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An Indigenous law of commercial contracting?

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Dr. Andrew Hutchison (Desautels Centre Affiliated Researcher and Professor, Department of Commercial Law, University of Cape Town) considers possibilities for an Indigenous law of commercial contracting from a South African perspective, drawing on several recent articles.

The South African Constitutional Court (ZACC) has stressed in many judgments that the version of African Customary Law which is recognised by the Constitution in that country is the “living” version.  Living customary law is a sociological concept, derived from current practices among a group of people which are recognized by that group as having the force of law.

At the same time, however, a perusal of one of South Africa’s standard textbooks on African Customary Law would leave the reader under the impression that this system is restricted to certain areas, such as family law, succession, traditional leadership and land title, and a similar array of topics to which the historic development of broader South African law has confined it.  Although some of these works contain a chapter on “contracts”, the “contracts” described therein also largely reflect the non-commercial concerns of a traditional kinship setting.

But the South African economy is a modern commercialized economy.  And even those parts of it which are largely beyond the reach of State law are the site of extensive commercial activity.  Take for example, Khayelitsha – a massive and largely Indigenous African settlement on the fringe of Cape Town.  Policing has been found to be exceptionally poor here by a government inquiry.  In the absence of State norms penetrating this space, non-State norms must govern the population.

The central focus of my recent research has been on community savings and credit clubs operating in Khayelitsha, Cape Town.  These are unregistered associations, which while recognised and defined by statute law (in places), are largely operated according to self-created norms.  The core business of these associations, referred to generically as “stokvels” in South Africa (or as ROSCAs – “rotating savings and credit associations” – in the academic literature), is providing access to credit through self-help means, as well as harnessing the financial discipline provided by a group of peers (friends, relatives, and neighbours) to save for big ticket items.  In the Canadian context, the closest analogue to these institutions would be credit unions.

An unincorporated association of this nature must rely on contracts for its efficacy: if debts are to be enforceable, there must be an accepted underlying norm of sanctity of contract.  At a group level, most South African stokvels are based on a “constitution”, which is essentially a contract between members which is renewed at the beginning of every year and to which new members must assent. 

It is a small jump from here to arguing that we may be looking at a “living” set of Indigenous contract norms, which are fully commercial in nature, and which have evolved organically over time among the same South African population who may recognize African Customary Law norms in other aspects of their lives. Stokvel disputes are not typically litigated in State courts, however, meaning that their governing norms must be derived from empirical study, rather than reported judgments.

My current work is at this intersection of Indigenous Law and Commercial Law.  See here for discussion of the role of contract norms in Khayelitsha stokvels, drawing on my own empirical research.  I have also used this research as a basis for further comparative work on unsecured lending and the Indigenous economy with an Australian colleague, Dr. Dominique Allen.  The Journal of Commonwealth Law will shortly publish an article, with both Canadian and South African elements, which discusses the role of registered credit unions in the Indigenous economy.  I have also compared the developing law of general application on good faith in contract in South Africa with contract norms and practice in the Indigenous economy.


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