SA employers have a right to dismiss employees who engage in loaning money to fellow employees, the labour court in Johannesburg has found, setting the cat among pigeons in what has become a regular occurrence in many workplaces around the country.
The court upheld the decision by the Free State National Botanical Gardens to dismiss one of its senior employees after it found him guilty of engaging in an unlawful moneylending scheme at work. A forensic investigation by Mazars found the employee was involved in loaning money to other employees at interest rates of 50%.
The employee argued that he was not engaged in a moneylending scheme, but rather a stokvel, the participants of which shared its proceeds in December. However, he admitted that some people had borrowed money from the stokvel scheme he ran.
The court said the employer was correct in showing the employee the door for lending some of his colleagues’ money.
“Even if the moneylending scheme was somehow not in breach of the National Credit Act, the commissioner’s decision to uphold the applicant’s dismissal would, nevertheless, have been reasonable,” the court found.
“For the duration of 2017, the applicant participated in the moneylending scheme at work — with fellow employees apparently having been charged exorbitant interest rates — and there was evidence of it having caused disruptions to the workplace. Though it might be considered harsh, a decision to the effect that this constituted serious misconduct warranting dismissal, nevertheless, falls within a range of reasonableness, and is thus not reviewable.”
Business Day reported in July that South Africans were turning to loan sharks as banks had tightened lending criteria in response to a surge in bad debts as high interest rates and inflation bite into disposable incomes.
The more stringent lending requirements force some consumers to borrow from loan sharks, exposing them to substantial risks such as exorbitant interest rates exceeding 50%.
Inflation has since cooled to a three-year low and the SA Reserve Bank has started cutting the cost of credit.
The stokvel market, said to be worth about R50bn, is a feature in SA. According to data from research firm Ipsos, the sector has more than 800,000 stokvel groups and 11-million members.
Siphile Hlwatika, a senior associate at ENSafrica in the employment practice, said employers could put in place rules banning loans either by an individual or through stokvels.
“While stokvels constitute an important part of the informal social security sector, they also carry the potential risk of becoming unlawful moneylending schemes in cases where the stokvel lends out money to members and/or third parties and interest is charged thereon,” he said.
“Stokvels which operate as moneylending schemes can lead to disruptions in the workplace if disputes regarding the repayment of loans arise between members of the stokvel, or between these members and other third parties who have been provided loans by the stokvel. In this regard, employees may potentially avoid the money lenders in the workplace when they have not been able to repay the loans.
“Another risk is that employees could potentially be making secret profits (through the interest charged) at the expense of the employer during working hours. As a result, employees may devote more time and attention to running the moneylending business in the workplace, as opposed to devoting time to their employment duties,” he said. /With Noxolo Majavu
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