South African Banks on Offensive to Parry Political Attacks
by Michael Cohen and Robert Brand
Blomberg
March 14, 2017, 9:28 AM EDT
South Africa’s banks have gone on the offensive after being criticized by some politicians over their lending practices and records in addressing racial inequality.
Attacks on the lenders have been led by President Jacob Zuma, who’s accused them of monopolizing the financial services industry, and questioned whether they colluded when closing accounts belonging to members of the wealthy Gupta family, who are his friends and are in business with his son. Parliament’s finance and trade and industry committees held hearings on racial transformation in the industry in Cape Town on Tuesday.
“The banking industry is not resistant to transformation,” Cas Coovadia, managing director of the Banking Association of South Africa, told lawmakers. “On access to financial services, we’ve made significant progress. We have training programs in place to fast-track junior and middle management. We must acknowledge the journey we have been through.”
The country’s financial system is becoming a battleground as Zuma seeks to drive a program of “radical economic transformation” that he says will move wealth to the majority black population in an economy still dominated by whites almost 23 years after apartheid ended. Criticism of the industry has intensified as the governing African National Congress prepares for a policy conference from June 30 to July 5.
Policy Debate
The banking association, which represents lenders including Standard Bank Group Ltd., Nedbank Group Ltd., FirstRand Ltd. and Barclays Africa Group Ltd., defended the industry’s record in extending services to black individuals and businesses.
While the proportion of people with access to a bank account has increased to 77 percent in 2016, from 44 percent in 2003, lenders still discriminated against the poor by refusing to provide financial services in certain areas because they are deemed too risky, Madoda Vilakazi, executive director of the National Economic and Development Council, said at the hearings.
“Class discrimination is on the rise,” he said. “Poor people are more likely to be poorly treated.”
The banking association said that between 2012 and 2015, banks made 94 billion rand ($7.1 billion) in financing available for affordable housing, 41 billion rand for small- and medium-sized black enterprises and 7 billion rand for black agricultural businesses. Total consumer credit at the end of September amounted to 1.67 trillion rand, of which 867.3 billion rand was tied up in mortgages, according to data from the National Credit Regulator.
New Financing
The industry intends making as much as 100 billion rand in additional financing available to support black-owned businesses over a period of about five years, said Thabo Tlaba-Mokoena, the bank association’s general manager for financial inclusion.
Banks have exceeded targets agreed with the government and labor unions to be 25 percent black-owned, 15 percent of which is directly held by black investors, the association said. Black people should own at least 50 percent of banks and insurers, said Floyd Shivambu, the deputy president of the opposition Economic Freedom Fighters.
“There isn’t significant black ownership of the financial-services sector,” he said. “We should legislate transformative targets.”
The Geneva-based World Economic Forum ranks South Africa’s banking system among the world’s best. The country has 37 licensed banks, which together hold about 4.8 trillion rand’s worth of assets. Foreigners hold about 49 percent of the shares in South Africa’s six biggest banks.
‘Meaningful Transformation’
“Meaningful transformation of the financial sector is not merely a question of ownership of financial firms,” Ismail Momoniat, a deputy director-general in the National Treasury, told lawmakers. “It’s much more than that. We need to look at how the sector supports real economic activity. Transformation must be mass-based and sustainable.”
While banks say they have done relatively well in diversifying their senior staff -- with an additional 22,800 black junior, middle and senior managers appointed between 2012 and 2015 -- they conceded that progress had been slow at a board and executive level, the association said. Of the five biggest lenders, which together control about 90 percent of the local banking market, only Standard Bank has a black co-chief executive officer, and he has a white counterpart, while the rest are all headed by whites.
“Some subsectors, like asset management, need to do far more to transform,” the Treasury’s Momoniat said, without elaborating.
The banking association’s Coovadia said a sound banking system was a crucial component of the economy and the industry intends countering its critics more proactively.
“We have been remiss in not introducing a narrative into the public space that actually begins to talk to real data and not to false data,” he told reporters on Monday. “You have got to ask whether there are certain interests that feel threatened by a well-regulated system.”
