South African banks under fire over their exclusion of black businesses
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DURBAN - SOUTH African banks have all but admitted to having done little to support black businesses financially, and have justified this by saying they were looking at the interests of their depositors.
This amid a growing outcry against financial discrimination and exclusion among black businesses.
In response to questions, the Banking Association South Africa (Basa), which represents 36 banks, referred to a recent statement that stated that the banks were aware that much still needed to be done for the economy to better reflect the demographics of the country.
The banks said total empowerment financing dropped 19.5 percent to R203.7 billion in 2019 and exposure to black economic empowerment deals dropped 35 percent from the previous year to R107bn in 2019.
Chief economist at Econometrix Dr Azar Jammine said small businesses, irrespective of race, faced challenges when they approached the country’s financial institutions for financial support.
Jammine said most small entrepreneurs, irrespective of race, have given up hope of even getting anywhere with the traditional banks.
“I am a small white businessman, and I have struggled with the banks as well.
“The principle is that it is easier to ask for a billion-dollar loan than to ask for a R10 000 loan very often because if you ask for a billion-dollar loan, you are seen as a big player, and the banks are interpreted as being more sympathetic to that kind of situation,” he said.
Jammine said all banks, including the South African Reserve Bank, recognised that more needed to be done to make it easier to assist small businesses, hence a flurry of activity around the development of alternative banking types.
Basa said its members had in 2019 progressed in implementing transformation in support of broad-based black economic empowerment (B-BBEE). However, this is yet to be felt by associations of black entrepreneurs.
Black businesses have made another clarion call for the speedy establishment of the state-owned bank and even an expansion of the Land Bank’s mandate, as black businesses still remained on the periphery of the economy while continuing to endure discrimination at the hands of the banks.
Associations representing businesses, such as the SA National Taxi Council (Santaco) and SA Black Farmers Association (BFASA), feel strongly that their members are still receiving a raw deal from the banks.
Basa has denied allegations of racial discrimination, saying that it, together with its members, “oppose discrimination in all forms and are committed to treating all their customers fairly”.
The taxi industry, according to Santaco, contributes R12bn to the country’s gross domestic product (GDP). The industry, which commands a turnover of R35bn annually, is, according to a survey by the Department of Transport, contributing 3.4 percent to GDP.
“But it cannot still have leverage when it wants financing from banks. This does not make sense, because, by virtue of its role and the number of people it moves on a daily basis, you will expect that naturally financing, as far as the industry is concerned, there should be endless options,” said Santaco spokesperson Thabiso Molelekwa.
“The influence that we have on the economy on public transport as a whole is unimaginable, [and] it does not make sense why we should be struggling,” said Molelekwa.
BFASA president Dr Xolile Mtshagi believes that if the banks cannot be transformed for the benefit of black traders, the government should drive the advancement of black entrepreneurs.
“Even before Covid-19, our people were still discriminated against big time.”
He said most black farmers were unable to get finance to purchase property. “If they get it, the interest rate is sky high with mad conditions.”