Reference
Private lending has a vocabulary borrowed from four different places: banking, property law, tax and exchange control. These are the terms that actually come up, defined in plain English and in their South African sense.
41 terms. Where a term is treated at length elsewhere on the site, the entry says so.
A levy a sectional-title owner owes their body corporate and has not paid. Arrear levies are a debt owed to the scheme, recoverable from the owner, and they are one of the commonest forms of security behind private lending to community schemes in South Africa.
A bank licensed by the South African Reserve Bank to handle foreign-exchange transactions on behalf of residents. Capital sent offshore moves through an authorised dealer, which applies the exchange-control rules and reports the transaction.
The legal entity made up of all owners in a sectional-title scheme, responsible for running and maintaining the common property and for collecting levies. It comes into existence automatically when the first unit is transferred, and it can borrow in its own name.
The amount lent, as distinct from the interest it earns. In private lending, capital is returned as the loan is repaid rather than sold; whether it comes back on a stated date or as recoveries arrive depends entirely on the structure.
The transfer of a personal right — typically a right to be paid — from one party to another. A lender may take cession of a borrower's book debts as security, meaning that if the borrower defaults, the lender may collect those debts directly.
Any scheme in which people share use of and responsibility for common parts: sectional-title schemes, share-block companies, homeowners' associations, retirement schemes and housing co-operatives. Defined in the Community Schemes Ombud Service Act 9 of 2011.
The agreement between a credit provider and a borrower under which credit is granted. Its terms, and who signs it, determine who carries the obligations of the National Credit Act.
The party that grants credit under a credit agreement. Where the National Credit Act applies to the agreement, that party may be required to register with the National Credit Regulator. Whether the Act applies turns on the parties, whether the agreement is at arm's length, the borrower's legal form and size, and the type and amount of the agreement — so the position has to be established from the documents rather than assumed.
Also: Community Schemes Ombud Service
The statutory body that resolves disputes in community schemes and holds their governance documentation. Where a private loan is made to a community scheme, CSOS is part of the environment the loan sits in, though it is not a guarantor of anything.
A borrower's failure to meet an obligation under the loan agreement — most often a missed payment, but it can include breaches of other undertakings. What counts as default, and what the lender may then do, should be stated in the agreement rather than assumed.
In the sense used by the Banks Act 94 of 1990, money taken from the general public on terms that it will be repaid. Taking deposits from the public is a licensed banking activity. A private loan is not a deposit, and an arrangement that behaves like deposit-taking without a licence is a serious warning sign.
The South African rules governing how residents may move capital across the border, administered by the Reserve Bank's Financial Surveillance Department through authorised dealers. The rules set out allowances, approvals and reporting rather than prohibiting movement outright.
Also: Financial Intelligence Centre Act 38 of 2001
The Act requiring accountable institutions to identify and verify the people they deal with on a risk-based basis, keep records and report suspicious transactions. Where a party is an accountable institution, expect customer-due-diligence procedures; the precise checks depend on the institution, the client and the transaction. An unexplained absence of identity checks where they should apply is a warning sign.
A bank deposit committed for a stated term at a stated rate. The bank owes the depositor the money, and South African deposit insurance covers a qualifying depositor up to a limit per bank if the bank fails.
Also: Foreign capital allowance
The allowance under which a South African resident taxpayer may transfer capital offshore in a calendar year, over and above the single discretionary allowance, on obtaining a tax compliance status PIN from SARS. The rand limits are set by the authorities and change from time to time; confirm the current figure with SARS or an authorised dealer.
A status term, not a legal one. On this site it means a consultant's agreement is current, no disciplinary process is open against them, and nothing has been found that would cause the listing to be withdrawn. It is a statement about a record on a date, not a prediction of conduct.
An undertaking by one party to answer for another's obligation. A guarantee is worth what the guarantor is worth: an undertaking from a company with no assets adds a signature to the file and nothing to the security.
The South African rule that unpaid interest stops running once it equals the outstanding capital. The common-law rule is reinforced for credit agreements by section 103(5) of the National Credit Act. It limits how far a debt can grow through arrears — and therefore how much a lender can ultimately recover.
The price of money over time, paid by a borrower to a lender. It is a lender's entire return: nothing has to rise in value for interest to be earned, and nothing about the arrangement pays more if the borrower does unusually well.
