A state-owned bank will herald a bank geared towards ordinary consumers, especially the poor and marginalised, says Cosatu. Photo: Damaris Helwig
PRESIDENT Cyril Ramaphosa’s signing of the South African Postbank Amendment Act into law will target ordinary consumers amid high expectations that it will foster greater financial inclusion than the banking system currently provides.
The Treasury says financial inclusion refers to a state in which all individuals and small, medium and micro enterprises (SMMEs) have access to and can effectively use a range of quality products and services provided by the regulated financial sector.
In the context of South Africa, this includes reaching those segments of society who are historically excluded from the formal financial sector as well as those who underutilise financial products and services.
At an individual and household level, financial inclusion is a necessary component towards reducing inequality and improving the quality of life of low-income earners, the Treasury says.
Ramaphosa signed the South African Postbank Amendment Act into law last week, paving the way for the separation of the Post Office and the banking entity.
The South African Postbank has now become a standalone financial institution that is expected to apply for a banking licence from the South African Reserve Bank (SARB).
“If it is ever going to be a fully licensed state bank, then that is a process that will start after 19 February where the now standalone Postbank will have to apply for a banking licence from the SARB and have to meet the strict requirements associated with licensing conditions for a bank,” independent analyst Khaya Sithole said in an interview with radio station Kaya FM 95.9.
He said it was important for the Postbank to be separated from the South African Post Office “because it cannot have the Post Office as its anchor shareholder”.
The process to separate the two has taken two years. Ramaphosa’s signing of the law to this effect was also “confirmation of an administrative procedure to detach the two institutions that essentially were in a ‘very toxic’ alliance.”
The existing structure of South African banks was also causing frustrations, Sithole added.
Ratings agency Moody’s has already projected that South African banks will struggle with non-performing loans this year. This is likely to lead to stricter lending criteria, with many consumers shut out from accessing financing facilities that are key in boosting the South African economy.
The Confederation of South African Trade Unions (Cosatu) on Friday described South Africa’s banking and financial services sector as characterised by “anti-competitive and monopolistic behaviour” as well as “a tendency to milk consumers with excessive bank charges, exploit banking workers with slave wages”.
Many of the current and large South African finance institutions were also ambivalent to “supporting job creation and local investments” as well as offering support for local procurement.
Cosatu spokesperson Matthew Parks said the groundwork laid for the South African Postbank to apply for a licence and commence operations as a state-owned bank would herald a “bank geared towards ordinary consumers”, especially the poor and marginalised.
“Many workers, the poor, the elderly, persons living with disabilities, those living in informal and rural areas and other vulnerable persons have long been sidelined by mainstream commercial banks, leaving them unable or struggling to access banking and financial services,” said Parks.
Onyi Nwaneri, a spokesperson for youth and SME development and capacitation organisation Tikka Africa, said South African small-scale enterprises would also be likely to benefit from the state-owned bank.
Cosatu said the mapping of a pathway towards a fully fledged and standalone Postbank would also provide impetus for the Post Office, which was in urgent need of revival.
The Treasury provided R2.4 billion for the Post Office in the 2023/24 Budget, but Cosatu argues that this needs to be “accompanied by a clear turnaround plan that can ensure that the Post Office can be stabilised, re-pivoted and set on a sustainable” path.
“The Postbank, with its symbiotic relationship with the Post Office, will help to re-pivot, stabilise and grow the Post Office and ensure disadvantaged communities can once again access and rely upon its services. This is critical if it is to be able to enter the banking and financial services sectors.”
Cosatu has called on the government to speedily provide the South African Postbank with much-needed recapitalisation as well as the appointment of competent management to run the eventual standalone bank.
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