Banking
• South Africa’s financial sector is well
placed to survive tough times
• The Free State is ranked third in South
Africa in cellphone-banking usage
South Africa’s banking and financial-services sectors are established and strong, but their innovative products and services are opening up new markets.
The South African banking sector is dominated by the banking Big Four – Standard Bank, Nedbank, Absa/Barclays and First National Bank (FNB). These four institutions drive a highly competitive and technically sophisticated banking and finance industry. The sector can accommodate the most demanding needs of business and foreign investors, with sector representatives across the banking, taxation and legal spheres well equipped to advise local and international parties on all aspects of the local banking environment.
The World Economic Forum’s Global Competitiveness Index 2008/09 ranked South Africa 45th out of 134 countries in terms of its productivity, efficiency and potential for growth. An evaluation of the country’s banking sector is an important criterion in this ranking and one in which South Africa has always fared well.
Banks fall under the supervision of the South African Reserve Bank, while other financial institutions are regulated by the Financial Services Board. The National Credit Act (NCA) (Act 34 of 2005) came into effect in South Africa on 1 June 2007. The Act regulates the granting of credit by banks to make sure that only those who can afford it will receive it. The NCA puts the onus on authorised credit providers to make sure that suitable precautions are taken when granting credit. This pre-emptive action on the part of government has, to an extent, protected South Africa from the worst of the international credit crunch.
New products for new customers
All four of South Africa’s major banks and
Postbank have been working hard to provide
banking services to the many millions of
South Africans who previously had no access.
Provinces with large rural populations, like the
Free State, are in line to benefit from this trend.
It is estimated that as much as R12-billion is
repatriated from the country’s cities to rural
areas in any given year.
A wide range of innovative products aims to extend the banking sector’s market. Mzansi banking is a national scheme put into effect in 2004, whereby full-service banking should ideally be available to all South Africans within 15km of their homes, and an automatic teller machine within 10km.
Other ideas, such as mobile ATMs and portable banking kits (whereby social grants, maintenance payments and other transactions can be done in remote rural areas), have served to extend the scope of financial services.
Cellphone banking is growing at a rapid rate with Free State ranking third in the country at 13.3% of the nation’s users. Standard Bank initiated free cellphone access for all its Mzansi Blue customers and First National Bank reported that it had 1.25 million cellphone-banking users in January 2009. According to Personal Finance, FNB has the second-highest market penetration (36%) of the cellphone-banking market, after Absa (39%).
International interest
In March 2008, Standard Bank concluded a
major strategic partnership with Industrial and
Commercial Bank of China Limited (ICBC), the
world’s largest bank by market capitalisation. In
terms of this partnership, ICBC became a 20%
shareholder in the Standard Bank Group.
Previous to the ICBC deal, Barclays’ acquisition of a majority stake in Absa in 2005 was the biggest talking point in the South African banking sector. The move was part of Barclays’ drive to build its brand outside of the UK and gave South African Absa clients access to the power of the Barclays Group abroad.
Financial-services sector
South Africa’s financial-services sector
compares favourably with those of industrialised
countries around the world and is a leader on the
African continent. The stock exchange based in
Johannesburg – the JSE Limited – is the largest
in Africa and the 16th-largest in the world, and
the strong national financial-services sector is
backed up by a solid regulatory framework.
South Africa’s financial hub, Gauteng, is the Free State’s provincial neighbour to the north and towns like Kroonstad, Welkom and Sasolburg certainly benefit from their close proximity to greater Johannesburg.
While financial services take a beating around the world, South Africa has managed to retain an element of control and avoid any drastic measures as yet. The insurance sector is one financial subsector that has experienced a bit of trouble, as markets cut down on spending.
South Africa’s insurance sector, though, is built on several strong pillars, with numerous large insurance companies ensuring that the sector remains competitive, transparent and reliable. The sector is well-capitalised and includes both short-term (property and vehicle) and long-term (health and life) insurers. Shortterm insurance remains practically a necessity in South Africa, but life insurance has come under pressure as a result of the economic downturn globally.
In late 2008, 69% of long-term insurers were well above the minimum requirement of assets-to-capital ratios.
KEY CONTACTS
Absa Bank: www.absa.co.za
Alternative Exchange (AltX):
www.altx.co.za
Banking Association South Africa:
www.banking.org.za
BankServ: www.bankserv.co.za
BankSeta: www.bankseta.org.za
Financial Intermediaries Association
of Southern Africa: www.fia.org.za
Financial Services Board: www.fsb.co.za
Institute of Bankers in South Africa:
www.iob.co.za
First National Bank: www.fnb.co.za
JSE Limited: www.jse.co.za
Nedbank: www.nedbank.co.za
Office of the Auditor-General of South Africa:
www.agsa.co.za
Ombudsman for Banking Services:
www.obssa.co.za
Postbank: www.postbank.co.za
Seta for Finance, Accounting and
Financial Services: www.fasset.org.za
South African Reserve Bank:
www.reservebank.co.za
Standard Bank: www.standardbank.co.za
