February 2020 TRANSFORMATION in banking 2016 - 2018 Contents 1. Foreword 2 2. Highlights 3 3. Introduction 4 4. Methodology 5 5. Data and analysis 6 About this report Ownership 7 This report is produced by Intellidex (Pty) Ltd Management 8 1st Floor, Building 3 Skills development 12 Inanda Greens Office Park 54 Wierda Road West Socioeconomic development 14 Sandton South Africa Procurement 14 Email: [email protected] Consumer education 15 Web: www.intellidex.co.za Tel: +27 (0)10 072 0472 Empowerment financing 17 Disclaimer Intellidex was commissioned by the Banking While Intellidex believes all information in this report to be accurate, Intellidex makes no representations Transformational infrastructure 17 Association South Africa (BASA) to produce or warranties regarding the completeness, accuracy this report from data supplied from member or reliability of any information, facts, estimates, forecasts or opinions contained in this document. The Black agricultural financing 18 banks. information and opinions could change at any time without prior notice. Intellidex, its directors, officers, The report reflects transformation in the staff, agents or associates shall have no liability for Black SME financing 18 any loss or damage of any nature arising from the use banking industry and its progress towards of this document. achieving the targets set out in the Financial Affordable housing 19 Sector Code. Copyright Supplier development contribution 20 ©2020. This document is copyrighted to the Banking The publication serves as a report to society Association South Africa. It may be distributed in on the contribution of the banking industry this form without prior permission, but prior written B-BBEE transaction financing 20 permission must be obtained before using the to the development of the country, and content in another form. as a platform for thought leadership on Enterprise and supplier development 21 transformation. Acknowledgements: Financial inclusion 21 Project manager: Colin Anthony It aims to serve as an authoritative annual Data & analysis: Orin Tambo and Letta Maponyane reference book of data on banks and BEE scores 24 empowerment, complemented with a Editorial: Londiwe Buthelezi and Colin Anthony Design & layout: Eleonora del Grosso narrative that analyses and explains trends in 6. Beyond scorecards 26 the statistics. Subeditor: Yvonne Fontyn 1 Foreword A story of progress: neither complete Highlights success nor complete failure Black board members up from Top black senior ans Rosling, in his book financial institutions. recent reductions. The sector is both managers up from HFactfulness, talks about the While all these elements are more competitive and diverse today strong human desire to think in terms of the number of players, 43% important, what is absolutely to of things in binary terms. He non-negotiable is contributing yet it remains safe and sound from a says: “Human beings have a basic to transformation of the broader prudential perspective. These are all urge to divide things into two worthy achievements. 32% South African economy and society distinct groups, with nothing but through providing world-class But the report will also show that an empty gap in between. We love products and services efficiently too little progress has been made to to dichotomise. Good versus bad. and effectively to an ever-wider in critical areas of transformation. Heroes versus villains. Dividing 51% constituency. Equally, maintaining Direct, meaningful ownership by the world into two distinct sides the safety and soundness of the black people and women remains is simple and intuitive, and also financial sector so that it does not too low. Many boardrooms are still dramatic because it implies conflict, impose huge costs on the economy insufficiently diverse. Top and senior and we do it without thinking, all when problems occur, costs which management remains too white and 36% the time. Journalists know this. They inevitably fall hardest on the poor, is male. There is insufficient lending to Socioeconomic set up their narratives as conflicts an objective that must be considered small businesses (of any colour, one between two opposing people, in any discussion on the financial may add). Township residents still development spending Black skills development views, or groups. They prefer stories sector. feel that they are not given the kind of extreme poverty and billionaires spending This report provides a granular of financial services they deserve to stories about the vast majority of account of how South Africa’s banks and for which they pay. people slowly dragging themselves and related financial institutions These red marks on the scorecard toward better lives.” have navigated the complex waters must be highlighted, not to The story of the transformation of in which they operate to transform demonise the sector, but to motivate 6% 23% the financial system in South Africa themselves into truly post-apartheid the sector to continue to walk along to similarly does not lend itself to one- institutions. the journey started almost three to liners, tweets or quick ripostes. It To steal another concept from decades ago. It is a journey that is however a story of slow, steady, Rosling, a situation can be better will not only determine the long- R666m meaningful and deep progress across but still not good enough. This term sustainability of the financial R3.3bn a wide range of fronts. It is not a report will show that there has been sector but will also determine if story of complete failure, but neither progress, meaningful progress on we as a country are to succeed in is it a story of complete success. It is most fronts. Ownership is far more overcoming the terrible legacy of Spending on a story of progress; of overcoming diversified today with institutional race and gender discrimination that real-world obstacles, tackling consumer education and pension fund ownership the is still so visible in our society. immense social challenges and dominant feature of ownership, in I wish to thank BASA for the Black agricultural navigating complexity in a world contrast to pre-1994 when a few leadership role that it has played in more dynamic yet uncertain than prominent families owned large mobilising the sector to transform. financing up ever before. 24% shares of the banks. Boardrooms South Africa is blessed by having Transformation is and must always are more diverse, both in terms of organisations such as BASA and a be seen as a multidimensional race and gender but also in terms calibre of bank CEOs who are firmly project. It encompasses the need of life-experience and background. committed to transformation and for rising black and women equity Black and women senior managers with whom policy makers and participation and ownership R180m 41% have risen in both number and regulators can regularly have mature of financial institutions, prominence. Most banks have and deep conversations about the transformation of the boardrooms, sound long-term partnerships to state of the sector and its future. financial inclusion, lending to small Spending on supplier Exposure to black SMEs procure more goods and services Long may the transformation and medium-sized businesses, from black- and women-owned journey continue. development almost providing services to townships and businesses. On financial inclusion, rural areas, procuring goods and almost 80% of South Africans doubled to services from black- and women- now have a bank account, up from owned companies and changing the Kuben Naidoo to just over half in the late 1990s. On 13% racial and gender composition of the aggregate, employment in the sector CEO: Prudential Authority staff and management of banks and has grown steadily, notwithstanding South African Reserve Bank R795m R28.8bn All figures reflect growth between 2017 and 2018 2 3 Introduction Financial inclusion and transformation are now at the core of banking in SA Methodology he Transformation in Banking agricultural financing increased It is not always best to assess report measures the progress by 41% to R4.5bn; and spending major change of the nature that Tthe banking industry has made on supplier development almost the Broad-Based Black Economic ■ Data were supplied by the banks, BASA. Like last year, our research towards the targets set out in the doubled to R795m. The increase Empowerment Act envisages with Financial Sector Code (FSC) as well in spending on financing SMEs, annual comparisons. But even based on the Financial Sector Code partners Intellidex collated data as its broader contribution to the black agricultural enterprises and when comparing the banking scorecard methodology for 2016, 2017 provided by South Africa’s registered social and economic development supplier development is far more industry today to when the first and 2018. Figures for 2019 were not banks. Intellidex aggregates that data of South Africa. It demonstrates, transformational and better for Financial Sector Charter was with hard data, that banks play a the economy and job creation than negotiated in 2002, the drastic yet available. in order to produce consolidated transformative role in South Africa ownership. Large banks are capital- changes in management, ownership ■ The following banks submitted figures for the industry, which we that goes well beyond the prescripts intensive and all around the world and services of banks are there data for this report: Absa, African publish here. of the financial sector code or the their ownership is