(All opinions expressed in the Expert Opinion section are those of the writer and do not necessarily reflect the opinion of the Credit Ombud.)
The incidence of undesirable practices relating to ‘garnishee orders’: a follow up report (University of Pretoria Law Clinic)
Charlotte van Sittert is a Research and Short Courses Attorney at the University of Pretoria’s Law Clinic
“… there could be as many as 5 million garnishee orders countrywide. Earlier estimates had put the figure at 3 million.”-Business Report, 26 August 2013
Uncertainty exists regarding the true number of active emoluments attachment orders, which are commonly but erroneously referred to as garnishee orders, in South Africa as well as the percentage of the workforce in South Africa affected by these orders. The media reports on the figure of emoluments attachment orders vary between 3 and 5 million active orders (Fin 24, 6 August 2012). The accuracy of these figures cannot be established as particulars of the sample size and the sampling methodology are not recorded.
Other media reports indicate that between 10% and 15% of South Africa’s workforce has active emoluments attachment orders effective against their salaries (Moneyweb, 1 October 2012).
In 2013 the UP Law Clinic and the Deutsche Gesellschaft fur Internationale Zussamenarbeit (GIZ) entered into an agreement in terms of which further research into the incidence of “garnishee” orders and the abusive practices to which employees with emoluments attachment orders against their salaries can fall prey, was conducted.
One of the aims of the research was to estimate how many employees in the formal sector in South Africa had emolument attachment orders against their salaries. (The formal sector is affected by emoluments attachment orders because this form of debt collection can only be used when a debtor is in formal employment.
Some of the findings of this research were:
- The private sector with the highest number of employees with garnishee orders against their salaries was the Mining sector with 12.9% of employees having orders against their salaries. This corresponds with media reports highlighting the Mining sector as one of the sectors experiencing trouble with over-indebtedness and possible exploitation. In this sector it is estimated that garnished employees have an average of 1.43 orders against their salaries.
- On the other hand, with 1 840 276 employees employed in the Services: financial intermediation, insurance, real estate and business industry at the end of June 2013, the estimated number of garnished employees with reference to the sample, is 2.28%. The average number of orders per garnished employee is 1.76.
- In the Manufacturing industry, employing a total 1 142 979 employees, it was estimated that 9.2% of employees have emoluments attachment orders against their salaries. An average of 1.40 orders exists for every garnished employee in this sector. These three sectors are compared below:
- From the above comparison it is clear that when estimating the number of employees with garnishee orders, one cannot use a sample coming from one industry alone and extrapolate the figure to be representative of the whole sector as it will not be accurate .
- The number of employees with emoluments attachment orders in the overall formal private sector proved to be lower than was speculated in the media. Based on the sectors used in Data set A 320 019 employees in the formal private sector in South Africa had emoluments attachment orders against their salaries in June 2013. If the remaining sectors identified by StatsSA for which the research team could not obtain a suitable sample, e.g Electricity, gas and water supply, and construction are included in calculations and it is accepted that a similar trend exists for these sectors, the number of employees in the private sector with emoluments attachment orders against their salaries in June 2013 would be 435 084.
- It is estimated that in June 2013, 72 118 employees employed by National Departments in South Africa had emoluments attachment orders against their salaries. The average number of orders per garnished employee was 1.60.
- 116 918 employees employed by Provincial Departments in South Africa in June 2013 had orders against their salaries, with an average number of 1.57 orders per garnished employee.
- The number of employees with emoluments attachment orders against their salaries in June 2013 in the overall public sector is estimated to be 240 034. This calculation is based on an estimate of 12.2% for the public sector, obtained as a weighted estimate from the national and provincial department data. This is notably lower than the figure released by the Public Service Commission in 2007 (20%). A reason for this can be that employees and their employers are more aware of the abuses relating to emoluments attachment orders. Garnishee administrators administering the orders on behalf of employers also play a role. A further reason may be that the compilers of the Public Service Commission Report did not take into account that an employee can have more than one emoluments attachment order against his or her salary and equalled the total number of emoluments attachment orders to the total number of public servants subject to these orders. A comparison of the public and private sector is done below:
- The total estimated number of employees with emoluments attachment orders against their salaries in the formal sector (excluding agriculture) in June 2013 was 675 118. According to the employment figures released by StatsSA for June 2013, 8 436 820 employees were employed in the formal sector in June 2013. This means that 8% of employees in the formal sector had a deduction made for either debt, maintenance or an administration order.
In the report the attachment of wages in a number of foreign jurisdictions like the United States, England and Wales, Germany and certain African countries, was investigated and compared to the South African position. It was found that, unlike South Africa, all the other countries surveyed had some form of limitation on the amount that can be deducted in terms of the emoluments attachment order and that multiple deductions are either prohibited or strictly regulated.
Irregularities and shortcomings in the emoluments attachment order process were also identified in the report. This includes:
- Uncertainty regarding the interpretation of jurisdiction and the in duplum rule and/or Section 103(5) of the National Credit Act;
- Lack of uniformity in the court processes followed by different Magistrates’ courts when granting orders which leads to forum shopping;
- Shortcomings in the statutory process with no provision for affordability tests;
- Irregular deductions affecting the repayment period, interest as well as costs charged;
- Payroll offices stopping deductions too soon or too late with costs and interest consequences;
- Fees being charged for statements of account whilst the Act provides for free statements of account to be delivered on reasonable request;
- Debtors paying instalments with no prospect of settlement resulting in debtors being caught in a debt spiral with no likelihood of rehabilitation;
- Lack of cap on amount that can be deducted resulting in employees being left without sufficient means for his own and his dependant’s maintenance;
- Charging of excessive fees, incorrect calculation of interest and outstanding balances, and non-admissible charges being levied;
- Granting of reckless credit and multiple deductions from employees’ salaries;
- 5% commission payable to employer paid by employee instead of credit provider;
- Fraud by clerks of court – currently court officials at two magistrate’s courts are under investigation for the issuing of fraudulent orders;
- Apportionment of payments not complying with Section 126 of National Credit Act.
Recommendations for the proper administration of emoluments attachment orders in the workplace are made in the report and particulars on agencies that could assist aggrieved consumers or employers are also given. The report will be released in the public domain at the end of November 2013.