The recent, eleventh-hour withdrawal of controversial amendments to the National Credit Act (NCA) was a victory for youth activism, yet it laid bare a deep flaw in how South Africa’s government approaches economic policy. These proposed changes, which were met with an overwhelming public outcry and a petition that surged to over 190,000 signatures, would have led to the mass blacklisting of graduates over outstanding student debt. The crisis is not just about Rands and cents; it is a long-term social liability that risks trapping an entire generation—the very one the state purports to empower—in a cycle of poverty and exclusion.
The activist who led the charge, Sabelo Chalufo, rightly described the initial ministerial explanations as “misdirection.” The heart of the matter is the fundamental tension between fixing South Africa’s credit system and simultaneously protecting the futures of those who need economic opportunity the most.
The Dangerous Ambiguity in the Proposed Regulations
The proposed amendments by the Department of Trade, Industry, and Competition (DTIC) primarily centered on two regulatory shifts that, together, created a perfect storm for student debtors.
The first was the inclusion of educational institutions within the scope of Regulation 18-7, making it clear that a student’s payment history could be submitted to credit bureaus. While the Minister claimed this ability always existed, the key issue was one of election—many universities, understanding the devastating consequences, chose not to act as debt-enforcement agents by blacklisting former students.
The real danger, however, lay in the subsequent amendment: Regulation 19-13. This clause sought to mandate that both a “credit provider” and a “data provider” must submit credit information to credit bureaus.
The problem? The term “data provider” was left undefined.
This lack of definition was a ticking time bomb. It was interpreted to obligate educational institutions—now technically “data providers”—to report all non-payment. The system would shift from a discretionary one, where institutions could choose not to blacklist a struggling graduate, to a compulsory one where they had no choice but to report outstanding debt. As Chalufo argued, this effectively meant: “No election. It is now obligatory for all.”
This regulatory tightening would have provided a powerful, clear-cut legal mechanism for entities like the National Student Financial Aid Scheme (NSFAS) to pursue the “aggressive debt collection enterprise” they had publicly hinted at. The law would have compelled compliance, regardless of the individual student’s circumstances.
The Catastrophic Social Trap: Blacklisting and Poverty
The consequences of this obligation would be severe and disproportionately fall on the most vulnerable groups in South Africa.
The beneficiaries of financial aid and the majority of student debtors come from poor, vulnerable, and predominantly black and brown communities. For these individuals, student debt is not a sign of financial irresponsibility; it is often the direct result of a fragile financial situation and historical disadvantage.
Once a graduate is blacklisted over a relatively small, outstanding student fee, their economic opportunities are fundamentally and severely harmed. The National Credit Act itself prevents those with adverse credit records from being employed in roles that involve finance, credit, or relationships of trust—a significant portion of the formal job market.
A law graduate, an aspiring accountant, or a finance professional could find their career path blocked for years, all because of an unpaid fee from their student days. As Chalufo recounted, one blacklisted individual, unemployed and owing only R1,090, faced a permanent barrier to re-employment. The solution proposed by the DTIC, whether by design or incompetence, would have trapped people into a cycle of poverty, fundamentally contradicting the state’s mandate for social upliftment.
You simply cannot get water from a stone, and you should not blow up a young person’s life because they can’t pay right now. A functional credit system is vital, but its maintenance should not come at the cost of excluding those it is meant to serve.
A Policy Driven by Assumptions, Not Analysis
The Minister’s after-the-fact explanation for the amendments—that they were intended to help Small and Medium Enterprises (SMEs) and sole proprietors access credit by providing credit bureaus with more data—was laudable in intent but flawed in execution.
This “charitable interpretation” quickly falls apart under scrutiny from SME finance specialists:
- Counter-Productive Tool: The very entrepreneurs the DTIC aimed to help—the small plumber or spaza shop owner—are precisely the individuals whose student payment history would be the most erratic and therefore negative. Using this metric would effectively block them from the SME financing pool, not enable them.
- Lack of Modelling: The single greatest failure of this entire process was the absence of a proper governance approach. As Sabelo Chalufo and others noted, the DTIC failed to calculate the fundamental question: What is the Rand value benefit of this solution, and does it significantly outweigh the massive social cost?Successful organisations model their solutions before proposing them; the DTIC proposed a solution “in the air,”without sufficient consultation with credit providers or social experts.
- Siloed Thinking: This failure to model and consult points directly to departmental incompetence and a tendency toward siloed thinking. Someone in the DTIC, focused solely on the technical mechanics of credit data, did not apply their mind to the broader societal context of student debt and youth unemployment. To the extent that this continued incompetence becomes actively harmful, it borders on maleficence.
The notion that government should lead with a solution first, and only then figure out the problem is an unacceptable governance model that wastes time, resources, and public trust.
A Call for Coherent Policy and Accountability
The temporary withdrawal of the regulations is merely a stay of execution. The student debt crisis remains, and the problem of credit access for emerging businesses is still unsolved. This moment demands a National Dialogue on Youth Debt and Economic Inclusion, bringing together all relevant players: DTIC, Higher Education, Youth, and civil society.
Any final, durable solution must include two key principles:
- NSFAS Financial Accountability
If the NSFAS system is to function, it must be held accountable for its own systemic failures. If NSFAS agrees to pay a student’s fees and then fails to do so, leading to the student being blacklisted, NSFAS must be held financially liable for any damages the student suffers, including loss of job opportunities. This legal leverage is necessary to correct a system that currently penalises the victim of the state’s incompetence.
- A Creative, Coordinated Funding Model
We must move beyond punitive debt collection and toward a coordinated funding solution. This could involve exploring models like a centralised debt relief fund (potentially drawing on all scattered government bursary efforts), or adopting a positive credit reporting model initially. The focus should be on creating pathways for repayment that do not block a graduate’s entry into the formal economy.
The government cannot defend a bad policy simply by saying a similar loophole existed 19 years ago. We have a clear opportunity to fix this problem today. We must be more creative in our thinking to resolve both the student debt crisis and the industry problem, ensuring that the policies we enact unlock opportunity, rather than erect insurmountable barriers for the very people tasked with building South Africa’s future.
You can listen to the full interview hosted on PowerFM.
https://omny.fm/shows/power-perspective-sunday-edition/south-africa-s-student-debt-trap
