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TransUnion warns of looming household debt crisis

MBONGENI MGUNI
Ear to the ground: Ramaselwana says more data sharing will improve the quality of the credit market
TransUnion Botswana, the country’s leading credit bureau, expects the lifting of the State of Emergency to trigger lay-offs across the economy, leading to a debt crisis among individual borrowers.

As a credit bureau, TransUnion has the largest database in the country on borrowers, their repayment patterns and both positive and negative behaviour across banks, retailers, insurance companies and other entities. The latest Bank of Botswana (BoB) figures show that individuals (as opposed to corporates) owed commercial banks P3.1 billion in arrears, with P1.1 billion classified in the extreme category.

While retrenchments have been illegal under the State of Emergency (SOE), local businesses have struggled to stay afloat due to the COVID-19 measures, resorting to other moves like cutting salaries, working hours, perks and conditions.

Others have simply folded, unable to carry on, particularly in the tourism, restaurant and nightclub sector. While government has ploughed billions into wage subsidies, tax relief programmes and the Industrial Support Fund, various indicators, including the BoB’s business confidence surveys, indicate that many companies are still struggling.

This week, TransUnion CEO Kabelo Ramaselwana said while the trend in negative listings had remained stable since COVID-19 broke out in the country, there were worrying signs on the horizon. “It’s difficult to get a clear picture of the situation because the largest employer in the country, government, has protected jobs through the SOE,” he told BusinessWeek.

 “That has helped and we have not seen massive inflows of negative listings. However, COVID found this country where indebtedness was growing, especially within households. “We have seen more repossessions of cars and homes. Every newspaper has those and other listings in there showing that people are in trouble. “We don’t know what’s going to happen with the SOE.

“People may lose their jobs and many people will be stuck with debts and without anywhere else to run to.” He added: “Companies have not been doing well and with the SOE lifted, shareholders will focus protection of value.

“Again, many companies are also moving into digitisation and some people are going to be rendered

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not needed after the SOE.” Ramaselwana added that the generally low level of entrepreneurial activity in the country meant that most employed people only had one source of income. Generally, banks have imposed tighter risk assessments since COVID-19 broke out in Botswana, in an attempt to reduce credit losses. Borrowers also have been reluctant to take up new credit due to the job insecurity caused by the pandemic.

However, debt and arrears attributable to individuals at commercial banks prior to the pandemic were already high, with many of these classified as unsecured. In addition, many borrowers are also indebted or committed to other formal and informal creditors such as clothing retailers, hire purchase, union deduction at source, metshelo and others.

Ramaselwana said while TransUnion’s database covered the banks and other major issuers of credit in the market, it was crucial that the Credit Information Bill be passed in order for full sharing of credit data to be made compulsory in the market. “We are still at a poor stage of data sharing in the market and on a scale of one to five, I would say we are at about two.

“Many entities were not aware of why and how they should share data. “Unions working with deduction at source say they don’t see the need. But we are trying to show them that someone at GEMVAS can go elsewhere and get more credit.

“We are pushing quite a number of entities to come on board and share information, like the microlenders who already use some of these services. “We have said we need that information so that the market has a full picture.”

Ramaselwana said TransUnion would continue engaging NBFIRA on greater information sharing. The Financial Stability Council, which comprises NBFIRA, the BoB and the Financial Intelligence Agency, earlier this month said the Credit Information Bill had been drafted.



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