In April 2023, a borrower formally admitted owing a sum of R1,209,600 to a lender by signing an Acknowledgment of Debt (AOD). Two individuals, Motlhopesi and Morwadi Phekola, stood surety for the debt. The borrower undertook to settle the amount by 31 May 2023, failing which interest at 20% per month would accrue.

When payment was not forthcoming, the lender issued summons to recover the outstanding amount. The borrower and the guarantors opposed the action, arguing that the AOD was, in substance, a credit agreement as defined in the National Credit Act 34 of 2005 (NCA). They contended that because the lender was not registered as a credit provider and had not performed an affordability assessment, the agreement contravened the NCA and was therefore unlawful.

The NCA serves to regulate credit transactions and safeguard consumers from abusive or predatory lending. It provides that any person advancing credit exceeding R500,000 must be registered as a credit provider, irrespective of whether the transaction is conducted in the ordinary course of business or merely on a once-off basis. The Act’s protections and obligations are thus triggered by the nature and amount of the transaction, not the lender’s occupation or business model.

In Baletsema (Pty) Ltd v Phek Engineering & Suppliers CC and Others, delivered on 13 August 2025, the North West High Court examined whether the AOD fell within the ambit of the NCA. The Court found that the agreement deferred payment of a monetary obligation and imposed interest, thereby satisfying the definition of a credit agreement under section 8(4)(f) of the Act.

Consequently, the Court held that because the lender was not registered as a credit provider, the AOD was invalid and unenforceable. The judgment affirms that even a single, high-value private loan may trigger the NCA’s requirements and cautions individuals and entities alike to ensure regulatory compliance before extending credit, however informal or once-off the arrangement may seem.