support needed for adolescents during a difficult time in their lives, as well as the need to de-criminalise their normal sexual behaviour.

We echo the sentiments of the Chairperson of the Portfolio Committee in saying that religious leaders and institutions have a duty not only to educate their members on their religious duties, but also to ensure that they use their platforms to educate the public on our Constitution and the rights enshrined therein.

By: Charlene May

Disclaimer: The opinions expressed by the Realising Rights bloggers and those providing comments are theirs alone, and do not reflect the opinions of the Legal Resources Centre. The Legal Resources Centre is not responsible for the accuracy of any of the information supplied by the bloggers.

16 Days: Raped on the border

During 16 Days of Activism for No Violence against Women and Children, the Legal Resources Centre will be sharing the stories of survivors of gender based violence who fled their countries to seek asylum in South Africa. Many women, children and sexual and gender non-conforming persons endure horrific hardship, sexual persecution, assault, rape and discrimination in their countries. When they arrive in South Africa their hardship does not end. Some women experience sexual persecution while crossing the border, while others may experience oppression, intolerance and discrimination while trying to create a life in South Africa. When they enter the asylum seeker process, they often endure further persecution. These are their stories.

Raped on the border

K was born in Zimbabwe. When she was 15 years old, she travelled with her friend, F, also 15 years old, to South Africa. Things were ‘not good’ at home in Zimbabwe and K wasn’t attending school. They crossed the border illegally, travelling through the bush. On the way they encountered a man. He said he could help them cross the border, and he offered them a place to stay; as well as food and money. K and F went with the man to his house. When they arrived, K asked for some soap so that she could wash her clothes. The man gave her some soap and a bucket, and she went into the garden, leaving F inside the house together with the man.

After she finished washing her clothes, K returned to the house. She found her friend lying on the floor. She was naked and screaming. The man chased them out of the house and told them if they ever told anyone about what had happened, he would find them and kill them. K and F never directly spoke about that day. In fact, F never told anyone about her rape.

When K and F arrived in Musina they were taken to a children’s shelter and interviewed by a social worker. K told the social worker what had happened to F, but F refused to speak about what had happened in the man’s house, so no action was taken. After some weeks passed, F became aware that she was pregnant. She told K that she must leave the shelter in order to find the man. K begged F not to leave, but she could not persuade her to stay. K has not seen F since.

Sexual violence and rape is not a unique occurrence on the border between Zimbabwe and South Africa where the vulnerability and desperation of women and girls place them in precarious positions. During interviews, women have told researchers that they gave undisclosed favours to men in exchange for helping them cross the border. Other women have been murdered and raped, even while traveling in groups. One woman explains, “I came illegally across the border through the Limpopo River. I came with a group who were guided by people who facilitate illegal border crossings. They took all of my money. They were also killing and raping people in the group.”

Unaccompanied minors are children who are not accompanied by an adult when they enter the borders of a country. Reasons that children leave their home countries and families for South Africa are often linked to issues in the family home; such as violence, poverty and lack of access to education. With HIV impacting on families, some young children will cross into South Africa following the death of a parent. Unfortunately unaccompanied female minors are often more vulnerable than young boys and need particular protection. UNICEF indicates that many of their vulnerabilities stem from the children’s fear of authorities, as well as their lack of documentation. This deters them from reporting violence or seeking services, or making asylum claims which would offer them some protection and give them the ability to access further services.