Banks must deal with criticism and negotiate
South Africa’s banks have to address both the fair and unfair criticism levelled at them before the “climate for negotiation” is lost, said Yunus Carrim, the chair of Parliament’s standing committee on finance.
In five years, it could be too late to have a “giveand-take” engagement.
This is some of what emerged during public hearings on transformation in the financial sector, which were held in March and May this year.
“When people are angry about their plight, it is all about money,” said Carrim.
“Is it accurate or objective? That is not how the world works. There were sweeping statements made by all sides.
“To us, it does not matter so much if the figures or views are correct. What it shows is the huge distrust in this sector, and how difficult it is going to be to move forward.”
The interim report stemming from those hearings was on Friday sent to the interested parties that participated in the process. The committee clearly expects many of them to be unhappy.
In an interview with City Press this week, Carrim called the hearings the “most polarised” he had witnessed in his parliamentary career, which started in 1994.
He stressed that the report was preliminary. “The view of the majority is that it is better that the banks negotiate and take transformation more seriously now because, five years from now, there will not be a climate to negotiate,” Carrim said.
“I think people are immensely frustrated and angry at what they see as the failure of banks in particular to play their role.
“The stakeholders that came there were questioning the figures provided by the dominant players in the sector. They say the figures are manipulated. There is enormous distrust in the monopolies,” he said.
“We think there is more transformation in the financial sector than the critics make out, but less than the major players say.”
He said the report stated that talks needed to be held with these “extremely frustrated” parties.
“At the hearings, it seems almost as if every frustration the participants had was that they felt excluded from the economy as a whole, and they vented this on the financial sector. You obviously can’t hold the financial sector responsible for the failures of the economy as a whole,” Carrim said.
“We defined transformation as more than just deracialisation. It is about more than just representation on boards or management. With the financial sector being as crucial as it is, it can play a greater role.”
He said that, in 1994, the financial sector contributed about 7% of GDP. Now it is 29.6%.
“If you look at the market capitalisation of the JSE, in the 1990s it was 100% of the GDP. Now it is 220%.” The report comes in the context of the imminent review of the Financial Sector Charter, which would set targets for normal measures of transformation like employment equity, but also finance-specific targets related to lending.
“Government is discussing how to demonopolise the economy. When you are talking about that, you are talking mainly about banks. It has a high level of monopoly by any measure. The ownership is largely in white and foreign hands,” Carrim said.
The report’s authors address a disparate set of abuses in the sector. These include the unfair repossession of houses, exorbitant fees and alleged collusion of currency traders at banks – a matter currently before the Competition Tribunal.
The report endorses an inquiry into “financial malpractices relating to the repossession of houses and cars, including their auctioning way below market value”.
The authors endorse the creation of a state bank, in the form of Postbank, as soon as possible to provide affordable banking and expand financial inclusion, particularly to neglected rural areas and townships.
At the same time, it said one state-owned bank was enough for now.
“At this stage, it would be better to focus on the Postbank and, later, based on the experiences of Postbank, consideration can be given to whether there is a need for another state-owned bank and what its specific role would be compared with Postbank,” reads the report.
It recommends that the private shareholders in the SA Reserve Bank get bought out “if it is financially possible”, simply to clear the air about the influence many believe these shareholders wield.