TRANSFORMATION in banking 2016 2018 - Banking Association of South Africa
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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
Ownership 7
About this report Management 8
This report is produced by Intellidex (Pty) Ltd
1st Floor, Building 3 Skills development 12
Inanda Greens Office Park
54 Wierda Road West Socioeconomic development 14
Sandton
South Africa Procurement 14
Email: mail@intellidex.co.za 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
Editorial: Londiwe Buthelezi and Colin Anthony
empowerment, complemented with a
narrative that analyses and explains trends in Design & layout: Eleonora del Grosso
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
to 43%
up from Top black senior
managers up from
32%
H ans Rosling, in his book financial institutions. recent reductions. The sector is both
51%
Factfulness, talks about the While all these elements are more competitive and diverse today
strong human desire to think important, what is absolutely in terms of the number of players,
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
36%
urge to divide things into two South African economy and society worthy achievements.
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 dichotomise. Good versus bad. and effectively to an ever-wider in critical areas of transformation.
Heroes versus villains. Dividing 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
the time. Journalists know this. They
when problems occur, costs which
inevitably fall hardest on the poor, is
management remains too white and
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
development spending Black skills development
6%to
between two opposing people, in any discussion on the financial may add). Township residents still
views, or groups. They prefer stories sector. feel that they are not given the kind
spending
23%
of extreme poverty and billionaires of financial services they deserve
This report provides a granular
to stories about the vast majority of and for which they pay.
account of how South Africa’s banks
people slowly dragging themselves
and related financial institutions These red marks on the scorecard
toward better lives.”
R666m to
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
the financial system in South Africa
R3.3bn
themselves into truly post-apartheid the sector to continue to walk along
similarly does not lend itself to one- institutions. the journey started almost three
liners, tweets or quick ripostes. It decades ago. It is a journey that
To steal another concept from
is however a story of slow, steady, will not only determine the long-
Rosling, a situation can be better
meaningful and deep progress across term sustainability of the financial
but still not good enough. This
a wide range of fronts. It is not a sector but will also determine if
report will show that there has been
story of complete failure, but neither
is it a story of complete success. It is
progress, meaningful progress on
most fronts. Ownership is far more
we as a country are to succeed in
overcoming the terrible legacy of Spending on
a story of progress; of overcoming
real-world obstacles, tackling
diversified today with institutional race and gender discrimination that consumer education
and pension fund ownership the is still so visible in our society.
Black agricultural
24%
immense social challenges and
dominant feature of ownership, in I wish to thank BASA for the
navigating complexity in a world
contrast to pre-1994 when a few leadership role that it has played in
financing up
R180m
more dynamic yet uncertain than
41%
prominent families owned large mobilising the sector to transform.
ever before.
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 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,
Spending on supplier Exposure to black SMEs
13%to
sound long-term partnerships to state of the sector and its future.
financial inclusion, lending to small procure more goods and services
and medium-sized businesses,
providing services to townships and
from black- and women-owned
businesses. On financial inclusion,
Long may the transformation
journey continue. development almost
rural areas, procuring goods and almost 80% of South Africans doubled to
R795m
services from black- and women- now have a bank account, up from
R28.8bn
owned companies and changing the Kuben Naidoo
just over half in the late 1990s. On
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
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
T
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
the 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 publish here.
