South Africans recently exercised their political freedom at the ballot box but for too many citizens economic liberty remains unattainable as they struggle to escape a crippling debt spiral. Bayport Financial Services, however, are pioneering an employer-led solution that is delivering results and creating hope for a financially secure future.
“Debt in South Africa has become a pandemic, and it’s very real.” Alfred Ramosedi, CEO of Bayport Financial Services, does not pull any punches in his assessment of South Africans’ relationship with debt. “While it is true that a great many households are in financial distress because of unemployment, it is also true that many more people do not know how to work with money. We see high earners ending up in unsustainable debt because in this country we tend to see loans as a way to buy what we want or get through the month, instead of a strategic financial tool with which to reach life goals.”
As a result, it is not uncommon for employees to spend as much as 80% of their take-home pay on debt repayments, and then needing to turn to payday lenders to put food on the table. “Many South Africans don’t even live paycheque to paycheque,” says Ramosedi, “they live from short-term loan to short-term loan, with the extortionate fees and interest rates dragging them ever deeper into debt.”
In 1599, British playwright William Shakespeare wrote in his tragic play Hamlet, “Neither a borrower nor a lender be”. Sound advice to be sure, but without the proviso that responsible borrowing and lending has the power to change the trajectory of people’s lives for the better. This Bayport has seen in the 20 years it has been doing business in South Africa, and it is on this legacy that the company is building its employer-led financial wellness programme for employed South Africans.
Bayport started implementing its new business model in 2019, but the hardship Covid-19 visited upon employees accelerated the transition from retail lender to employer partner. Under the new model, Bayport enters into an agreement with employers that allows the company to restructure employees’ debt through settlement discounts negotiated with credit providers and the issuing of a consolidation loan under terms and conditions that are far more favourable than anything an over-indebted individual can hope to access in the open consumer-credit market. Importantly, this employer-led model includes compulsory financial literacy training and education.
“Our aim is to create a partnership with employers to get their staff out of debt. That’s what Bayport does now,” explains Ramosedi. “Our business goal is financial wellness that helps people escape the debt spiral and we achieve this by combining practical, impactful and responsible debt solutions with financial literacy.”
Ramosedi’s words ring with authenticity, born not only from his BCom and MBA degrees and more than 25 years of experience in South Africa’s banking and financial services sectors, but also from the difficult path he had walked with debt when, as a young professional, he had lost control of his personal finances. “I know what it’s like to be in over your head; I have a personal stake in helping people to manage their money better.” In the words of late Archbishop Desmond Tutu, Bayport wants to shift from just pulling people out of the river to going upstream and finding out why they’re falling in.
As an unsecured credit provider, Bayport understands the bad-debt risk credit providers carry and that defaulting lenders often result in bad debts having to be written off. This phenomenon, however, gives Bayport an opportunity to help providers and borrowers alike. “Central to our debt solution is negotiating with credit providers on behalf of employees based on the debt we assumed they had written off. Our intention is to reach an agreement where the provider can recover at least some of the outstanding debt, which reduces their risks and costs of chasing payments,” explains Ramosedi. “Based on the employee’s reduced debt burden, we negotiate a consolidation loan with the person. This means we settle all their debts and they only have one loan, ie, with Bayport, to repay. The employee enters into a debt agreement with Bayport and their instalments are recovered via the payroll in terms of Bayport’s contract with the employer.”
Key to this arrangement is Bayport’s ability to offer favourable terms and conditions given its own strong credit rating and business volumes that enable it to secure funding. In its latest quarterly review, for instance, Standard & Poor’s (S&P) awarded Bayport a triple-A rating as a standalone company.
The combined result of Bayport’s good standing and ability to craft debt solutions, is that the company facilitates an average 46% reduction in monthly debt instalments for its employee customer base. “When their debt obligations have been halved, people actually go home with money in their pockets and can get through the month without borrowing to pay for necessities,” notes Ramosedi. “For many, it is also the start of a savings habit.”
This three-way partnership between employer, employee and Bayport extends to compulsory financial literacy. Employees have free access to Bayport’s online e-learning portal that currently features 12 modules covering a wide spectrum of financial literacy topics, as well as tools and practical tips that make it easier for employees – and their families – to adopt healthy financial habits.
The online modules are also adapted for face-to-face workshops and masterclasses, and are supported with monthly financial wellness blog posts and social media interactions. In so doing, Bayport is building a trove of information, tools and tips that can be accessed anytime and free of charge. What is heartening for Ramosedi is the fact that many employers have embedded these modules and teaching materials into their induction processes. “In addition, many employers have given us a fixed office at their premises, which means their staff have quick and easy access to our support when they need it. We are working hard with all employers to become part of their employee assistance programmes,” he says.
Employers are generally open to joining forces with Bayport because they know that when their staff have been freed from their financial concerns, they are more likely to come to work on time and able to be fully engaged and productive. Sick leave statistics reduce and even workplace relationships improve. Since 2019, Bayport has assisted 47 719 employed South Africans with debt solutions and a real chance at a future of sustainable financial wellness.
Beyond the personal and workplace impact, however, Ramosedi also sees the economy benefitting from a growing number of financially secure individuals. “This solution to our personal-debt pandemic will, over the longer term, support South Africa’s consumption-based GDP. If people don’t have money in their pockets, they don’t buy goods and the economy doesn’t grow. Guiding people out of debt and into healthy financial habits therefore also supports the national agenda.”
One of the most satisfying outcomes of the employee financial wellness programme, is the strong trend of customers investing in assets once they have successfully completed the debt rehabilitation process and rebuilt their credit score. “The fact that over the past four years, 2 557 employees have secured home and/or vehicle loans to the value of R886 million, is hugely exciting because only through assets can real wealth be built,” says Ramosedi. “To walk alongside people as they progress from over-indebtedness to investment – be it in a home, further education or a stock market portfolio – is a joy and a privilege.”
It is also another potential game-changer for South Africa, because when people invest in homes and other financial instruments, they start to realise the importance of working together to create a better country for us all. By investing in their future, they are investing in South Africa’s future, and that is invaluable for the country as it aspires to grow into an economically vibrant democracy.
