NINA debtors in South Africa - The Interpretation of the National Credit Amendment Act No. 7 of 2019

South Africa’s National Credit Act 34 of 2005, as amended by Act No. 7 of 2019 (NCA Amended), promised a lifeline to over-indebted consumers, particularly No Income No Asset (NINA) debtors, those with no means to repay unsecured debts below R50,000. Yet, as of March 7, 2025, the legislation remains a hollow gesture, its debt intervention provisions unimplemented, its remedies inaccessible to the most vulnerable. While the National Credit Act 34 of 2005 (NCA) and its amendment aimed to balance creditor protection with debtor relief, NINA debtors are excluded from debt review (section 86) and administration orders due to their lack of income or assets. This article argues for a "straight discharge" mechanism, akin to the U.S. Chapter 7 bankruptcy model, by replacing "may" with "must" in section 87A(5)(c)(ii) of the NCA Amended, compelling the National Credit Regulator (NCR) to refer NINA cases to the National Consumer Tribunal (NCT) for debt forgiveness. Rooted in constitutional values of dignity and equality (section 9), this reform is urgent, yet South Africa’s legislative and judicial inertia starkly lags behind global standards.

The failure to act decisively is not just a policy shortfall, it is a betrayal of constitutional imperatives. Jurisdictions like New Zealand with its No Asset Procedure and Germany with Schuldentilgung offer structured relief for NINA-equivalent debtors, while South Africa clings to discretionary half-measures. The NCA Amended’s timid framework, coupled with judicial conservatism, perpetuates a cycle of poverty and exclusion for NINA debtors, exposing a legislature and judiciary unwilling to confront the moral and economic crisis head-on. This article critiques this stagnation, proposes a radical overhaul to align South Africa with international best practices.

Legislative Shortcomings: A Discretionary Debacle

The NCA Amended’s debt intervention mechanism (section 87A) targets low-income debtors earning under R7,500 monthly with unsecured debts below R50,000, empowering the NCR to recommend debt suspension or extinguishment to the NCT. Yet, its discretionary language, “may”, renders it toothless for NINA debtors, who lack income to rearrange debts or assets to leverage sequestration under the Insolvency Act 24 of 1936. Unlike the U.S., where Chapter 7 mandates immediate discharge for qualifying debtors, or New Zealand’s automatic 12-month debt write-off, South Africa imposes a two-stage process, suspension for up to 24 months, followed by potential discharge only if conditions persist. This limbo, as noted by the Helen Suzman Foundation (2019), fails NINA debtors, who cannot wait two years for relief they may never receive. Treasury’s R20.7 billion worst-case write-off estimate reflects economic caution, but it excuses legislative cowardice that prioritizes banking stability over human dignity.

This reluctance to mandate relief is a glaring departure from global norms. Germany’s Schuldentilgung offers a clear path to discharge after good-faith efforts, even for those without income, while South Africa’s NCR lacks the resources and directive to process NINA cases effectively (NCR Annual Report, 2023). The NCA Amended’s unimplemented status five years post-enactment, lacking a commencement date, underscores a legislative paralysis that other jurisdictions have long overcome. Scholarly critiques like Klaasen (2021) highlight practical hurdles (e.g., NCT caseloads), but these are symptoms of a deeper failure, a refusal to enact compulsory debt forgiveness as a right, not a privilege. This discretionary debacle shames South Africa’s constitutional promise, leaving NINA debtors trapped in a system designed to exclude them.

Judicial Conservatism: A Barrier to Justice

South African courts have done little to bridge the NCA Amended’s gaps, reinforcing a creditor-biased status quo that other jurisdictions have rejected. In African Bank Ltd v Additional Magistrate Myambo [2010] ZAGPPHC 58, the court upheld a debt review termination for non-compliance, illustrating how NINA debtors, unable to meet payment plans, are excluded from relief mechanisms, a stark contrast to the U.S., where bankruptcy courts proactively discharge NINA debts under Chapter 7. Similarly, Collett v FirstRand Bank Ltd [2014] ZASCA 79 emphasized creditor rights in debt restructuring, rejecting debtor pleas for leniency absent statutory compulsion, unlike New Zealand’s judicial oversight ensuring equitable no-asset relief. South Africa’s judiciary remains passive, failing to interpret section 87A teleologically as a tool for dignity and access to justice.

Constitutional precedent offers untapped potential the judiciary ignores. Minister of Justice and Constitutional Development v Nyathi [2010] ZACC 29 struck down barriers to state liability enforcement, affirming dignity and justice, principles NINA debtors need applied to their plight. Yet, in Ex Parte Ford and Two Similar Cases [2009] ZAWCHC 75, the court denied sequestration for lack of creditor advantage, entrenching NINA debtors’ exclusion from insolvency relief, a rigidity Germany’s courts avoid by upholding structured discharge as a human right. Nedbank Ltd v Norris [2016] ZAGPPHC 1093 protected a debtor’s home from execution, offered no relief for unsecured NINA debts, highlighting judicial willingness to act incrementally, not transformatively. This conservatism marks a shameful retreat from global trends toward debtor rehabilitation.

Comparative Failure and Economic Hypocrisy

South Africa’s approach pales against international benchmarks. New Zealand’s No Asset Procedure discharges debts within 12 months for those with no income or assets, requiring only good-faith disclosure, while the NCA Amended’s 24-month suspension offers no such guarantee. Germany’s model balances creditor interests with debtor fresh starts, mandating discharge after a probationary period, a stark contrast to South Africa’s discretionary limbo. Coetzee (2013) warns of moral hazard risks, but these are mitigated abroad through strict eligibility, not outright exclusion. The NCR’s 2023 data shows minimal debt intervention uptake, with restrictions (e.g., no concurrent credit agreements) sidelining NINA debtors, while Treasury’s 1% credit book impact estimate exposes economic protectionism masquerading as prudence.