data for this report: Absa, African
of the financial sector code or the their ownership is almost entirely for all to see. The industry now
BEE generic codes of good practice. institutional, with low levels of provides affordable, accessible and Bank, Al Baraka, GroBank, Bidvest ■ Caution needs to be taken by readers
The report shows that while the direct individual ownership. appropriate transactional services Bank, Capitec, Finbond, FirstRand, in comparing the data for 2017 and
performance of the industry across The proportion of black board to an estimated 80% of adult South
Grindrod, Investec, HBZ Bank, 2016 in this report with the data for
key transformation measurements directors increased from 40% to Africans across income groups and
remains uneven, it has exceeded 45% in 2018, approaching the 50% geographical locations. There can Mercantile Bank, Nedbank, Sasfin, those years published in last year’s
many of the key targets set out in industry target. In addition, junior be no doubt that financial inclusion Standard Bank, China Construction report. Between this year and last
the FSC. management in banks is now 85% and transformation are now at the
Bank Corporation, Citibank and year there has been a change in the
black. This is important as it means core of the business of banking in
Black ownership measures – Ubank. banks’ reporting – two banks exited
there is a pipeline of young black South Africa, even as the industry
like voting rights – have declined
talent and experience who will upholds its ultimate responsibility However, not all banks are included while four banks entered, due to
over the three years under review
transform the management and to safeguard the deposits entrusted
(2016-2018), but on aggregate in each of the sets of analysis below foreign banks closing branches in
executive ranks of the industry in to them by all South Africans. As a
remain above the FSC targets, with SA and new banks opening. In order
the coming years. Opportunities vital part of the country’s economic because different categories are not
the exception of black economic
for advancement in the industry infrastructure, banks must operate relevant to some banks. to make the data comparable on a
interest. The decline in black
remain, despite a reduction in in a way, and at a pace, that ensures
economic interest is mostly due like-for-like basis, we recalculated
headcount in some operations. they remain sustainable businesses ■ “Large banks” refers to the “big six”:
to the continued exit of black the figures for 2017 and 2016 as if the
The South African Reserve Bank that can offer their investors and FirstRand, Standard Bank, Absa,
shareholders who received shares
has issued three new banking customers a reasonable return. sample for 2018 had been the same in
through empowerment schemes Nedbank, Investec and Capitec.
established by the large banks. It licences, increasing competition and BASA’s mandate is to “make those years. Additionally, there were
is estimated that by 2015, black expanding the banking industry. banking sustainable, profitable ■ Figures for all banks are for their 2018
some technical changes including a
investors had realised R57bn in value and better able to contribute to the financial years except for Capitec,
from bank empowerment deals. social and economic development change in the reporting year-end of
and transformation of the country”. African Bank and Investec, whose
Ownership measures are likely one bank and some recalculations of
to continue to drift down in the While the BASA commissioned the 2020
banking transformation report
financial years end in the first quarter
historic data of some other banks.
of 2019.
coming years as black investors
realise value and diversify their performance of from an independent agency –
■ To ensure that industry data
In some of the targeted financing
Intellidex – to ensure the integrity categories, more banks were able
portfolios. Because of these changes
in ownership, the Financial Sector the industry across and credibility of the findings, which are meaningful, ownership and to provide data this year compared
are based on statistics submitted
Transformation Council included
black business growth funding
key transformation by its member banks. It will help
management control data were
weighted by banks’ total assets to
with last year due to improvements
the banking industry to show in data management systems. An
as a new element of the code that
came into effect in December 2017.
measurements measurable progress in our efforts to determine industry aggregates. explanatory note detailing the
transform our industry and economy
This funding will contribute to
transformation by supporting the
remains uneven, it and highlight where more work ■ This is the second annual relevant changes can be found in the
needs to be done in the coming year. transformation report published by affected sections.
growth of black businesses across
the economy.
has exceeded many
In 2018, large banks’ balance of the key targets set Cas Coovadia
sheet exposure to black small
and medium enterprises (SMEs) out in the FSC Managing Director
increased by 13% to R28.8bn; black Banking Association South Africa
4 5
Data and analysis Ownership Black ownership percentage
in banks
T he transformation progress
reported in this year’s annual
report took place in a difficult
transformation factors that are
reported here therefore should
be seen as an even stronger
■ Black ownership measures have declined across the three years on all
measures.
