World Economy

S.African Banks on Offensive

Total consumer credit at the end of September amounted to  1.67 trillion rand.Total consumer credit at the end of September amounted to  1.67 trillion rand.

South Africa’s banks are going on the offensive after being criticized by some politicians over their lending practices and records in addressing racial inequality.

Attacks on the lenders have been led by President Jacob Zuma, who’s accused them of monopolizing the financial services industry, and questioned whether they colluded when closing accounts belonging to members of the wealthy Gupta family, who are his friends and are in business with his son. Lawmakers are due to interrogate the banks on their racial transformation records in Cape Town on Tuesday, Bloomberg reported.

“We are not going there cap in hand, despite all the noise around the industry,” Cas Coovadia, managing director of the Banking Association of South Africa, told reporters on Monday. “We have been remiss in not introducing a narrative into the public space that actually begins to talk to real data and not to false data. You have got to ask whether there are certain interests that feel threatened by a well-regulated system.”

The country’s financial system is becoming a battleground for Zuma’s drive for “radical economic transformation” to transfer wealth to the majority black population in an economy still dominated by whites almost 23 years after apartheid ended. Banks have exceeded targets agreed with the government and labor unions to be 25% black-owned, 15% of which is directly held by black investors, the association said in a presentation.

 Funding Choices

“A choice must be made between financing of black ownership and increasing financing in the real economy,” the association said. “Banks have to reserve capital for certain types of activity. Ownership deals are usually financed through loans by banks to black individuals or groups. For every rand of capital a bank uses to finance a new black shareholder, approximately 80 rand ($6.10) is removed from financing a black business.”

The association said that between 2012 and 2015, banks made 94 billion rand in financing available for affordable housing, 41 billion rand for small- and medium-sized black enterprises and 7 billion rand for black agricultural businesses. The industry also spent more than 60 billion rand with black-owned industries in 2015, up from 38 billion rand in 2012, it said. Total consumer credit at the end of September amounted to 1.67 trillion rand, of which 867.3 billion rand was tied up in mortgages, according to data from the National Credit Regulator.

The organization represents lenders including Standard Bank Group Ltd., Nedbank Group Ltd. FirstRand Ltd.’s First National Bank and Barclays Africa Group Ltd.

While banks say they have done relatively well in diversifying their senior staff—with an additional 22,800 black junior, middle and senior managers appointed between 2012 and 2015—they conceded that progress had been slow at a board and executive level, the association said. Of the five biggest lenders, which together control about 90% of the local banking market, only Standard Bank has a black co-chief executive officer, and he has a white counterpart, while the rest are all headed by whites.

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