Debt collection in South Africa

The debt collection process in South Africa begins with an assessment of the debtor’s solvency, their business sector, business history, availability of documentary evidence of the debt, ongoing court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy that will be used on the client’s behalf in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve the fastest possible debt recovery.

The average time for informal out-of-court collection is up to 60 days (except in cases where a debt repayment plan has been agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The limitation period for debt collection is 3 years. For debts based on notarial contracts and bills of exchange, the limitation period is 6 years. The limitation period is interrupted if the debtor explicitly or tacitly acknowledges the debt. After the interruption, the limitation period begins to count anew.

Judicial debt collection in the Republic of South Africa is carried out in the usual and simplified judicial procedure.

Ordinary court proceeding is initiated by the service of a summons, whereupon the registrar of the court, if the summons complies with the procedural requirements, records it and organises for the defendant to be summoned to court.

After receiving the summons, the debtor is given from 7 to 14 days to file a notice of intent to defend with the court. The period depends on the distance of the defendant from the location of the court. If the defendant files a notice of intent to defend, the plaintiff must file a statement of claim within fourteen days of receipt of the notice. The statement of claim must set out the nature of the claim, the legal conclusions that the plaintiff is entitled to draw from the facts set out in it, and a request for the required compensation. Within 21 days of receipt of the statement of claim, the defendant must file an objection to the statement of claim. In turn, the plaintiff may file a response to the debtor’s objection within 14 days of receipt. After that, the defendant may file a response to the plaintiff’s response within 14 days. 

If the defendant fails to file a notice of intention to defend with the court, the plaintiff must file a claim in default judgment form and the court may, without hearing evidence, enter judgment against the defendant or any other order it thinks fit.

If the defendant files a notice of intention to defend, the plaintiff may apply to the court for summary judgment provided that the claim: is based on a liquid instrument and is for a specified sum of money. The plaintiff’s statement must be sworn. At the hearing of the application for summary judgment, the defendant may: provide the plaintiff with security satisfactory to the registrar for any judgment; or convince the court by affidavit or oral evidence that he has a valid defence to the claim. If the defendant fails to provide security or to convince the court, the court may enter summary judgment in favour of the plaintiff. Otherwise, the court will proceed with the case in accordance with the general procedure. 

The court then conducts the trial and, after reviewing all evidence and the parties’ arguments, the court makes a decision. If the defendant is absent during the trial, the plaintiff has the right to present evidence of his claims to the extent that the burden of proof lies with him. The decision is made in accordance with the volume of evidence presented by the plaintiff.

The Magistrates’ Court decision may be appealed to the High Court within 20 days of receiving the reasons for the judgment. The High Court decision may be appealed to the Supreme Court of the Republic of South Africa within 15 days of the judgment. The Supreme Court decision is final and cannot be appealed further.

Once the judgment has entered into legal force, the creditor must initiate enforcement proceedings. The judgment may be brought for enforcement for 30 years. As part of the enforcement of the judgment, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating intangible assets; seizing the corporate rights of companies.

An alternative option for debt collection is the bankruptcy procedure of the debtor. A creditor has the right to initiate this procedure if the following conditions are met: 1) the amount of the debt is not less than 100 South African rand, payable either immediately or at a specified future date; 2) the debtor has committed an act of bankruptcy.

According to the provisions of the Insolvency Act, the following actions are considered to be acts of bankruptcy: 1) the debtor disposes of any of his assets in a manner that is detrimental to his creditors or gives an advantage to one creditor over others; 2) enters into or proposes to enter into any agreement with any of his creditors for the full or partial release of the debtor from his debts; 3) the debtor leaves the territory of the Republic of South Africa or hides from creditors; 4) the debtor does not satisfy the demand of the judgment or does not indicate the presence of assets sufficient to satisfy the judgment, or if it follows from the executor’s report that he has not found sufficient liquid assets of the debtor to satisfy the judgment; 5) the debtor notifies any of its creditors in writing that it is unable to pay any of its debts.

As part of the bankruptcy procedure, if the debtor’s assets are insufficient to fully satisfy the claims of creditors, it is possible to cancel the debtor’s transactions made with the intent to cause damage to creditors. Such transactions include, in particular: 1) any disposal of property without valuable consideration; 2) any transaction in which the debtor’s counterparty knew that the debtor was in a state of bankruptcy; 3) giving unreasonable preference to one creditor over others. The cancellation of such transactions allows the property lost by the debtor to be returned and the liquidation estate to be increased, which contributes to a more complete satisfaction of creditors’ claims.

If you have any questions or need support on international debt collection in South Africa, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us for more information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY SOUTH AFRICA

16.01.2025

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