35
Black voting rights (%)
■ Capitec, Nedbank and FirstRand reported declines in their black 32.8
environment for banks. Broad achievement, given that they 28 29.7
economic interest (black ownership) while Absa, Investec and Standard 29.0
economic activity slowed down occurred in the face of strong 21 25.0
Bank reported slight improvements.
further with negative per capita economic headwinds that banks 14
■ Economic interest of black women, which had improved marginally
economic growth recorded for the faced. Banks also faced a more
in 2017, also declined during 2018 but remains above the FSC target for 7
sixth year in a row. competitive environment with the
individual banks of 10%. 0
The weak economic environment entry of three newly licensed banks.
Growth in financing of affordable ■ The decline in black interests is mostly due to a continued exit of
makes it difficult for banks to increase shareholders who received shares through empowerment schemes Black women voting rights (%)
lending, while a conservative stance housing, black small businesses, BEE 35
transactions and black agriculture established by the large banks in 2005. Most of those matured in 2015,
must be taken on cost control. at which point beneficiaries were free to dispose of their interests. 28
Banks also face a worsening credit all took place in a context in which
overall bank balance sheets barely Shareholders sell to realise value, which many BEE shareholders 21
environment with significant growth achieved. For many BEE shareholders, their bank shares were their only
grew ahead of inflation, growing 14
in credit impairments between 2017 real asset, so selling also makes sense from a diversification point of view. 12.8 12.9
6.5% in 2018. Enhanced spending 11.8
and 2018. This makes it difficult to 7 10.0
on enterprise development, ■ While banks’ ownership measures deteriorated during 2018, on
drive transformation that depends, 0
socioceconomic development and aggregate banks remain above the FSC targets with the exception of
for example, on lending growth to
supplier development took place black economic interest, which fell slightly below the 25% target.
targeted sectors, or for banks to Black economic interest (%)
incur the costs of enhanced skills and while profitability was under ■ Based on public announcements, some banks have or are undertaking
pressure, shown in declining return- 35
supplier development. transactions that will improve aggregate black ownership for the
on-equity and profit growth of only industry. For example, Discovery Bank is implementing a transaction 28
The improvements in most 28.7
4.7% in 2018. that will see 10% of its shares in the hands of black people; Tyme Bank 21 24.8 24.2 25.0
(which did not submit data for 2018) has seen majority ownership taken 14
by African Rainbow Capital; and Capitec has acquired Mercantile Bank
7
(which had no black ownership). However, the larger banks will likely
experience a continued exit by black shareholders and the net effect is 0
Banking sector financial performace vs GDP (% change)
difficult to anticipate.
20% Black women economic interest (%)
■ The 2016 and 2017 ownership figures for this year are not directly
35
comparable with those in last year’s report due to changes to the
sample. Last year nine banks were in the sample, but this year there 28
15% are 14. Because of different sample sizes, the weightings of different 21
banks changed, which affected the weighted industry aggregate figures. 14
The impact was a reduction of ownership figures for 2017 of about 0.7 11.1 11.3 10.5
10% 7 10.0
percentage points and for 2016 of about 2.0 percentage points.
0
5% Economic interest of designated black
groups (%)
35
0% 28
21
14
-5% 7 9.2
5.3 4.3 3.0
0
-10%
2016 2017 2018 Target
2016 2017 2018 2019
Fourteen banks reported their black economic
interest. The rest of the banks are held by foreign
Year-on-year total assets growth Year-on-year profit/loss Year-on-year real GDP growth Return on equity (ROE) investors and therefore do not reflect any black
ownership.
6 7
Management control Management control
Number of directors
Black representation in management (total number)
200
60 000
187
175 177
150 50 000 51 103 51 218 51 682
90 40 000
in 2018
100
30 000
28 807
75 80 Top senior 104 25 803 27 338
in 2016
50 20 000
61 55 60
48
37
26 30 10 000
0
19 16 15 2 4 5 66
in 2017 0 2 920 3 164 3 651
Total number Black board Black women Total Black Black women
of board members board executive executive executive Senior Middle Junior
members members directors directors directors
2016 2017 2018
2016 2017 2018
■ Banks in the sample had 113,430 employees (2017: 112,342) who are classified as managers according to the
definitions in the FSC code.
