Real Estate Investor Magazine South Africa October 2014 | Page 21

UPFRONT

reduction, according to Standard Bank. The cut will raise borrowing
costs for banks and result in more stringent lending criteria, lifting
finance costs for companies and consumers. According to Gary
Palmer, CEO of Paragon Lending Solutions, the downgrade may
prompt banks to tighten their lending regulations to business
because of fears that they may default on their loan repayments.
This would mean that businesses in the property sector, which need
to have to access to available funds at short notice in order to secure
property transactions as they arise, will be affected as they won’t be
able to transact quickly. He explains that banks are very cautious of
incurring high levels of indebtedness from businesses in the property
sector, and are therefore likely to implement stricter lending criteria.
Also spare a thought for those whose lives have been devastated –
many from the most vulnerable section of our society. Says Solomon:
“Sadly, in the midst of the illegal activity by credit providers, the
consumer credit crisis and this bubble that has burst at African
Bank, the NCR has remained the silent spectator as millions of
consumers are financially ruined and their lives devastated. Reckless
lending is having a devastating effect on millions of consumers and
in the worst heartbreaking cases has led to suicides, leaving families
destitute and without their bread winners.”
The lending practices of the financial institutions, the debt of
South African citizens and the decline of the financial system
are not “government’s” concern: the buck stops with you and me.
Ultimately, it is the people of South Africa who will pay the highest
price.

www.reimag.co.za

October 2014 SA Real Estate Investor

21