SAMWU TAKES STEPS AGAINST MICRO LENDERS

Part of the Financial Transformation Sector Summit process, which is currently on the agenda of the Public Finance and Monetary Policy Chamber at Nedlac, involves discussion of the practices of micro lenders. This article was contributed to the Dialogue by the South African Labour Bulletin, and can be read in full in the June edition (Vol 26 No 3).

Micro lenders have seen the benefit of infiltrating unions to access huge numbers of workers to provide micro loans. This has led to corruption and the payment of bribes to shop stewards and union officials. Samwu reveals how it dealt with this issue in its own ranks.

As mentioned in the previous Labour Bulletin (Vol 26 No.2) micro lenders and the insurance industry began moving aggressively into the market of the so-called blue-collar workers from 1994 onwards. This, and other factors resulted in unions beginning to explore the notion of facilitating the provision of a range of financial services to their members. Some unions such as the NUM, through their investment company, set up a separate financial services division to provide such services to mineworkers.

Samwu, one of the few unions that has resisted setting up an investment company, was eventually forced to intervene to regulate the number of micro lenders providing services to workers in local authorities. Samwu general secretary Roger Ronnie explains that the union had to get involved in order to lessen the burden of unscrupulous loan sharks on their members. It was eventually agreed that the provision of micro loans had to be regulated. Initially a central agreement, to offer micro loans to workers in local authorities, was entered into with Unibank. However, a number of problems emerged and the union decided to secure a new service provider. In the interim however, a number of companies attempted to enter through the "back door" to provide loans to workers.

The union discovered that certain companies had used rather "aggressive" means to market their services to shop stewards and union officials. Various measures were employed such as providing financial incentives, cellular phones and holidays to officials to secure the business. Ronnie said the union was only able to track the bribes made by one company, as they had been rather overt about it. The union has subsequently instituted disciplinary proceedings against a number of these officials, some of whom are still suspended pending an inquiry. It was important, Ronnie said, for the union to be seen to take action against these individuals as it showed that the union would not tolerate corruption within its ranks.

Following this incident the union went out to tender for the provision of micro loans. This process culminated in the contract being awarded to FNB. The agreement reached will apply to workers across the majority of local authorities and could affect an estimated 120 000 workers. The agreement stipulates the interest rate that the bank can charge as well as the limit for monthly repayments. The SA Local Government Bargaining Council has agreed to grant FNB stop order facilities so that deductions can be made for repayments of loans. Repayments cannot amount to more than 25% of take-home pay.

Roger said as part of its own initiative, the union has started its first national savings and credit co-operative. The aim of the co-operative is to encourage a culture of savings amongst workers. If after a period of time workers need to access loans then they can do so.