The Eastern Cape Provincial Treasury has launched an investigation into the alleged reckless lending practices of the Eastern Cape Rural Development Agency (ECRDA).
This follows after the Democratic Alliance exposed how the ECDRA’s practice of granting unsecured loans at ridiculously low interest rates has led to millions of Rands being lost.
Given the parlous state of public finances, reckless lending practises by state entities is criminal and has to be stopped at all costs.
The ECDRA, which falls under the Department of Rural Development and Agrarian Reform, has been granting agricultural and non-agricultural loans to individuals at an interest rate as low as 3%.
In response to a parliamentary question from the Democratic Alliance, DRDAR MEC, Nonkqubela Pieters, revealed that over the past five years the ECRDA wrote off loans to the value of R59 million, with R42 million of these write-offs in the last financial year (2020/21).
The total loan book for the financial year 2020/21 was R138,8 million, but the ECRDA only managed to recover R6 million in repayments for the financial year – equating to just 4 cents on the Rand.
During the same financial year, some 87% of all loan recipients have defaulted on their payments.
SEE IQP 02 3rd session (6th) Q46
The DA approached both National Treasury and Provincial Treasury to investigate the lawfulness of these lending practices. Provincial Treasury has now confirmed that they have launched a preliminary investigation into the lending practice of the ECRDA.
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The ECRDA is a registered credit provider with the National Credit Regulator and currently makes agricultural and non-agricultural loans available to applicants residing within the boundaries of the Eastern Cape.
The agricultural loans are for individuals that require seasonal input capital for primary production and/or the purchase of assets or farming infrastructure. Non-agricultural loans are short term loans that provide tenderpreneurs and hawkers with financial assistance.
The DA believes the lending practises by ECRDA is grossly negligent and that it is exposing the Eastern Cape Provincial Government to adverse financial risk.
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