The Nature of the Creditor-Debtor Relationship in South Africa

Abstract

This article was a result of an investigation measuring the ‘Correlation between Borrower Education and Non-payment Behaviour in Low Income Homeowners in South Africa as the premise of the study and poor relationship between lenders and borrowers as the secondary proposition. The study was motivated by the high level of foreclosures for non-payment of mortgages in the Protea Glen area in Johannesburg, Gauteng, as reported by the Human Rights Commission Inquiry in 2008. In investigating this non- payment behaviour the researcher employed largely quantitative instruments supplemented by qualitative methods. The study revealed interesting empirical findings that largely invalidated the founding hypotheses, despite existing theoretical frameworks - underpinned by various scholars - that sought to corroborate the hypotheses. The findings have however supported the premise that households reporting poor relationships with lenders were susceptible to non-payment behaviour. The rest of the secondary hypotheses were rejected by the empirical findings, viz. that there was no correlation between the level of formal education and non-payment behaviour; the link between propensity to default and the age of homeowners were also invalidated. From these findings, it can be demonstrated that there is a critical need for mitigating measures to remedy the identified shortcomings in this sector.