South African Business 2018 edition

OVERVIEW Banking and

OVERVIEW Banking and financial services New banks and new stock exchanges are adding to South Africans’ choices. SECTOR INSIGHT Tyme has the first new banking licence since 1999. South Africa’s banking and financial services sector is experiencing a surge of innovation with several new banking licences expected to be granted before the end of 2018. First to get over the line in 2017 was Tyme, which stands for Take Your Money Everywhere and refers to the bank’s digital origins and its plans for the future which do not involve opening a branch network. Commonweath Bank of Australia bought a controlling share of Tyme when it was a loans company and African Rainbow Capital is the venture’s BEE partner. The banking licence is the first to be issued since Capitec was granted a licence by the South African Reserve Bank in 1999. Capitec has since gone on to become a major player on the South African retail banking scene. It now merits inclusion in a new “Big Five”, with Standard Bank, Absa, FNB and Nedbank. In terms of assets, the five biggest banks are Standard Bank, FirstRand (which owns FNB), Absa (which is part of Barclays Group Africa), Nedbank and Investec. According to the Reserve Bank, this group had 89% of market share in 2015. Merchant banking and investment banking are the most competitive sectors with companies such as BoE Private Clients, Rand Merchant Bank and Investec prominent. There are 40 international banks with offices in South Africa, including Bank of China, Standard Chartered, JP Morgan Chase, HSBC and Citibank. Afgri, South Africa’s largest agricultural company which already offers financial services, bought the South African Bank of Athens in 2017. The bank was purchased from the National Bank of Greece Group and is still subject to regulatory approval. Most South African agricultural companies have financial divisions. Other applicants for new banking licences are Discovery and Post Bank, a division of the South African Post Office. Discovery is already a giant on the JSE (market value of R83-billion) with a wide range of products and services that give it access to millions of customers. Life SOUTH AFRICAN BUSINESS 2018 128

OVERVIEW insurer MMI Holdings is entering a partnership with African Bank to enable it to start taking deposits and loaning money. A further two state banks are planned: Ithala (currently an enterprise funder in KwaZulu-Natal) and the Human Settlements Development Bank which will focus on housing for poorer households and state-funded housing projects. Financial services group Old Mutual (a 54% stakeholder in Nedbank) is set to create four stand-alone businesses out of the Old Mutual Group. This will allow the UK-based wealth management business and the New York-based asset managers to be free of linkages to the rand, while the South African businesses, Nedbank and Old Mutual Emerging Markets, can focus on their specialities. Fintech is the new buzz word in the world of banking. Barclays has established a worldwide organisation to promote the latest thinking in app development. Rise has seven outlets around the world, including one in Woodstock in Cape Town. The photograph on the previous page shows Nedbank’s new property venture office in Mount Edgecombe. The insurance market has become more varied over time, with a greater variety of products available to more market segments, including middle-income earners. An example of a product responding to new realities is Old Mutual’s iWYZE medical gap cover, designed to pay the difference between what a medical aid scheme is willing to pay and what the hospital or doctor is charging. Framework The South African banking and financial-services sector has a good international reputation because of a strong regulatory and legal framework. In 2017 this was tested when several auditing and consulting firms were implicated in accusations of “state capture”. The fact that the allegations were brought into the open by alert civil society organisations and the media has been cited by some commentators as positive factors. 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 South Africa represents all registered banks, local and international. Major sub-committees oversee capital supervision, credit risk, consumer affairs and the SA Securities Lending Association. The JSE is the world’s 19th-biggest exchange and nearly 400 companies are listed on the JSE or AltX, the JSE-owned exchange for smaller companies. Other investment options that are available through the JSE are Yield X (interest rate and currency instruments), the South African Futures Exchange (SAFEX) and the Bond Exchange of South Africa (BESA). In 2017 several new exchanges won regulatory approval, with ZAR X winning the nod from the Financial Services Board (FSB). There is no trading in derivatives or high-frequency trading on this exchange. A2X, in which African Rainbow Capital is an investor, will offer secondary listings platform for JSE-listed companies and aims to cut costs for investors. 4 Africa Exchange (4AX) will focus on companies with market capitalisation of up to R8-billion. Agricultural trading company NWK is a shareholder in this venture. The newcomers all promise to use the latest technology to make trading simpler, quicker and cheaper. ONLINE RESOURCES Auditor-General South Africa: www.agsa.co.za Financial Services Board: www.fsb.co.za Insurance Institute of South Africa: www.iisa.co.za Insurance South Africa: www.insurance.za.org JSE Limited: www.jse.co.za The South African Institute for Chartered Accountants: www.saica.co.za 129 SOUTH AFRICAN BUSINESS 2018