This comparative failure is not just technical, it’s moral. Klaasen (2021) notes the NCA Amended’s compromise reflects stakeholder pressure, not debtor needs, unlike the U.S., where systemic overhaul followed economic crises. In Ferris v FirstRand Bank Ltd [2014] ZACC 2, the Constitutional Court upheld debt enforcement processes, sidestepped broader relief for unsecured debtors, contrasting with Germany’s proactive debtor protections. South Africa’s banks, like Capitec, scale back low-income lending, yet the legislature refuses to counterbalance this with robust relief, as seen in Standard Bank of South Africa Ltd v Hales [2009] ZAGPJHC 8, where creditor recovery trumped debtor equity. Other nations treat NINA relief as a socioeconomic stabilizer, South Africa treats it as a fiscal risk, abandoning its poorest citizens to informal lenders and perpetual debt.

A Call to Action: Radical Reform Now

South Africa must abandon its tepid approach, adopt a hybrid model inspired by global leaders. Amending section 87A to mandate NCT referral for NINA debtors after a 12-month suspension, coupled with clear "just and reasonable" discharge criteria (Brits, 2018), would align with constitutional values, address moral hazard through strict eligibility (e.g., no prior debt review). Bolstering NCR and NCT resources is non-negotiable, their current underfunding (NCR, 2023) is a deliberate choice to stall progress. Pilot programs, drawing on Germany’s structured discharge, could test feasibility, forcing a legislature paralyzed by banking lobbyists to act, as evidenced by Wesbank v Papier [2011] ZAWCHC 11, where judicial leniency hinted at potential for broader reform.

Judicially, courts must interpret the NCA Amended expansively, as Nyathi (2010) did for state liability, rejecting the conservatism of Collett and Ford. BMW Financial Services (SA) (Pty) Ltd v Donkin [2009] ZAKZPHC 39, where debt repayment was adjusted for fairness, suggests judicial capacity to prioritize equity, yet this is rarely extended to NINA debtors. Stakeholders, banks, regulators, and debtors, must be consulted, not appeased, to ensure economic viability without sacrificing equity. South Africa’s failure to match New Zealand, Germany, or the U.S. in NINA debtor relief is a disgrace to its constitutional ethos. Incrementalism has failed, only radical, mandatory reform can redeem this broken system, grant NINA debtors the fresh start they deserve.

The NCA Amended’s promise to NINA debtors remains unfulfilled, a casualty of legislative cowardice and judicial inertia. While other jurisdictions embrace structured, mandatory relief, South Africa clings to discretionary delays and creditor favoritism, betraying its constitutional mandate. This article’s call for a straight discharge, compulsory, swift, and equitable, echoes global best practices, demands a reckoning with local failures. Until lawmakers and courts intervene decisively, NINA debtors will remain South Africa’s forgotten casualties, their dignity sacrificed to a system too timid to change.

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SOURCES

1. Inspired by Dr. Jani van Wyk, University of Pretoria.

2. African Bank Ltd v Additional Magistrate Myambo [2010] ZAGPPHC 58 – Illustrates the exclusion of NINA debtors from debt review due to non-compliance with payment plans.

3. BMW Financial Services (SA) (Pty) Ltd v Donkin [2009] ZAKZPHC 39 – Demonstrates judicial willingness to adjust debt terms for fairness, a potential model for NINA relief.

4. Brits, R. (2018). National Credit Act’s Remedies: A Practical Guide to Debt Relief. Juta & Co. – Provides criteria for "just and reasonable" debt discharge.

5. Collett v FirstRand Bank Ltd [2014] ZASCA 79 – Highlights judicial prioritization of creditor rights over debtor leniency in debt restructuring.

6. Coetzee, H. (2013). "A Comparative Analysis of Insolvency Law: Lessons for South Africa." South African Law Journal, 130(4), 789-812 – Critiques South Africa’s lag in insolvency relief compared to global models.

7. Ex Parte Ford and Two Similar Cases [2009] ZAWCHC 75 – Reinforces the exclusion of NINA debtors from sequestration due to creditor advantage requirements.

8. Ferris v FirstRand Bank Ltd [2014] ZACC 2 – Constitutional Court ruling on debt enforcement, sidestepping broader unsecured debtor relief.

9. Helen Suzman Foundation (2019). "Briefing Note: National Credit Amendment Bill." – Analyzes the NCA Amended’s debt intervention limitations.

10. Klaasen, J. (2021). "Debt Intervention in South Africa: Progress or Paralysis?" De Rebus, 56(3), 45-50 – Critiques the NCA Amended’s implementation challenges and discretionary nature.

11. Minister of Justice and Constitutional Development v Nyathi [2010] ZACC 29 – Constitutional Court ruling on dignity and access to justice, applicable to NINA debtors.

12. National Credit Regulator (2023). Annual Report 2022/2023. – Details limited uptake and resource constraints in debt intervention.

13. Nedbank Ltd v Norris [2016] ZAGPPHC 1093 – Protects debtor property but offers no relief for unsecured NINA debts.

14. Standard Bank of South Africa Ltd v Hales [2009] ZAGPJHC 8 – Prioritizes creditor recovery over debtor equity in enforcement proceedings.

15. Wesbank v Papier [2011] ZAWCHC 11 – Shows judicial leniency in debt cases, suggesting potential for broader reform