Case study: Addressing the challenge of employee indebtedness

Indebtedness is a serious and complex social challenge in South Africa. Many of our employees are struggling with a level of personal debt that is difficult to manage. Indebtedness has a deep impact on employees and their families and research has shown that it is an underlying cause of low morale, stress and labour unrest in the mining industry.

As part of our commitment to addressing this challenge, we have identified the following principal causes of debt:

• Employees living beyond their means: Employees succumb to peer pressure in seeking to emulate the lifestyle of their neighbours, even though their income may differ substantially.
• Financial illiteracy: Employees lack sufficient literacy to understand the detail of credit agreements and the complexity around interest and fee structures. Other challenges are a failure to budget effectively or determine the affordability of taking on additional repayment commitments.
• Easy access to cash: Nearby shops advertise cash offers, attracting employees into the debt cycle.
• Irresponsible money lenders: Mineworkers are often vulnerable to irresponsible lenders who act outside of the law and exploit borrowers.
• Fraudulently obtained emolument attachment orders (EAO): Some of the EAOs issued are obtained by fraudulent means.
• Providing for a second household: Some of our employees who migrated from the rural areas or neighbouring countries have established a second family in the vicinity of the mine, which they need to support.
• Protracted strike: The five-month-long strike in the platinum sector in the first half of 2014, during which the ‘no work no pay’ principle applied, had a material socio-economic impact on our mineworkers, resulting in many increasing their dependence on credit still further.

This year we have been continuing to focus on initiatives to assist workers with financial literacy and planning, and to mitigate employee indebtedness. In addition to addressing financial literacy and education as part of our team mobilisation process, we have established an internal task team to promote progress. We have also launched a campaign and a one-day financial life skills course to explain employee payslips, focusing on providing employees with an understanding of the pay structure, benefits and deductions, overall impact on net pay, managing their budget and debt. We have a wellness forum that meets monthly to consider all employee wellness issues, including financial wellness, within an integrated framework.

We have implemented measures to ensure that micro-lenders found to be operating at residences and mine property are removed. During 2015, unscrupulous lenders, some of whom masqueraded as selling safety equipment, were found to be operating on Rustenburg Impala property, including the residences.

We have employed a former sheriff of the court in our finance department to assist us in identifying and curbing fraudulent garnishee orders. We have already seen some improvements, as some garnishee orders in place have been deemed illegal. The Pay-roll Office records levels of personal debt and monitors trends for discussion in Joint Forum meetings. We refer high-risk employees to Careways financial advisers for assistance with understanding and managing their debt. Careways also provide debt counselling and debt consolidation services.

This year, we audited 40 cases in which judgments had been obtained against employees and emoluments attachment orders (EAOs) issued. In virtually all these cases we found one or more substantial breaches of the rules relating to judgments and EAOs. In August 2015 a court ruled that these EAOs had been obtained illegally and thus fall away and employees released from all obligations to pay. The money lenders will also abandon the debt of some 330 more employees with existing EAOs.

Implats has made detailed submissions to the Chamber of Mines, which is consolidating information on the number and legality of garnishee order issues. We are working with the National Credit Regulator (NCR) and Department of Trade and Industry, and providing input on the review of the National Credit Act Amendment Bill.