South African Business 2016 edition

OVERVIEW Banking and

OVERVIEW Banking and financial services South Africa’s biggest economic sector has seen significant adjustments in the banking landscape, The finance, real estate and business-services sector is South Africa’s biggest, comprising 21.1% of South Africa’s gross domestic product (GDP). The South African banking and financial-services sector is highly regarded internationally because of a strong regulatory and legal framework. The sector provides a full range of services including commercial, retail and merchant banking, mortgage lending, insurance, auditing and investment. A small number of firms handle most of the country’s biggest auditing accounts. The big four are Deloitte, Ernst & Young, PwC and KPMG, with SekelaXabiso also in the running thanks to the award by Transnet of a R1.3-billion account. The financial sector has consistently added to the country’s total real annual growth, even in years when the total has declined. South Africa is an ideal stepping stone into Africa and several international concerns have set up head offices, primarily in Johannesburg. These include Bank of China, Bank of Taiwan, Citibank, Deutsche Bank AG and HSBC Bank. Standard, which operates as Standard Bank or Stanbic in THE MOBILE ECONOMY IS INCREASINGLY IMPORTANT FOR BANKING 17 African countries outside South Africa, is Africa’s largest corporation. Banks such as the Development Bank of Southern Africa and the Land and Agricultural Development Bank of South Africa focus their loans on support for infrastructure and developmental projects. Institutions The South African Reserve Bank (SARB) is the central bank and falls under the National Department of Finance. It sets monetary policy and decides on domestic interest rates. The SARB oversees the banking-services sector, while the Financial Services Board (FSB) governs the non-banking financial-services industry. The Banking Association of South Africa represents all registered banks, local and interna- SOUTH AFRICAN BUSINESS 2016 126

OVERVIEW attracting and retaining clients. In its latest annual report, FNB noted a 15% increase in online banking transactions, and a massive 7% jump in banking through its app, and a further jump of 25% in mobile transactions. tional. Major sub-committees oversee capital supervision, credit risk, consumer affairs and the SA Securities Lending Association. South Africa’s principal financial-service markets include the national stock exchange, the JSE Ltd, the Alternative Exchange (AltX) and the SA Futures Exchange. The JSE Securities Exchange is the largest stock exchange in Africa and consistently ranks in the world’s top 20 derivatives exchanges by number of contracts traded. The AltX is a division of the JSE and attracts a diverse range of small and mediumsized high-growth companies. Mobile-friendly The mobile economy has become increasingly important in Retail banking Retail banking has for many years been dominated by the big four – Standard Bank, Nedbank, Absa/Barclays and First National Bank–but there has been one significant new entrant into the market. Capitec has made remarkably quick progress in gaining a share of the retail market – and not only among the previously unbanked. According to the latest banking customer data, there has been a shift between Nedbank and FNB, with Nedbank replacing FNB in third place, while Absa has had to repay millions of rands in miscalculated credit card interest. In its full year report to June 2015, FirstRand’s full year report to June 2015 reported a drop in total FNB banking customers to 7.1 million, on the heels of a slide to 7.3 million customers in 2014 from 7.6 million in 2013. The drop is due to the bank reorganizing its customer data, in which process over 300 000 accounts in 2015 were reclassified as dormant. In 2014 the bank lost a big portion of mass-market customers when it lost the government’s social grant tender. Nedbank’s interim results to June 2015 reported an 8% in main banked clients over the period, with total clients up 6% to 7.3 million. Miscalculated credit card interest rates have cost Barclays Africa Group’s Absa Bank millions of rand in repayments to customers in arrears . This is the second time the bank has made an error in interest rate calculations. Customers are advised to scrutinise their statements. Thousands of customers have been affected. South African banking customers at June 2015 Bank 2014 customers 2015 customers Change Standard Bank 11.1 million – – Absa Bank 9.2 million 9.2 million 0.0% Nedbank 7.1 million 7.3 million +2.8 FNB 7.3 million 7.1 million -2.7% Capitec 6.2 million 6.7 million +8.1% 127 SOUTH AFRICAN BUSINESS 2016