Our interests at heart
IT’S AN UNPALATABLE FACT that very few governments or even cabinet members have the moral courage or noble intent to boldly adopt unpopular legislation even when it would be not only a swift and effective cure for a problem but also the most obvious.
The only solution SA Reserve Bank governor Tito Mboweni seems to contemplate is control via interest rates, when other better and more pragmatic solutions are at hand. Manipulating interest rates is allencompassing and its negative impact is indiscriminate, affecting innocent producers and profligate consumers, poor and rich, alike.
We’re always being told that largely the poor inhabit South Africa. Increasing interest rates hurts the middle and lower income sectors the most. While an increase in rates might put a damper on new purchases it also results in an unavoidable increased burden for existing credit, such as hire-purchase agreements, mortgages, credit card budget payments and overdrafts.
With a pen stroke, SA could apply constraints that would attack inflation and slow credit demand without hurting those unable to defend themselves. All the Finance Minister has to do is preclude the banks from using the courts to recover debt incurred by individuals for all consumables, such as food and liquor bought via a credit card or on monthly account. That will include removing the clever ruse whereby items normally irrecoverable through debtors’ courts – such as fuel, gambling and liquor purchases – are paid via credit card (a so-called “cash only” petrol card purchase can be transferred to a standard credit card), an exercise that’s patently against the spirit of the “cash only” principle for those purchases.
Government won’t do that because it hasn’t got the fortitude to go against the mighty bank lobby, so the poorest of us will continue to bear the burden of the easier-tolegislate interest rate increase. But there’s a precedent, set by a previous government that didn’t like gambling and the concept of suing for gambling debts and liquor purchases and
virtually excluded the use of the courts for this purpose.
Nor should credit cards be allowed when paying any primary debt. Government has steadily reduced the amount of deposit a consumer has had to pay when buying cars and furniture. The effect of that is also to benefit the banks and increase the monthly burden on the poorer consumer. It’s great for business and banking, lousy for the consumer – so par for the course.
When the banks bleat that such regulation is unenforceable mechanically, let me point out that cash tills can discern between VATable and non-VATable items. Why not the same preclusion on credit cards to identify consumables, so that when the purchase is made the bank and consumer will be aware that this portion of the debt used to buy consumables isn’t recoverable through the courts. That would slow down profligacy dramatically.