Durban: Workers in the eThekwini Municipality are under severe financial strain as a result of “predatory loans” that are consuming a large percentage of their salaries, leaving them struggling to make ends meet every month.
A municipal labour union has flagged five loan companies which it said had trapped workers in a vicious cycle of debt where they are borrowing money every pay-day just to survive.
These companies put in a stop order via the employer which means they take their loan repayments before the employee gets their wages, forcing the worker to survive on whatever is left. The Mercury has seen payslips showing that in some cases, more than 95% of the employees’ wages are deducted as stop orders. The employees are then forced to borrow again to survive for the rest of the month.
One payslip in possession of The Mercury has deductions showing that a worker earning close to R20 000 a month has deductions on his payslip totalling more than R18 000 and is left with a meagre R1 800 to live off until the next pay cheque arrives.
It also showed at least three loan deductions from three different financial services providers. There are also other deductions listed on the payslip.
The Independent Municipal and Allied Trade Union (Imatu) revealed that some city employees are sometimes left with less than R10 from their wages after these deductions.
Queen Mbatha of Imatu detailed the origins of the problem. She said as part of the collective bargaining agreement, the unions and the municipality had agreed for the use of stop orders to make deductions from workers’ salaries for some products like insurance that have been sanctioned by the unions.
She said this is now being abused to allow for predatory lending which has brought many of their members to the brink of financial ruin.
Mbatha added that loan companies are now putting stop orders without even verifying whether the workers can afford the loans.
“We have instances where people are left with just R7 as pay that goes to their bank accounts,” she said.
“There are five of these companies. The number of municipal staff members in their uniforms queuing outside the company’s offices (which is close to where they work) every pay day is shocking. The worker would have been paid that day, but would have no money on the same day and have to go to this company to borrow again.
“The year is coming to an end and municipal employees are supposed to be getting their bonuses but there are people who will not get their bonus because they (bonuses) have essentially been attached by these finance companies.
“Some were attached in April so if an employee is supposed to get a bonus at the end of the year, it will now be paid over to the company, plus whatever else the employee was owing, leaving the city workers with nothing,” Mbatha said.
“This is a serious situation. We have had workers quitting their jobs, committing suicide and even the productivity of the municipality is suffering because these workers are ‘not showing up’ at work because they also owe their co-workers in the municipality money and cannot repay them,” said Mbatha.
She said that in 2013 the National Treasury had demanded that the practice be stopped but it had persisted with new stop orders being put in place.
Another official from Imatu in eThekwini, who did not want to be named, said they had been briefed directly by the workers on their plight.
“I do not know what interest these loans are charging but it is high. It's taken the form of a loan shark who operates inside the municipality and you cannot avoid that loan shark.
“It's like these companies are the ones paying the salaries of municipal employees now.
“There is no limit to how much they can take each month, there should at least be a limit to allow the employees to be able to live,” he said.
“A solution has to be found here because many of these workers have been overwhelmed by the loans and have quit their jobs,” he said.
Attempts to reach the South African Municipal Workers Union (Samwu) were unsuccessful.
Municipal spokesperson Gugu Sisilana said the unions must take responsibility for the current state of affairs.
“The loan companies hold contracts with the trade unions, not with the municipality. Under a collective agreement with the union, the municipality deducts loan repayments directly from employees’ salaries.
“Since the trade unions have established these agreements with the loan companies, they are the ones responsible for addressing these questions,” Sisilana said.
The National Credit Regulator said: “As the National Credit Regulator, we have only been made aware of the situation, and we will make contact with the affected institution to verify the facts.”