Black ownership of SA banks plummets
High number of maturing BEE deals among the contributing factors
Fewer black people own stakes in SA banks than was the case in 2016 due to a large number of empowerment deals having matured in 2015.
The 2019 Transformation In Banking Report showed that black ownership fell to 30.5% in 2017 from 34.8% in 2016, while black economic interest fell from 30.3% to 25.4%.
This was, however, still ahead of the Financial Sector Code target of 25%.
Khulekani Mathe, senior general manager of financial inclusion at the Banking Association of SA (Basa), said the decline in black ownership and interest was largely due to BEE deals that matured between 2015 and 2017 and saw shareholders disinvesting to put their money in other asset classes.
“Debate around ownership of banks can be heated and misguided. Yes, there has been a little bit of a decline but a large part of it is attributable to the many BEE transactions that matured in 2015,” said Mathe.
He said the decline should not be seen in a negative light because, like other investors, those shareholders who held bank BEE shares also wanted to limit their exposure to a single asset class.
He said the decline, however, does put the spotlight on how banks remain transformed when BEE deals mature.
About 40% of SA bank shares are held by foreign investors, which leaves 60% to be shared between individual SA investors and big institutional investors such as the Public Investment Corporation.
Institutional investors take up most of that 60% and are included in the determination of black ownership. The demise of VBS Mutual Bank in 2018 is likely to have changed the reported black ownership figures, but not significantly, since VBS accounted for only 1% of SA banks’ assets.
The report also showed that SA’s banks lent R3.35-trillion to consumers and businesses between 2016 and 2017. But lending to small and medium enterprises (SMEs) declined 7%. Funding for enterprise development also declined.
Mathe said lending to small businesses has been challenging because absolute growth in SME numbers in the past 10 years has been stagnant.
He said Basa and its member banks explored ways in which they could increase their targets for SME funding, but “the pipeline of new SMEs was pretty much broken”.
Basa said roughly 75% of lending to SMEs is provided by banks.
Basa managing director Cas Coovadia said the association has been in discussions with the Treasury about creating a government guarantee scheme for SMEs. The government would have to provide a guarantee when small businesses with good growth prospects approach banks but do not have collateral.
As far as spending on other development-related sectors is concerned, banks reported a 13.6% rise in funding for BEE deals. Funding for affordable housing rose 26% while loans to black-owned agricultural operations and transformational infrastructure grew 20.6% and 7.6% respectively.