Postbank holds the key to greater and wider financial inclusion in SA
With its extensive network across all areas, the state-run bank could target rural residents and the urban poor
The fifth ANC national policy conference in June coincided with the celebration of the 62nd anniversary of the Freedom Charter. The charter enjoins us to strive for a country in which all South Africans share opportunities, including participation in the economy. “The people shall share in the country’s wealth,” it states.
The conference was a fitting occasion to reflect on the progress we have made and the challenges that lie ahead. The government has made great strides in improving the quality of life for many South Africans since 1994. But more work needs to be done to secure these gains and ensure all South Africans, especially those in rural areas and the urban poor, form part of the economic mainstream.
The discourse on financial inclusion takes place at a time when we are discussing and implementing strategies to promote digital inclusion. The two issues go hand in hand and constitute the twin priorities of the ANC and the ANC-led government.
This calls upon us to move with the necessary speed to achieve financial inclusion while preparing SA for the Fourth Industrial Revolution, which entails new social and economic advances driven by machine-to-machine communities, which, over time, will surpass the number of connected human beings.
In his opening address to the conference, President Jacob Zuma said: “We also need to consider the transformation and deracialisation of the highly concentrated financial sector in the interest of the vast majority of the country. The licensing of the Postbank is therefore also important, hence the need to finalise the licensing process and to capacitate the bank to distribute social grants.”
The president’s call for the licensing and capacitation of the Postbank has created the necessary impetus for an accelerated drive to make this a reality. On a broader scale, this calls for the whole of the government and society to support this vision.
This mandate is critical in addressing the market failure that has left the majority of citizens unbanked, underserviced and without access to finance. It is an important way to grow the economy and bridge the informal and formal economies.
The Postbank has an extensive network providing access to small towns, villages and farming communities. It is a well-managed, well-capitalised bank with net equity in excess of R2.7bn and capital of R1.4bn in excess of capital adequacy requirements, to ensure continuing operations and the protection of depositors’ funds. It offers a savings account, the number of which had grown to 5,731,135 in 2016, with total deposits standing at R5bn. It offers low transaction costs compared with commercial banks.
Since July 2016, when we were given permission to establish a banking company by the South African Reserve Bank, we have made significant progress. We were given one year to comply with a number of requirements to enable us to submit an application for the corporatisation of the Postbank. Some of our achievements include:
The appointment of board members who have undergone a fit and proper assessment to the satisfaction of the regulator. The Cabinet approved the appointment of the board in March 2017;
The registration and incorporation of Postbank SOC Ltd with the Companies And Intellectual Property Commission in April. This makes the Postbank a banking company with a governance structure, instead of being a division of the South African Post Office;
The finalisation of the bank-controlling company structure of the Postbank in consultation with the Treasury in June. We have opted for a structure that will not require an additional capital injection, particularly in view of the difficult economic climate. A new bank-controlling company will be registered to own the whole of the Postbank. The bank-controlling company will in turn be wholly owned by the Post Office;
The submission of the banking licence application to the Bank on June 26, well ahead of the July 4 deadline;
The push for the amendment of the Banks Act to align it with the Companies Act, which allows a state-owned company to establish a bank-controlling company. We are pushing for this legislation to be processed expeditiously as it is a short amendment.
Significant strides have been made to position the Postbank to play a role in growing and transforming the economy. Among others, the application for a licence that will enable it to lend money has been lodged with the Bank and endeavours are under way to amend the relevant laws to make this a possibility. Progress is also being made to deal with the role of the Postbank in disbursing social grants.
The president’s call is also a painful reminder of how the promise of 1994 has been betrayed by the lack of transformation in the financial sector to ensure financial inclusion of all South Africans, irrespective of race, sexual orientation or social standing, across all economic sectors. While we worked together to deliver the Constitution, many of our fellow citizens in townships and the countryside remain on the margins. Many small businesses still struggle to access finance.
While we welcome the investment the private sector has made, it is worrying that so many of our people live in economic black holes. These are caused by the monopolistic economic structure that originates from our colonial and apartheid past.
As a disciplined force of the left that is biased towards the working class and the poor, the ANC is addressing this apartheid legacy head-on with our programme of radical socioeconomic transformation to ensure financial inclusion, and intervening through forming a developmental state bank.
TRANSFORMATION PROGRAMMES
A cursory look at transformation efforts show that meaningful endeavours have been driven by the government. Many black people who poured their life’s savings into black economic empowerment transactions are now populating bad debtors books because they were sold dud assets at a premium. Other transformation programmes failed because dominant players adopted monopolistic tendencies that included pricing competition out of the market.
Financial inclusion – done correctly — can undo migrant labour patterns, one of apartheid’s enduring legacies. This social economic construct has also meant that many households in the countryside are headed by women. So a move towards financial inclusion should take into account the challenges that are faced by such women.
State intervention is a viable option for tackling these challenges. The licensing of the Postbank is at the centre of these efforts. We must mobilise state resources to ensure the Postbank introduces the following: Payment of government grants; Responsible and sustainable lending to individuals who cannot access credit, with an emphasis on those who seek to invest in small businesses, without excessive bank charges to ensure affordability; and
Developing a collaborative arrangement with the development finance institutions at all levels and acting as a gateway to communities.
Stagnant and low economic growth rates in recent years mean we need to change gear and move towards radical forms of transforming society and opening up opportunities for our people, instead of merely tinkering with parts of the system, which has left us with an unequal society that even the IMF has cautioned us against. Statistics SA has identified the areas of greatest underdevelopment. We need to marshal government and private sector resources and channel them to these areas.
Already, the R10bn the state is distributing monthly in social grants is transforming the countryside. We need to strengthen efforts at ensuring the money circulates in rural areas. The licensing of the Postbank can help us achieve this.
It is only when we give our people, especially women, the power to change their circumstances that we can truly achieve an inclusive, fairer and more equal society.