Banks are going on the offensive after being criticised 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 monopolising 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. Lawmakers are interrogating the banks on their racial transformation records in Cape Town on Tuesday.
“We are not going there cap in hand, despite all the noise around the industry,”Cas Coovadia, managing director of the Banking Association of South Africa, told reporters on Monday. “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. You have got to ask whether there are certain interests that feel threatened by a well-regulated system.”
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.
The banking association, which represents lenders including Standard Bank Group Ltd., Nedbank Group Ltd., FirstRand Ltd. and Barclays Africa Group Ltd., is saying the industry is doing enough to expand the black business class and extend services. Criticism has intensified as the ANC prepares for a policy conference from June 30 to July 5.
While the proportion of people with access to a bank account has increased to 77% in 2016, from 44% 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 on Tuesday.
“Class discrimination is on the rise,” Vilikazi said. “Poor people are more likely to be poorly treated.”
The banking association said that between 2012 and 2015, banks made 94 billion rand 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.
Banks have exceeded targets agreed with the government and labor unions to be 25% black-owned, 15% of which is directly held by black investors, the association said. Black people should own at least 50% of banks and insurers, Floyd Shivambu, the deputy president of the opposition Economic Freedom Fighters, said.
“Meaningful transformation of the financial sector is not merely a question of ownership of financial firms,”Deputy Director-General in the National Treasury Ismail Momoniat 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.”
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.
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% 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.