Minister Parks Tau
Minister Parks Tau has assured the country that the recently published draft credit regulations are not intended to prejudice individuals indebted to institutions of higher learning, with the focus instead on ensuring access to finance for micro, small and medium enterprises (MSMEs). This comes after backlash from EFF MP Sihle Lonzi, who has been vocal about the need to protect young people from the burdens of student debt, highlighting concerns that the proposals could unfairly impact those already struggling with financial exclusion.
Background to the Draft Regulations
The draft regulations were published on 13 August 2025 for a period of 30 days of public comment, as provided for in the National Credit Act. These proposed changes aim to improve coordination with MSMEs to access the finance ecosystem, while working to establish a strong and supportive environment for MSME financing. The amendments seek to comprehensively address the persistent challenges and barriers in the sector, such as the lack of adequate MSME credit and risk history that impedes their ability to access credit from formal sector providers, resulting in them falling prey to informal lenders that charge exorbitantly.
Government is committed to improving coordination with MSMEs to access the finance ecosystem. Government is also working to establish a strong and supportive environment for MSME financing, aiming to comprehensively address the persistent challenges and barriers in the sector. Lack of adequate MSMEs credit and risk history impedes their ability to access credit from formal sector providers resulting in them falling prey to informal lenders that charge exorbitantly.
Regulatory reforms are part of broader efforts to enhance access to finance for MSMEs and close the long-standing credit gap they face. We are all too aware that the majority of our people have faced systematic exclusion and these regulations seek to undo this exclusion, by unlocking access to finance. We are also acutely aware of the debt burden faced by many young people in the country, and would not act to further prejudice those who need assistance.
The National Credit Act, enacted in 2005 and effective from 2007, regulates the credit industry to promote a fair and non-discriminatory marketplace, protect consumers, and encourage responsible borrowing and lending. It established the National Credit Regulator (NCR) to oversee compliance. Over 32 million South Africans are active credit consumers, with the industry valued at over R2 trillion. However, MSMEs, which contribute about 35% to GDP and employ over 60% of the workforce, often struggle with access due to limited credit histories.
The proposals include measures for credit providers to generate credit and risk histories as part of a more holistic programme to support MSMEs and township economies more generally. This aligns with efforts to bridge the financing gap, estimated at R346 billion annually for small businesses, by fostering better data sharing and risk assessment.
Public Participation and Extension Considerations
The Minister is committed to a fair public participation process. This includes ensuring all inputs that are made during the public participation process are considered before finalising the regulations, and if necessary, extending the period of public participation. To this end, the Minister notes the comments that have been made in the public domain as they relate to the draft regulations.
The Minister remains committed to ensuring that these regulations do not unfairly impact on individuals as an unintended consequence. The Minister will engage stakeholders in order to clarify this process and allay any fears that this process may prejudice the most vulnerable in our society.
Since publication, over 500 submissions have been received, reflecting diverse views from banks, consumer groups, and businesses. The NCR has held workshops to explain the changes, emphasising that they aim to reduce reliance on high-cost informal credit, where interest rates can exceed 300% annually.
Backlash from EFF MP Sihle Lonzi
The statement follows sharp criticism from EFF MP and Youth Command Leader Sihle Lonzi, who has accused the proposals of potentially criminalising students by incorporating unpaid higher education fees into credit records, thus barring them from formal finance. Lonzi, a vocal advocate for student debt relief, argued that such measures would perpetuate exclusion for young people already burdened by unemployment and inequality.
In a recent parliamentary debate, Lonzi stated that student debt should not be a life sentence, urging the government to prioritise forgiveness over punitive regulations. He linked the draft to broader failures in addressing the 1.8 million defaulters on student loans, totalling over R20 billion owed to institutions like NSFAS. Lonzi’s EFF has tabled a draft Student Debt Relief Bill, proposing cancellation for qualifying low-income graduates to boost economic participation.
Lonzi’s backlash gained traction on social media, with thousands sharing concerns that the regulations could blacklist graduates, hindering job prospects and entrepreneurship. He called for an extension of the comment period beyond the initial 30 days to allow more input, warning that rushing could deepen the credit gap for vulnerable groups.
Government’s Response and Commitments
In response, Tau reiterated the department’s dedication to inclusive growth, noting that improving MSME financing is a key driver of economic growth, with a particular focus on ensuring transformed, inclusive and affordable financial services for women, underserved communities, and vulnerable groups. Bridging this financing gap will not only strengthen MSME resilience and expansion but also contribute significantly to the overall growth of the national economy.
The DTIC has invited further engagement, with spokesperson Kaamil Alli available for media enquiries. The department maintains that the amendments will not unfairly impact individuals, focusing instead on building credit profiles for small businesses to access affordable loans.
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