On or about 6 April 2023, the borrower acknowledged its indebtedness to the lender by concluding an acknowledgment of debt (AOD), with Motlhopesi Phekola and Morwadi Phekola standing as the guarantors in the amount of R1,209,600, which was to be paid by the borrower on or before 31 May 2023, with failure to make payment attracting 20% monthly interest.

Following the failure of payment, the lender instituted legal proceedings, which the borrower and the guarantors opposed and raised points in limine that the AOD constituted a credit agreement under the National Credit Act 34 of 2005 (NCA), and the lender was not registered as a credit provider. Thus, the AOD was unlawful as the lender was not registered as a credit provider.

Additionally, it was argued that the lender failed to conduct an affordability assessment, as required by the NCA.

In order to regulate the credit industry and protect consumers from unfair practices, the NCA mandates that any person providing credit must be registered as a credit provider if the credit amount exceeds the prescribed threshold in the amount of R500,000. This is irrespective of whether the credit provider is involved in the credit industry and irrespective of whether the credit agreement in question is once off.

In Baletsema Proprietary Limited v Phek Engineering & Suppliers CC and Others (M521/2023) [2025] ZANWHC148 (13 August 2025), the High Court, having examined the content of the AOD, concluded that the AOD was indeed a credit agreement, as it involved deferred payment and interest charges, thus falling under the purview of the NCA. As a result, the court found that due to the lender’s non-registration as a credit provider, the agreement was unlawful and void.

Takeaways

• The judgment underscores the importance of compliance with the NCA’s registration requirements for credit providers.
• Entities engaging in credit transactions must ensure that they are registered to avoid agreements being declared void.
• The judgment also highlights the necessity of conducting affordability assessments to protect consumers and ensure fair lending practices.