Thought leadership: Monde Ndlovu, head of advocacy and thought leadership, shares that the state-owned bankin

MONDE NDLOVU, head of advocacy and thought leadership at the Black Management Forum, shares that the state-owned banking and finance industry remains fragmented and needs to be recalibrated

The South African economy has struggled to register positive and meaningful economic growth in the last decade, and National Treasury has projected a 1.8 per cent average in the next three years. The country, described by former president Thabo Mbeki as two worlds, continues to underperform and underutilise its human capital. The recently tabled budget by the finance minister further exposes the country’s structural challenges.

The commodities boom and revenue collection mechanisms have assisted greatly in softening the blow on consumers and servicing the country’s debt. Only 12 million people out of an economically active population of

39.7 million are formally employed. National Treasury has also exposed that 46 per cent of the population receive a grant. If there were no commodity boom coupled with a more efficient revenue service, the minister would have been under severe pressure to increase taxes, severely impacting the economy. This is not a sustainable situation for South Africa, therefore the country needs bolder ideas, starting with the banking and financial services sector.

BANKING NEEDS A MAKEOVER

According to Stats SA, finance is the biggest industry, contributing 24 per cent to the gross domestic product. The banking and financial services sector is lauded and taunted as one of the most sophisticated worldwide. This is a strange paradox –

South Africa has a world-class financial system, yet it operates in the most unequal society in the world. This system has not sufficiently grounded itself in the context of the country. There are indeed two worlds, possibly even more, in South Africa.

Capitec is challenging the established commercial banks. It has the largest client base in the country, with the lowest costs for banking. Capitec has entered the space the People’s Bank was pursuing under the stewardship of the late Lot Ndlovu. According to Brand Finance, “the brand continues to position itself as the nation’s leading retail franchise, delivering a low-cost alternative to traditional banks, and has already built a strong, loyal customer base”.

The debate of a state bank to service the lower end of the market, and attract the underbanked, continues to rage. Past attempts to build black-owned commercial banks have been swallowed by the very system and not defended by black people with real vigour and clarity. People’s Bank is one example of a bank aggressively aiming to service the lower end of the market, but its aspirations were halted and arrested (that is a story for another time). African Bank, founded by black trailblazers, has had its challenges but still exists today.

The South African Reserve Bank (SARB) wanted to sell its stake in African Bank, presenting a great opportunity for black people, and even the state, to acquire an equity stake. A BEE consortium could have been created to acquire this stake and drive the transformation agenda through African Bank. The Public Investment Corporation could have been approached to fund the transaction – this could have placed the bank on a different transformational trajectory.

The South African Postbank, a state-owned banking institution, draws its mandate from the Postbank Amendment Act of 2013 to provide accessible and affordable financial services, including lending, to the unbanked and underserved. Although not yet a registered bank, it does participate fully in the national payments system. The ongoing crisis of separating the Postbank and the Post Office is delaying the process of acquiring a banking license. The SARB has also required the bank to have a bank-holding company, which will play an oversight role in banking policies and management. The Postbank has satisfied the SARB on its capital adequacy ratio of 30 per cent.

The state also owns the Development

Bank of South Africa, Ithala, Industrial Development Corporation and Land Bank.

The state-owned banking and finance industry remains fragmented and needs to be recalibrated, clarified, and executed with precision. Postbank must overcome its current challenges so it can provide for the lower end of society, providing quality financial products that can dent poverty, unemployment, and inequality.

The debate around humanising the financial system is not yet closed.

This is a strange paradox – South Africa has a world-class financial system, yet it operates in the most unequal society in the world.