The credit lending process was by its nature discriminatory, the joint meeting of the Portfolio Committee on Trade, Industry and Competition and the Standing Committee on Finance heard on Tuesday.
Standard Bank CEO, Mr Kenny Fihla, said most black people in South Africa did not have an asset base they could leverage when borrowing from the banks, at least comparable to the white people. “Credit decisions are by their nature discriminatory. Africans do not have an asset base one could leverage,” Mr Fihla said.
The banking sector and the regulatory entities were invited to brief the committees on their banking practices and the regulatory framework. Major banks honoured the invite, including ABSA, Capitec, FNB, Standard Bank, and Investec. The Reserve Bank, the Prudential Authority, the Fiscal Conduct Sector Authority, and the Banking Association of SA accompanied them.
Members sought clarity on several issues, including legislation that does not have the desired impact, account closures, bank fees, greylisting, Ithala Bank’s liquidation, lack of transformation, manipulation of the Rand, and discriminatory practices in the banking sector.
Committee member Mr Lufefe Mkutu said the structure of the banking system was modelled on the structure of South Africa’s economy, which was built around servicing white minority interests. “Fundamentally, we have not been able to transform these institutions. The post-1994 era was about managing the economic patterns and not changing the ownership patterns. We should ensure there is meaningful transformation,” said Mr Mkutu.
He said presenters did not have to recite numbers to the committee but more about what they were doing to resolve fundamental issues of ownership and control.
Co-Chairperson Dr Joe Maswanganyi said banks must be held accountable for not meeting transformation targets on ownership, procurement and financial support for Black-owned enterprises. “Over recent decades, South Africa has undertaken substantial legislative and policy initiatives aimed at reforming the financial sector to facilitate meaningful participation by historically disadvantaged groups. Nevertheless, despite these interventions, progress has been sluggish, fragmented, and often characterised by symbolic rather than substantive changes,” Dr Maswanganyi said.
“Reports emerging from various oversight engagements—including those conducted by the B-BBEE Commission, the Financial Sector Transformation Council and the National Treasury—have persistently illuminated the deeply entrenched structural inequalities that continue to pervade the financial sector in South Africa.”
Mr Mkutu pointed out that lending practices were very expensive for those banks declared high-risk clients and, inadvertently, blacks in South Africa. “You are doing business for profit accumulation and not investing in good faith. Would you invest for social responsibility purposes?” he asked.
Mr Mkutu said unwillingness to invest in quality education made banks part of reproducing inequality. He criticised the racial profiling of clients and said those in the small, micro and macro enterprises borrowed at suffocating interest rates merely because they lacked collateral. “We cannot leave the responsibility of building South Africa to the private sector. The state must be involved, or this country will go to the dogs.”
FNB clarified that it undertook to assist clients of Ithala Bank when the deadline for alternative accounts approached. It clarified that migrating the accounts as a group made more sense than the logistical nightmare of having clients come en mass to open accounts at a fee.
The Chairpersons wanted a broader follow-up meeting with the financial sector, including the insurance sector and the Public Investment Corporation, to brief Parliament as members suspected bank owners were the same people who provided insurance.
“The discourse today must transcend rhetoric. The expectation for the implementation of actionable measures is paramount. Parliament will not hesitate to consider legislative interventions to assure compliance with transformation imperatives,” Dr Maswanganyi said.
Sibongile Maputi
5 February 2025
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