Sibongiseni Mbatha
CAPE TOWN - Does South Africa need black banks, banks owned and managed by black people? Yes, 24 years into our country’s hard-earned democracy, black banks are long overdue.

Despite the fact that South Africa has the largest and most sophisticated banking industry in Africa, almost a quarter of its population, mostly black, has no access to banking services of any kind.

We need a black bank to cater for the needs of the marginalised, particularly the black small and medium enterprises.

There are benefits of black-owned banks. They include increased diversity, serving as an example of black enterprise and educating low-income communities on banking procedures. Indeed, the government should take a firm stand in helping the formation and licensing of black banks.

Why do we need black banks? Banks are the cord that binds consumers, corporations, companies, businesses, shops and the world at large.

Indeed, a strong and resilient banking system is the foundation for sustainable economic growth.

Banks are at the centre of the credit intermediation process between savers and investors. They provide critical services to consumers, enterprises, and governments who rely on them to conduct their daily business.

Indeed, even though our country’s economic growth has stalled over the past few years, the financial services sector, including the banks, accounts for around 10.5percent of gross domestic product and employs more than 300000 people, and so is of economic importance in its own right and not just as a facilitator of more general economic growth.

Our banks’ balance sheets remain liquid, strongly capitalised and in a good position to take advantage of growth opportunities as they arise, not only here in our shores, but across the continent.

The robustness of South Africa’s banking sector can be attributed to the country’s sound regulatory framework, its well-capitalised banks and the banks’ limited exposure to high risk and foreign assets.

South Africa remains the benchmark for other African and indeed emerging nations to follow, particularly in the regulation of our finances in the teeth of economic turmoil.

International investors (including from other African countries) take the continent’s pulse from our country.

So, why does South Africa’s banking sector remain the benchmark for Africa and other emerging nations to follow?

Indeed, since 2016 South Africa had 16 local banks, 16 controlling companies, and three mutual banks, 15 local branches of foreign banks, two co-operative banks and 36 representative offices of foreign banks.

The South African Reserve Bank (Sarb) licensed 12 institutions between 2011 and 2016. According to Sarb’s 2016 figures, the banking sub-sector manages R4.8trillion in assets, or about 112percent of the country’s GDP, and has 16 local banks (from 40 in 1994), 15 local branches of foreign banks, 36 representative offices of foreign banks, two co-operative banks and two mutual banks.

However, the “big four” banks, Absa, Standard Bank, Nedbank and FirstRand, account for more than 80percent of the total banking sub-sector assets and market, controlling assets of R4.87trillion, which amounted to 112percent of the country’s GDP.

The market share of banks by assets as at January 2017 was 24.92percent - Standard Bank; 20.51percent - FirstRand; 19.3percent - Absa; 17.7percent - Nedbank; 8.02percent - Investec; 1.46percent - Capitec Bank and 8.09percent - other banks. The top six banks control more than 90percent of market share by assets, while the “big four” banks control more than 80percent.

Of course, we all know how the African Bank and VBS banks have become the poster children of all that is wrong with unfettered lending.

The woes of these banks still represent a tough challenge for the financial regulators as they now must work to reassure depositors and investors and restore confidence in one of the country’s key lenders.

The above background, together with real and perceived high prices for banking services and products, has raised serious concerns about the need for competition in South Africa’s banking sub-sector.

That is why we at the Association of Black Securities and Investment Professionals (Absip) believe that given the scale and depth of South Africa’s problems, banks can and should do more to contribute to transformation, growth and development, looking hardest at investment in job-intensive sectors, small and medium enterprises (SMEs) financing, co-operative financing, infrastructure and agriculture.

With the above background, who then can argue that we don’t need black banks?

The role of black banks or a black bank would be to service black communities, make sure blacks receive lending to buy their first home, send their children to university and start their own businesses.

Black banks will be sensitive to the needs of black communities and will do a better job of informing and educating the black communities about banking and credit because too many of our people do not have good, banking knowledge.

There is now a greater need for more black banks, which can have close relationships with black customers and cater to their banking needs.

Blacks have to learn to own their own. If we’re talking about economic development and economic empowerment, we have to come in and we have to have a powerful black bank or banks.

A black bank (or banks) is as essential today as they have ever been.

If there are no black-owned banks, blacks will remain at the periphery of economic power, hence there has to be a deliberate government and SA Reserve Bank policy position to help licence black banks.

Sibongiseni Mbatha is president of the Association of Black Securities and Investment Professionals.

The views expressed here are not necessarily those of Independent Media.

-BUSINESS REPORT