OPINION: Rather than engaging in legal arguments about liability and damages, as an amend, banks should be encouraging their fellow BUSA members to support a decent universal basic income grant. It would in fact merely be a case of advancing self-interest. Banking – for change, writes Isobel Frye.
Most people in South Africa have grievances against their banks – the service, the fees, the general sense that banks control our lives.
They certainly exercise control over the economy and their collective collusion led to the two-year Competition Commission Banking Enquiry from 2006. While a number of the Commission’s recommendations have been implemented, most of these entail transactional banking.
Banks also are required to provide credit facilities to oil the operations of businesses in an economy. The engine of growth and jobs in any country is the SMME sector. Banks are in fact failing to meet their Financial Sector targets of providing access to credit for SMMEs, and in particular black-owned SMMEs.
Do banks have a constitutional human rights based obligation to ensure access to credit for millions of people trying to make their small businesses work? Probably. Do they have a moral obligation? Totally. Supporting the calls for the roll-out of a decent universal basic income grant would be the first step in remedying the decades of harm that their failure to adequately support SMMEs has done.
In 2011 the UN Human Rights Council endorsed the UN Guiding Principles on Business and Human Rights. One of the key principles is that companies that find that their actions cause human rights harm should immediately desist, or adapt their behaviour, and consider the payment of reparations where harm may have been caused by their practices.
The 2008 Competition Commission Banking Enquiry findings make for interesting reading. The enquiry found that institutionalised collusion between the main banks permeated many banking practices, to the detriment of customers and the benefit of banks and their shareholders. Price setting for ATM access, red-lining of properties for mortgage bonds, and manipulation of the national payments systems all provided rich pickings at the cost of ordinary customers and consumers.
Many people see the unfettered consolidation and protections of the financial sector as being at the core of apartheid capitalism. Reading through the TRC Final Report on the role of business in supporting and enabling the actions of the apartheid state, it is clear that many private sector institutions failed or refused to see the link between their “business activities” and the human rights violations being perpetuated by the state. Do banks today recognise the link between their practices and the perpetuation of poverty and racial inequality in South Africa?
The South African Constitution binds all state bodies in their engagement to citizens. This is known as vertical application. The Constitution also has horizontal application between private parties, depending on the nature of the right in question. This would include “juristic persons” like companies. The extent to which the common law in any jurisdiction can be extended to bind companies to comply with human rights standards is a question of great debate globally, and our constitutional court would be well placed to advance the jurisprudence if a case is brought before it.
The South African constitution guarantees to all the fundamental rights to equality against discrimination and to inherent dignity. Race is a distinct prohibited ground for both direct and indirect discriminatory actions.
A disproportionate number of black African people are affected by poverty and unemployment in South Africa than any other race group. The 2017 Poverty Trends report found that 47% of black Africans live in poverty compared to 0.8% of whites. And 51% of black Africans were unemployed in 2021 compared to 11.5% of whites.
The unemployed are frequently admonished that they should step up and create their own businesses and not wait for the government or the private sector to create jobs for them. People are trying to do this, and in 2017 there were an estimated 5.7 million SMMEs in South Africa, but 2.9 million were struggling for survival.
The role of banks in supporting SMMEs through the provision of accessible credit is acknowledged by the Banking Association of South Africa (Basa). Banks, according to its 2019 Annual Report, hold people’s savings and investments and use them “to help finance South Africa’s social and economic infrastructure and to extend credit to individuals and businesses, big and small, to enable them to expand, grow the economy and create jobs”.
Banks are failing abysmally in this goal, and they are failing black SMME holders directly.
According to a Basa commissioned report into SMMEs’ experience of access to credit, there has been “no meaningful improvement in access to finance for small businesses over the last 10 years” and financial institutions have not met their Financial Sector Codes targets for SMME financing. According to the Basa 2020 Transformation Report, banks’ lending to black SMEs dropped from R29 million in 2018 to R21 million in 2019.
One test for whether an enforceable constitutional right exists between private parties is if there is a special relationship between them, and whether the body in question has the power to control access to a particular service.
It could certainly be argued from the plethora of financial sector legislation and targets that a special relationship does exist between banks and SMMEs for financial support.
For millions of survivalist entrepreneurs, it is social grants that provide the most dependable support for their operating costs, and they create demand by giving their customers a small disposable income. And yet BUSA – the apex Business federation of which Basa is a key member – released a statement last year discrediting the reform proposal of a universal income grant. This possible reform would have the potential to support all the survivalist SMMEs that Basa’s members haven’t managed to reach in the last 10 years and drive the development of a flourishing SMME sector.
The banking sector has implemented some of the 2008 Competition Commission’s recommendations. However, by their own admission, they have not met their obligations in providing access to financing for SMMEs. Is this a clear harm done by the sector that has harmed people’s human rights? Rather than engaging in legal arguments about liability and damages, as an amend, banks should be encouraging their fellow BUSA members to support a decent universal basic income grant (BIG). It would in fact merely be a case of advancing self-interest. Banking – for change.
* Isobel Frye is director, Studies in Poverty and Inequality Institute.
** The views expressed here are not necessarily those of IOL and Independent Media.
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