Election Watch: In the run up to the national elections of 2014 many parties will be talking about their policies and drawing up manifestos. But what are their policies when it comes to people’s finances?
Instead of making you go through all the policy paraphernalia Justmoney will ask as many political parties as it can what their policies are when it comes to debt, bankruptcy, saving and other consumer issues that affect the finances of households.
This week Angelique Ruzicka speaks to the Democratic Alliance’s (DA) shadow minister of finance, Tim Harris, to find out why cash strapped consumers should vote for the party in the 2014 elections.
1. How would your party tackle debt problems in our country?
The effects of unsecured lending are starting to put some South Africans under a huge amounts of pressure. The role that debt played on Marikana was clear. A lot of credit providers didn’t act responsibly and the current regulatory framework doesn’t put enough power in the hands of consumers, so we have tabled a whole lot of proposals.
(Harris sent Justmoney the DA’s policy on unsecured lending). We highlighted the following major policy points:
Credit bureaus: Banks and credit providers should be required to update credit bureaus with customer payment information more frequently, and should send immediate updates when a customer has defaulted. All credit agreements should state the full monthly payment, inclusive of all fees, insurance and other costs. The total repayment and the total cost of credit [should] similarly be [displayed].
Credit life insurance: All credit agreements should contain a highlighted explanation of exactly what insurance is being purchased, the claims process, and the risks of missing even one monthly payment.
Interest rate calculation: The DA proposes that a new formula be developed which establishes a directly proportional relationship between the repo rate and the maximum interest rate. This new formula should be developed in consultation with the NCR and the major lenders to allow for a reasonable profit margin, but which will not unfairly and arbitrarily punish customers for increases in the repo rate.
Defaulters: There should be no charge for removing a default judgement from one’s credit history, or indeed, that this should occur automatically once the loan in question has been fully repaid.
Credit information and jobs: We propose that the legislation makes it illegal for credit information to be requested, or used, in hiring decisions.
Garnishee orders: The DA proposes that South Africa adopt a framework similar to that of the United States that places clear limits on garnishee orders, at 25% or less of an individual’s gross income. Credit providers should be held responsible for all legal and administrative costs of garnishee orders on individuals earning less than R15, 000 a month.
To read the full document, click here.
2. How would you address food inflation?
The Apartheid government have created a certain structure of the economy that 20 years of ANC government hasn’t broken down. It’s an economy still dominated by large private and public sector companies with monopolies. That was a deliberate strategy by the Apartheid government to try and implement a state capitalist model and the ANC ironically has not rolled that back. One of the effects of that is that we have a lack of competition. Our policy is all about boosting competition and that’s how we would keep prices down.
3. How would you reduce utility bills?
We would definitely embark on an aggressive privatisation plan that would try and introduce competition into the electricity market, for example. In cases where that is not appropriate the challenge is to keep those increases of administration below inflation. On the private sector side we’d increase competition.
4. How would you encourage entrepreneurs?
It’s important to turn this country into one where it’s easy to start and grow your business. We need to reform, cut red tape and ensure that entrepreneurs have the financial and non-financial support that they need.
5. What are your tax policies and are there any that would reduce the burden on the consumer?
We support the zero rating of products in the VAT system that exist already and oppose any increase in that. On the supply side we put forward various proposals to reduce tax. We have a mechanism to try and help small businesses cope with fluctuations in their cash flow by giving them a targeted tax break, which we think will help the small business survival rate. We have a targeted tax break for big businesses that would use employee share ownership schemes because we like the idea that workers would have a stake in the companies they work for.
6. How would you incentivise the country to save?
We would increase the deductions around savings right from the deductibility on interest earned, to estate duty and donations tax. Your interest earned should be tax free up to R50, 000 or 50% of your taxable income.
7. E-tolls – what’s your stance?
The major problem with the system is the percentage of the revenue that goes to overheads. It’s a very expensive way to collect revenue from road users. A much better and simpler way to finance it [maintenance of roads etc] would be through a provincial fuel levy. It’s easy to administer. Road users would pay directly but not with a huge chunk of that payment going to support the gantries and toll collection.
8. What would be the key reason for cash strapped consumers voting DA?
The economic management by the ANC [is] letting South Africans down. It’s not an economy that’s growing fast enough or creating enough jobs. The DA is currently putting forward a comprehensive plan to turn this around. The ANC’s manifesto talks about creating six million jobs through the Expanded Public Works Programme (EPWP). That is important but if that’s the be all and end all of their jobs plan then that is not enough.
9. What’s your policy on bankruptcy? It appears that only the very rich can afford to go bankrupt in this country. Would you introduce any plans where it would be easier for poorer consumers to file for it?
The New Companies Act provides for business rescue. It hasn’t been perfect in its application but it is an improvement on previous procedures. My understanding is that we are saving more companies using business rescue. We have various problems with the Companies Act but broadly we are supportive of the business rescue provisions. As a party we would try and tweak them to improve them to make sure that we reduce the failure rate of small businesses.