The financial services sector must stop speaking with forked tongue
South Africa’s key priority for 2020 is jobs. A number of public sector initiatives to stimulate development and promote food security are underway. However, there remains a heavy reliance on the private sector to play its role in building an inclusive economy. While promises are aplenty, delivery is sketchy, with the financial services sector leading in empty promises.
Presidential investment conferences, where industries make huge public pledges to boost the economy, have become the norm. An amount of R290 billion over a five-year period was pledged at the October 2018 conference. The November 2019 conference had a sterling attendance comprised of representatives from 22 countries, Fortune 500 Companies, seven of the ten largest global banks, global development finance institutions as well as representatives from domestic companies. The amount pledged by local and international investors totalled R363 billion.
It is estimated that on each occasion the financial services sector pledged around R100 billion. This commitment however is not reflected in reality. When one looks at the attrition of jobs, it is clear that companies in the sector are speaking with forked tongues.
The country’s big banks continue to record huge profits, while unashamedly shedding jobs. Standard Bank closed 91 branches with an estimated 1,200 job cuts. Likewise Absa had an initial job cut estimate of 827 and Nedbank, 1,500. We are being told that the jobs blood-bath in the sector is largely due to the fourth industrial revolution and digitisation.
The argument that job losses are due to digital transformation may be partly true, but the reality is that South Africa’s financial services sector has outsourced its IT functionalities offshore, including to a company called Zensar, despite possessing internal capacity. The motivation for the outsourcing is purely profit-driven.
Arguably, Zensar, through using artificial intelligence, is able to improve efficiencies by enabling: more accurate depiction of potential borrowers at lower costs; the reduction of operating costs and risks; seamless security monitoring and management; smart optimisation of investment banking and trade; better regulatory compliance; seamless detection of anomalies and credit card fraud; and enhanced customer support and experiences. The controversy is not automation and integration of artificial intelligence, it is that the existing staff are capable of performing those same functions and hence there is no need for offshore outsourcing.
Zensar Technologies Limited is a software and services company, with its headquarters in Pune, India, which has enjoyed significant expansion under Vivek Gupta, its then Chief Executive - Global Transformation Services and Vice Chairman-Akibia. In 2019 its revenue from Africa grew by over 23 percent sequentially, with South Africa’s financial services sector being a key source.
This growth is partially built on a narrative that South Africa has a significant digital skills gap. The reality though is that the current digital transformation process is more evolutionary than revolutionary and accordingly the necessary skills, such as developers, database administrators and user interface designers, already exist. Admittedly, skills strengthening is required in the areas of big data, cloud computing, the Internet of Things and information security. But the skills deficit in these areas are of a global nature and not specific to South Africa.
We don’t need an international company like Zensar to expand our capacity and we certainly don’t need them to perform functions that the financial sector had historically insourced. Particularly since it is current IT staff who are training those from countries that the jobs have been outsourced to.
What is needed is job opportunities for existing ICT experts and absorption and training expansion of our young graduates through workplace exposure so that they may gain experience. In August 2019, Career Junction reported a 27 percent drop in ICT sector jobs in the previous year. An analysis of the BankSETA list of ‘Hard-to-fill-vacancies’ below, confirms that these vacancies are more due to a shortage of experience and poor conditions of service, than the absence of skills.
- 251101 ICT Systems Analyst – lack of relevant experience
- 251201 Software Developer – equity considerations, poor remuneration and poor job location
- 251203 Developer Programmer – lack of relevant experience, lack of relevant qualification, equity considerations
- 252101 Database Designer & Administrator - equity considerations, poor remuneration and poor job location
- 252301 Computer Network & Systems Engineer - lack of relevant experience, lack of relevant qualification
- 252901 ICT Security Specialist – lack of relevant experience
Source: 2019 JCSE-IITPSA ICT Skills Survey, pg 18.
It is most unfortunate that the financial services sector is exploiting the digital transformation process to cut jobs for the sake of increasing profits. Not only do we need this sector to invest in productive sectors in the economy and drive community reinvestment programmes; but we need it to contribute to creating quality jobs, starting with retaining existing jobs, absorbing young graduates and facilitating skills upgrades. It has to stop the outsourcing of its IT functionalities.
These matters require further discussion at a second financial service sector transformation summit, through NEDLAC. Such a summit should take stock of the implementation of the 2004 agreements and develop further targets for the transformation and complete overhaul of the financial services sector of our country.
We need sincere, patriotic capital. The financial services sector must not speak with forked tongue. It must move beyond paying lip service and honour its commitments made at the investment conferences. Greater transparency is also required from both the long-term and short-term insurance industries. The financial services sector is after-all, the sector which relies most heavily on integrity!
* Reneva Fourie is a policy analyst specialising in governance, development and security.
** The views expressed here are not necessarily those of Independent Media.