Cape Town - South Africa’s 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 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.
Lawmakers are due to interrogate 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
for Zuma’s drive for “radical economic transformation” to transfer wealth to
the majority black population in an economy still dominated by whites almost 23
years after apartheid ended. Banks have exceeded targets agreed with the
government and labour unions to be 25 percent black-owned, 15 percent of which
is directly held by black investors, the association said in a presentation.
Funding choices
“A choice must be made between financing of black
ownership and increasing financing in the real economy,” the association said.
“Banks have to reserve capital for certain types of activity. Ownership deals
are usually financed through loans by banks to black individuals or groups. For
every rand of capital a bank uses to finance a new black shareholder,
approximately R80 is removed from financing a black business.”
The association said that between 2012 and 2015,
banks made R94 billion in financing available for affordable housing, R41
billion for small- and medium-sized black enterprises and R7 billion for black
agricultural businesses. The industry also spent more than R60 billion with
black-owned industries in 2015, up from R38 billion in 2012, it said. Total
consumer credit at the end of September amounted to R1.67 trillion, of which R867.3
billion was tied up in mortgages, according to data from the National Credit
Regulator.
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The organization represents lenders including Standard
Bank Group, Nedbank Group, FirstRand’s First National Bank and Barclays Africa
Group.
Industry shortcomings
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 funding details have yet to be
finalized, the association’s preference is to agree to a lending target and for
the individual banks to issue the loans.
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.
“There is something in our economy that makes it
difficult to achieve employment equity,” said Khulekani Mathe, senior
general manager of the banking association’s financial inclusion division. “Our
education system has let us down over many years, but it’s the sort of argument
you can’t make and get away with it. We accept we have not met those targets
and we are saying we need a broader discussion around some of these issues.”