The tax certificate South African financial institutions issue summarising investment income paid to a client. Whether a particular payer issues one depends on its own reporting obligations. Income earned is declarable whether or not a certificate is received, and the treatment of a given return depends on the instrument, the source and the taxpayer — confirm it with a tax practitioner.
The contribution a sectional-title owner pays their body corporate to fund running costs, maintenance and reserves. Levies are the scheme's income; when enough of them go unpaid, the scheme has a real shortfall and a real claim.
How readily capital can be turned back into cash. Private lending is generally illiquid: there is no market to sell into, so capital comes back as the loan is repaid or not at all until it is. Illiquidity is one of the things a lender is being paid for.
The document that records what was lent, to whom, at what rate, for how long, what secures it, what happens on default and how disputes are resolved. If an arrangement cannot produce one, there is nothing to discuss.
The rate of income tax applied to the next rand a taxpayer earns. Interest is taxed at the lender's marginal rate, which is why two lenders earning the same interest can keep materially different amounts of it.
Security over immovable property, registered in the Deeds Office. It is the strongest commonly available form of security in South Africa and the slowest to enforce: registration takes weeks and enforcement is a court process.
Also: NCA; Act 34 of 2005
The Act governing consumer and small-business credit in South Africa. Where it applies, it may require the party granting credit to register, regulates the cost of credit, imposes affordability duties and gives borrowers remedies. It does not apply identically to every arrangement: the parties, the borrower's legal form and size, whether the agreement is at arm's length, and the type and amount of the agreement all bear on it.
Also: NCR
The regulator that registers and supervises credit providers, credit bureaux and debt counsellors under the National Credit Act. Its register of registrants is public, and checking a counterparty's registration on it takes a couple of minutes.
The registration number issued to a registered credit provider by the National Credit Regulator. Where registration is required, the provider will quote the number without being asked and it can be checked against the NCR's public register. Where an arrangement falls outside the Act, no number exists — which is a different thing from one being withheld, and worth establishing rather than assuming either way.
Security over movable property, registered by a notary. A special notarial bond over specified, identifiable movables gives the lender a real right; a general notarial bond ranks lower and must be perfected before it bites.
The extinction of a debt through the passage of time. Under the Prescription Act 68 of 1969 an ordinary contractual debt prescribes after three years unless interrupted, which is why a lender's patience with a non-paying borrower is not costless.
Also: Prime
The benchmark rate South African banks quote to their lowest-risk clients. It moves with the Reserve Bank's repo rate and is the anchor from which most rand lending is priced.
A return quoted relative to prime — prime plus a stated margin — rather than as a fixed number. It rises when rates rise and eases when they fall, which makes it a floating return rather than a guaranteed one.
A person or entity whose capital funds lending and whose return is the interest paid on it. The term covers an individual lending directly under their own agreement and an individual whose capital is deployed through a registered credit provider — two quite different positions that share a name.
The rate at which the South African Reserve Bank lends to commercial banks, set by its Monetary Policy Committee at scheduled meetings. Changes in the repo rate move prime, and therefore move prime-linked returns.
Backed by a claim over an asset or a right that the lender may enforce if the borrower does not pay. Security changes what happens after a default; it does not make a default less likely, and it does not guarantee recovery of the full amount.
Also: SDA
An annual allowance under which a South African resident over 18 may transfer funds abroad for any legal purpose without a tax compliance status PIN. The rand limit is set by the authorities and has changed over time; confirm the current figure with SARS or an authorised dealer before planning around a number.
An agreement that one creditor's claim ranks behind another's. A subordinated lender is paid after the senior lender in a recovery, which is a materially different position from the one the headline rate suggests.
A written undertaking by a third party to pay if the borrower does not. In South Africa a suretyship must be in writing and signed by the surety to be enforceable.
Also: Tenor
How long capital is committed. Some private-lending arrangements have a fixed term with a date attached; others have none at all, and capital returns as underlying loans are repaid. The difference matters more to most lenders than the rate does.
Taking money from the general public on terms that it will be repaid, without a banking licence. It is an offence under the Banks Act, and it is the shape most collapsed 'investment' schemes take. A structure that pools money from strangers and promises a fixed return deserves this question directly.
On this site, a consultant whose identity has been confirmed, who has completed the required training, holds a current consultant agreement and is in good standing, and whose status can be checked on a public profile. It is not a regulatory approval and not an authorisation to give financial advice.
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