Blomberg
March 14, 2017, 9:28 AM EDT
South Africa’s banks have gone on the offensive after being criticized by some politicians over their lending practices and records in addressing racial inequality.
Attacks on the lenders have been led by President Jacob Zuma, who’s accused them of monopolizing the financial services industry, and questioned whether they colluded when closing accounts belonging to members of the wealthy Gupta family, who are his friends and are in business with his son. Parliament’s finance and trade and industry committees held hearings on racial transformation in the industry in Cape Town on Tuesday.
“The banking industry is not resistant to transformation,” Cas Coovadia, managing director of the Banking Association of South Africa, told lawmakers. “On access to financial services, we’ve made significant progress. We have training programs in place to fast-track junior and middle management. We must acknowledge the journey we have been through.”
The country’s financial system is becoming a battleground as Zuma seeks to drive a program of “radical economic transformation” that he says will move wealth to the majority black population in an economy still dominated by whites almost 23 years after apartheid ended. Criticism of the industry has intensified as the governing African National Congress prepares for a policy conference from June 30 to July 5.
Policy Debate
The banking association, which represents lenders including Standard Bank Group Ltd., Nedbank Group Ltd., FirstRand Ltd. and Barclays Africa Group Ltd., defended the industry’s record in extending services to black individuals and businesses.
While the proportion of people with access to a bank account has increased to 77 percent in 2016, from 44 percent in 2003, lenders still discriminated against the poor by refusing to provide financial services in certain areas because they are deemed too risky, Madoda Vilakazi, executive director of the National Economic and Development Council, said at the hearings.
“Class discrimination is on the rise,” he said. “Poor people are more likely to be poorly treated.”
The banking association said that between 2012 and 2015, banks made 94 billion rand ($7.1 billion) in financing available for affordable housing, 41 billion rand for small- and medium-sized black enterprises and 7 billion rand for black agricultural businesses. Total consumer credit at the end of September amounted to 1.67 trillion rand, of which 867.3 billion rand was tied up in mortgages, according to data from the National Credit Regulator.
New Financing
The industry intends making as much as 100 billion rand in additional financing available to support black-owned businesses over a period of about five years, said Thabo Tlaba-Mokoena, the bank association’s general manager for financial inclusion.
Banks have exceeded targets agreed with the government and labor unions to be 25 percent black-owned, 15 percent of which is directly held by black investors, the association said. Black people should own at least 50 percent of banks and insurers, said Floyd Shivambu, the deputy president of the opposition Economic Freedom Fighters.
“There isn’t significant black ownership of the financial-services sector,” he said. “We should legislate transformative targets.”
The Geneva-based World Economic Forum ranks South Africa’s banking system among the world’s best. The country has 37 licensed banks, which together hold about 4.8 trillion rand’s worth of assets. Foreigners hold about 49 percent of the shares in South Africa’s six biggest banks.
‘Meaningful Transformation’
“Meaningful transformation of the financial sector is not merely a question of ownership of financial firms,” Ismail Momoniat, a deputy director-general in the National Treasury, told lawmakers. “It’s much more than that. We need to look at how the sector supports real economic activity. Transformation must be mass-based and sustainable.”
While banks say they have done relatively well in diversifying their senior staff -- with an additional 22,800 black junior, middle and senior managers appointed between 2012 and 2015 -- they conceded that progress had been slow at a board and executive level, the association said. Of the five biggest lenders, which together control about 90 percent of the local banking market, only Standard Bank has a black co-chief executive officer, and he has a white counterpart, while the rest are all headed by whites.
“Some subsectors, like asset management, need to do far more to transform,” the Treasury’s Momoniat said, without elaborating.
The banking association’s Coovadia said a sound banking system was a crucial component of the economy and the industry intends countering its critics more proactively.
“We have been remiss in not introducing a narrative into the public space that actually begins to talk to real data and not to false data,” he told reporters on Monday. “You have got to ask whether there are certain interests that feel threatened by a well-regulated system.”
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