Leaders of a trade union in the City of Johannesburg promoted a company that offered unsecured loans to its members that have left workers in severe financial distress and led to litigation and threats against payroll staff.
The Sunday Times can reveal that about 7,000 municipal workers in Johannesburg are under debt review — citing hefty loan repayment deductions as the reason. No affordability tests were conducted before the loans were granted.
The South African Municipal Workers Union (Samwu) entered into an agreement with Shosholoza Finance, granting it access to the city’s payroll and giving the company permission to deduct loan repayments from workers’ salaries.
Zinhle Debt Counselling recommended that the deductions be halted as the workers were struggling to make ends meet. The City of Johannesburg obtained a legal opinion that advised the city to stop the deductions.
But when the recommendations were implemented, Shosholoza Finance threatened legal action as the company said it was losing R1.8m a month. The company also opened a case against city manager Floyd Brink for cancelling the deductions.
In response to a subpoena to appear in court in May, Brink revealed that city employees had been threatened after the city halted the deductions. One worker had her tyres slashed, while another was followed home by a suspected hitman.
The union has defended its relationship with Shosholoza, saying it was the same arrangement it has with other service providers.
The Sunday Times has seen payslips that reflect hefty deductions, which in some cases meant staff received nothing on payday. This is not the first time microloan lenders have been found to be exploiting municipal workers. In 2021 the Sunday Times reported on an investigation by the National Credit Regulator into loan repayments being deducted directly from workers’ salaries.
This week, a Johannesburg worker, who asked not to be named as he fears victimisation, said it took him two years to free himself from the clutches of Shosholoza Finance, a period which put strain on his family. He said a total of R239,760 was deducted over two years.
“I went to them a week before my payday in 2022, seeking financial help. I asked for a loan of R120,000. They deducted R9,990 for 24 months — even though I tried to make sure that the little monies I receive in between, like bonuses, I paid towards the loan.
“They never gave me any loan agreement, they did not tell me what the interest is — they just said it will be fixed but inflation-related. During that period, I was unable to meet some of my financial obligations, my wife had to use her stokvel monies to help me pay Shosholoza.
“With Shosholoza, they don’t care whether you qualify or not, they don’t do a cost analysis. They just give you that money as long as you produce a municipal employee number. They take their money directly from payroll, there is nowhere you can run to. When you pay off your debt and you go back, they just give you more money so that you become their slave. That’s how they work,” said a victim.
He said he did not understand how the city agreed to let Shosholoza continue to recklessly lend workers money.
“In 2022, I lost a cousin who was working at Pikitup. When we investigated his death we realised that this guy was overburdened with Shosholoza loans and could no longer see where his hard-earned income was going because he was under so much stress and debt. He tried negotiating with his HR department but unfortunately they could not assist him. He ended up taking his life.”
In 2022, I lost a cousin who was working at Pikitup. When we investigated his death we realised that this guy was overburdened with Shosholoza loans and could no longer see where his hard-earned income was going because he was under so much stress and debt. He ended up taking his life.
— Municipal worker
The Sunday Times has seen another payslip where Shosholoza Finance deducts R14,000, which is almost half of the worker’s R30,000 net pay.
In 2017 Samwu and Shosholoza Finance entered into an agreement whereby the company offered “development loans for school and varsity fees, home renovations, personal short-term emergency loans and other financial products”.
Under the agreement, Samwu leaders act as sales representatives for Shosholoza Finance, and offered the company a platform to interact directly with union members. In return, Samwu could make funding requests to the company.
The agreement stipulates that Samwu will “assist with and promote Shosholoza Finance to the members and encourage members' employment companies and municipalities to conclude payroll or stop-order deduction agreements with Shosholoza Finance”.
In addition Samwu will “endorse and promote Shosholoza as its preferred financial services provider and provide Shosholoza with an irrevocable and unconditional mandate to assist the members, as well as allow Shosholoza to frequently present presentations to promote and market their services”.
Shosholoza stated in the agreement that Samwu “may from time to time request a sponsorship or financial assistance for various matters”.
Shosholoza Finance is registered with the NCR with certificate NCRCP2711. The Financial Services Conduct Regulator said Shosholoza was not registered as a financial services provider.
A national credit report, prepared by advocate Marcia Mashele on a debt review in June 2022, found that Shosholoza Finance did not conduct any affordability checks when it extended loans to municipal employees. “The credit provider over extended credit without the necessary affordability tests which have a risk of leading to over-indebtedness of employees. They provide products without conducting the necessary affordability checks.
“The credit provider disbursed multiple loans to customers within a short period of time without conducting proper affordability assessments, no credit report and income verifications were accessed or verified.”
Mashele recommended that an instructional letter be issued to the credit provider to address reckless lending that could lead to high risk of over-indebtedness.
The City of Johannesburg then commissioned a legal opinion by Mphoke PK Magane Attorneys, which concurred with Mashele’s findings. “As at February 2024 there were approximately 28,307 employees that belong to the city's core administration division. This figure obviously changes monthly as personnel join and leave the city. Further, there are a total of 4,643 employees who have been listed by microlenders including Shosholoza as having loans from February 2023 to February 2024.
“This is quite a significant number, amounting to 16.4% of the total city employees. It is evident from the data analysis report that at the end of every month, most of the employees within 16.4% of the affected employees have their salaries consumed by the debit order repayments to credit lenders.”
The legal opinion recommended that the city stop processing these debit orders for repayment of various loans between itself and the city’s employees, which precipitated the complaint from Shosholoza.
Brink, in his explanatory affidavit filed in court after Shosholoza opened a case against him, condemned the “harsh approach” taken by Shosholoza and Samwu officials in demanding answers for non-payments as a result of the deduction stoppage.
“This process has caused the payroll team great distress and panic as they had to face threats by Shosholoza through Waks Attorneys, that if they don’t process payments they will sue the payroll team in their personal capacities.”
The affidavit also details physical distress and bullying suffered by payroll employees.
There is no corrupt relationship between Samwu and the service providers. Those that allege, are better suited to respond, all service providers are treated equally as far as we know
— Samwu regional chair Ester Mtatyana
Samwu regional chair Ester Mtatyana defended the union’s relationship with Shosholoza Finance.
“The relationship between Samwu and Shosholoza is as a result of the main collective agreement. It is similar to other service providers we have. It’s a trade union initiated scheme. Shosholoza Finance has been part of the union scheme before we even became regional office bearers. To our knowledge all Samwu prescripts were complied with and followed.”
Mtatyana said the union is not aware of any complaints regarding Shosholoza, adding: “There is no corrupt relationship between Samwu and the service providers. Those that allege, are better suited to respond, all service providers are treated equally as far as we know ... We do not know the basis of the allegations. Those who are alleging should be able to explain the basis. The one alleging should be able to elaborate on how kickbacks are done or are even possible. All service providers have their own offices and field workers that conduct their business.”
The Sunday Times contacted Shosholoza Finance under the pretence of inquiring about applying for a loan.
“We offer short-term loans with 5% interest, from one month to six months,” said a consultant on the company helpline.
“We work with municipalities and their entities. We need your payslip, but if you don’t have a current one we can take an older one. We check affordability and credit but that will not affect your chances; come, my darling, you will get money.
“Your credit, we will overlook that thing. We overlook most things. We just need to know that with your net, we will be able to deduct. Most of the things we just overlook. Just bring a payslip, you will get money don’t worry.”
She encouraged the reporter to submit documents to Shosholoza Finance by e-mail or to visit the offices in Bedfordview.
The city's group corporate and shared services department, which oversees HR and transactions divisions, had not responded to questions at the time of going print.
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