No questions asked: the rise of loan sharks in lockdown South Africa

Flipping through my fieldnotes written back in the early days of the South African lockdown, it’s the stoicism of my research participants that strikes me. When president Cyril Ramaphosa announced the commencement of a national lockdown at the end of May this year, I was entering my sixth month of ethnographic fieldwork in the rural townships in the Sundays River Valley in the Eastern Cape, a region home to some of the country’s largest game reserves, and I continued my field research until I left in late October.

Before the pandemic, residents had already been grappling with a year long drought and a job market in deep crisis, defined by precarious contracts, low wages and high unemployment. With the lockdown, the tourism and hospitality sector where most found work also shut down.

My doctoral research is part of an anthropological project looking into the impact of government interventions and social grants on the economic survival strategies in these townships based in the Department of Anthropology and Development Studies at Radboud University (Netherlands).

Although by the time the lockdown hit, people had begun to grow accustomed to my everyday presence in their neighbourhoods, there were still some subjects that I felt were too sensitive to ask anyone but my closest research participants. When most told me how they saw no other way to get by but to survive on their social grants and social networks, I knew that there was one strategy still open that we rarely mentioned in our conversations: borrowing money from a loan shark.

My chief interest during the early days of my fieldwork was neither loan sharks nor money lending, but rather how notions of wellbeing could be studied through looking at how money was shared within households. Wellbeing had been the topic my MA thesis in anthropology at the University of Oslo which was based on fieldwork in Fiji. I had imagined myself continuing to work in Oceania, but when I came across this project I found it resonated well with my wider interests in topics such as social protection and precarious labour.

Changing regional specialisation to a country I knew little about beforehand was at the same time something a cause of trepidation and excitement. Before I left to take up the current position, I received a good advice from a professor I had worked with: be open for serendipity during your fieldwork.

Having grown up and spent the better part of my life in Norway, loan sharks was something I associated with Nordic noir crime fiction, which also says something about how exotic this figure appears from the privilege and comfort of Norwegian middle class life. As my fieldwork in the Eastern Cape progressed, I soon discovered that real life loan sharks (commonly known as skoppers, an Afrikaans term) were far from the image of the slimy mobster holding court in a dimly lit room I had in my mind.

In Sundays River Valley, most loan sharks are respectable elderly ladies, often pensioners, staying in some of the more spacious township houses. Unlike mobsters, they do not rely on threats of violence to ensure compliance, but rather they hold on to their clients’ IDs or social grant cards as deposit – in South Africa, social grant beneficiaries receive a bank card that they can use at cash machines to carry out transactions with their grant money.

Sharks usually have access to a stable income, either from their own job or their partners’. They are often involved in various informal trades. Some sell prescription drugs, others meat. It is notoriously difficult to set up an interview with a skopper about their business: their activities are both illegal and morally frowned upon. All the sharks I have been talking to passionately deny taking IDs or grant cards as collateral, and insist that they only accept clients with stable employment.

Despite such statements, it is not uncommon to see sharks lurking around cash machines with a stock of grant cards on the day when the grants are paid out. Surprisingly loan sharks have not received much coverage in the local papers, but their significance has only increased during lockdown.  

My fieldwork suggests that it is predominantly the women of the household who borrow money. Usually women are the beneficiaries of the child care grants, and, since it is harder for women to find employment, their IDs are often the ones loan sharks hold on to.

Apart from the income from work and social grants, households get by through the support they can get from their social networks. While these transfers of money between family and friends are key for economic survival, they also entail a good deal of tensions and frictions. If anything, the lockdown amplified these frictions even more. Since there was never a lot of money circling in the community in the first place, decisions to lend money to family and friends have a significant impact on the household budget.

Those who needed cash are not eager to borrow from their networks either. Rumours about who is asking whom for money spread fast, thus exposing personal financial circumstances to public scrutiny. Jealousy and envy are also an issue, and those who obtained loans in this way also felt that they risked to attract the resentment of people who might take issue with their success in securing financial resources, and resort to malevolent occult means to harm them.

Loan sharks, on the other hand, guaranteed privacy. As one research participant explained to me:

If I ask a family member, they want to know all about why I need the money, how I will use it and so on. And even after interrogating you for a long while, they still might decide to find an excuse not to [lend] you the amount! With a skopper its easier, no questions, just the cash.

The loan sharks’ interest rate is usually 50% per month, although, depending on the amount, it can be even higher. In comparison, money lending opportunities on the formal market charge 30% per month. The advantage with loan sharks is that people get money the same day, while the other loans require a formal application process and can take weeks to be processed.

