Selected contracts of sale of movable goods in terms of the National Credit Act 34 of 2005

Abstract

The National Credit Act 34 of 2005 (“NCA”) is applicable to three main categories of credit agreements, the credit facility, credit transaction, and the credit guarantee. The credit guarantee in terms of section 8(5) is an undertaking or a promise by a person to satisfy the obligation of another consumer in terms of a credit facility or a credit transaction to which the NCA applies. The purpose of the dissertation is to investigate the NCA credit guarantee as an instrument to promote access to credit to small and medium enterprises (“SMEs”) in South Africa. A discussion of the guarantee as an international instrument to advance SMEs’ access to credit, and of the characteristics of the independent guarantee versus the suretyship agreement, is preceded by a brief discussion of the NCA’s field of application. This is merited by the interrelatedness of the section 8(5) credit guarantee with the other main types of agreements subject to the NCA. The nature of the section 8(5) credit guarantee is discussed next, which in my opinion is an independent guarantee. The question is also addressed whether the credit guarantee in terms of the NCA, similarly to the other credit agreements subject to the Act, is classified into sizes. The dissertation is concluded with remarks on the use of the credit guarantee in terms of the NCA as an instrument to address SMEs’ access to credit. It is recommended that the definition and size classification of the credit guarantee in the NCA must be clarified, which will enhance the use of this powerful instrument to achieve the Act’s purposes.