Much has been said about the level of household indebtedness in Botswana, particularly the fact that much of it is driven by general low financial literacy and an engrained culture of consumerism.
Appeals have been made to the financial sector regulators, chiefly the Bank of Botswana (BoB) and the Non-Bank Financial Institutions Regulatory Authority (NBFIRA), to intervene and either act to enforce greater transparency protocols by lenders or provide statutory debt relief avenues for those most distressed. Unfortunately, to date, interventions by both institutions have been perfunctory at best, misdirected at most and dismissive at worst.
The central bank has made it clear repeatedly that their interest in overall household debt is limited to the extent that this problem affects systemic banking sector stability, while NBFIRA appears content with a requirement it made to lenders to include a warning clause in their advertisements on credit products.
The BoB has also hinted that it applies “moral suasion” to the commercial banks, a type of soft diplomacy in which it appeals to them to measure their credit aggression with humanity. The trouble with these measures is that they clearly fall far below the level of interventions demanded by the crisis at hand. Even in the absence of consolidated data on levels of household borrowings and credit obligations across the banks, insurance companies, hire purchase, salary advances and other informal avenues such as metshelo, it is clear a crisis exists. This is evident from the BoB’s own data showing that for 2016, credit growth among households fell to a more than 22-year low, due to what the new governor, Moses Pelaelo called a “debt overhang” in which households simply could not take on any more credit.
The actual situation on the ground is that Botswana has a small and generally static population of the formally employed, estimated in the latest Statistics Botswana data at below 200,000. This is the population of individuals who can technically borrow from formal lenders. Within this population, however, most lenders, particularly the non-bank ones, target public servants, workers at parastatals and affiliated bodies, resulting in this category of households carrying the heaviest debt. A trend known as ‘zero-nett pay’ has emerged where some formal sector workers walk home penniless at the end of the month due to multiple, overlapping credit obligations to banks, micro-lenders, insurance companies and unions. Statutory debt relief, as provided for in South Africa by the National Credit Regulator, is urgently required in Botswana to protect and rehabilitate the most distressed households. As observed by Debswana managing director, Balisi Bonyongo recently, lenders are “killing” Batswana with obscene debt, dropping productivity levels and resulting in the formally employed becoming walking debt zombies. The situation can be rectified and we look forward to just one brave legislator in the upcoming winter Parliament taking a stand to protect this country’s workers from unfair creditors and also, from themselves.