As more weeks went by under lockdown, money became scarcer. While many households had several members working before, families were now lucky if they had a single salary coming in. People who were previously more financially independent, were now embroiled in tensions over money with family members who could still fetch an income. Here too loan sharks were often preferred avenues for borrowing money than asking close family.

The lockdown also reduced mobility to the urban areas, as drivers heading to town were more reluctant to pick up strangers, and if they did, they charged exorbitant rates. This meant less access to banks, formal lending institutions and urban relatives. Where else to go, but to the loan shark next door?

More recently skoppers have become instrumental in bankrolling informal alcohol sales, which surged as a result of Covid-19 restrictions on formal sales and distribution. During the ban on alcohol sales which lasted for most part of the period from end of March to mid-August this year, there was a short-lived boom in the sale of infamous home brews known as ginger or pina-pina. The ban was eventually lifted, but sales were restricted to four days a week, Monday to Thursday.

This created a niche for those looking to make a profit out of weekend drinkers. Many households took out loans to stockpile the popular Black Label lager beer and Klipdrift brandy, which were resold informally at premium prices in the weekend, when formal distribution was closed. One research participant told me he had borrowed thousands of rands, and defaulted on a bank loan, but was confident that, with the profits from his weekend sale, he would be able to pay back all that he owed.

A common trope in the academic literature in anthropology and African studies is that people engage in mutual relations of sharing and exchange, which come with certain roles and expectations that allow those who borrow money from the better resourced party to keep dignity and to not being diminished by the exchange of resources and the obligations entailed – two important scholarly books on these topics are James Ferguson’s Give a Man a Fish: Reflections on the New Politics of Distribution and Francis Nyamnjoh’s “C’Est l’Homme Qui Fait l’Homme”: Cul-de-Sac Ubuntu-ism in Côte d’Ivoire.

What this body of research highlights is that, despite the many hurdles and tensions involved in this constant work of building and maintaining social relationships – where material exchanges are just one part of a broader constellations of social and moral values – people prefer to engage in such relationships, rather than to cut ties.

Yet, my fieldwork shows otherwise: in the rural townships in this part of South Africa, loan sharks are preferred precisely because they offer an alternative to ambivalent and often tense relationships of exchange with friends and family.

Loan sharks thrived during lockdown also because of the insufficient economic response from national government, which did expand its safety nets, including the establishment of additional welfare grants and food relief for the most vulnerable, but in practice, especially in the initial phase of the pandemic restrictions, there have been major bureaucratic delays in the delivery of these relief measures, and widespread allegations of fraud and corruption.

Beyond the immediate needs caused by the Covid-19 restrictions and the ensuing economic crisis, more structural interventions to curb people’s reliance on informal lending are needed. The key issues remain that of high unemployment and poor service delivery – something that many disenfranchised rural and urban communities experience across South Africa.

My research data suggests that the amounts borrowed from loan sharks are generally small, and the loans are usually taken out towards the end of the month. Use of informal lending avenues is also closely tied to the fluctuations in the local labour market for piece jobs – which unfortunately is still a major source of income not only for the unemployed, but also for those in formal employment whose wages are too low to cover household needs. The market for piece jobs is highly unstable, and goes through up and downs with changes in the formal economy – when a national economic crisis such as that spurred by the lockdown ensues, piece jobs also rapidly dry up.

The recently introduced Social Relief of Distress (SRD) grants, which cover all unemployed adults (unlike pre-existing social grants tied to disability, child support or elderly age), are a welcome and much needed intervention. What is needed however is a more permanent solution, as the SRD payments have only been developed so far as temporary measures.

The South African government is now considering the introduction of a Basic Income Grant for all working age unemployed people, which would provide much more stability to a large sector of the population not currently entitled to any welfare grants beyond the temporary relief measures.

These grants would provide households with more options as the end of the month draws near. It is doubtful loan sharks can ever be fully eliminated, certainly not until the structural dimensions of high unemployment and low wages in a highly precarious and unequal capitalist economy are addressed. But the conditions under which people make decisions about borrowing can be improved.

Magnus Godvik Ekeland is a PhD candidate in anthropology at the Department of Anthropology and Development, Radboud University, Netherlands. He has recently finished a year of fieldwork in South Africa, and previously carried out field research in Fiji and Norway. His research focuses on survival strategies, distribution and the good life.

The views expressed in this article are those of the author and do not necessarily reflect Corona Times' editorial stance, or the position of any institution or association.

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