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.”