■ In this report the 2016 and 2017 figures differ from those
■ The sharp decline in the number of top senior managers between 2016 and 2017 is largely due to corporate grade
published in the previous report largely due to different
banks in the sample. Two banks exited the sample and reporting changes at Absa, where the number of top senior managers fell from 116 to 12.
Proportion of directors who are black (%)
four banks entered. Furthermore, the proportions ■ The number of black managers across all levels has not changed much over the past three years.
of directors who are black were weighted by banks’
■ During 2018 banks had 84,230 black managers, up from the 81,786 reported in 2017.
total assets. The previous report shows unweighted
Black board Black women board
proportions. We resolved this year to apply weights to
members members
this measure to account for the different sizes of banks.
■ Banks continued to make strides in transforming their
boards, with the number of black board members Proportion of managers who are black ■ While the number of black
continuing to grow and surpassing the 50% mark managers at banks has not
for the first time since the introduction of the black 29 changed much over the past
Top senior
economic programme. three years, there has been some
32
improvement in the proportion
■ While the total number of directors on banks’ boards 39.8 18.5
36 of black managers, particularly
declined to 177 members (2017: 187) the proportion of 42.6 20.4
50.7 25.3 at the top level.
directors who are black increased to 50.7% from 42.6% 41
in 2017 and 39.8% in 2016 driven mostly by large banks 50 25 ■ Overall, black managers
Senior
46
such as FirstRand, Investec and Nedbank which have accounted for 74.7% of bank
more than half of their directors being black. 47 management teams during 2018,
■ A net of five black members were appointed to banks’ Black executive Black women executive up from 72.8% in the previous
directors directors 60 year.
boards during 2018. There appears to have been
Middle
a deliberate effort by banks to replace non-black 63 ■ Black top senior management
members who resign with black appointees. 65 roles climbed to 36% during
■ Black women now account for more than a quarter of 2018 from 32% in the previous
banks’ board members. Women representation has 82 year.
Junior
also surpassed the industry target of 25%. FirstRand, 83 ■ The number of black senior
Investec and Nedbank have above-average women 5.8 85 managers also increased to
representation on their boards. 35.9 5.8
36.6 6.8 3,651 (2017: 3,164), putting
■ The proportion of black executive directors improved to 0 25 50 75 100 the proportion of black senior
37.6
37.6% from 36.6% in the previous year, but remained 25
Percentage managers at 47% (2017: 46%).
50
well below the target of 50%. 2016 2017 2018
■ The proportion of black women in executive 2016 2017 2018 Target
directorship roles also remains below the sector target.
8 9
Detailed analysis of the racial breakdown of management teams Junior management
Top senior management
35 000
250
33 143
32 354
30 000
31 661
200 205
25 000
150 20 000
145
117 15 000
100
12 306
11 985
11 758
50 10 000
10 284
53
10 092
53
42 43
8 753
34 30
7 090
7
6 879
6 781
19 12 5 21 15 5 000
0
392
470
495
African Indian Coloured White Foreigner
0
2016 2017 2018
African Indian Coloured White Foreigner
2016 2017 2018
■ There was an increase in the total number of top senior managers between 2017 and 2018. The proportion of
whites and blacks in top senior management increased at the expense of foreigners.
■ There has been a sustained increase in the proportion of blacks
■ More than half of the 52 net new appointees to top senior management were whites. (particularly African blacks) in junior management level.
■ The number of black Africans increased significantly, from 42 to 53. There was also a notable increase in the
number of Indians in top senior management, from 19 to 30.
Employment equity is one area in which all local banks have managed to excel
over the years, with black people constituting the majority of promotions
into all job grades, with junior management, for example, now 85% black.
Middle management But most banks are still struggling to replicate these successes at senior (47%
black) and executive management levels (36%). On a positive note, black
20 000 women representation is improving in most banks. Banks have set ambitious
■ The total number of middle
targets to accelerate employment equity, where progress has been slow. For
managers at banks rose slightly.
instance, Standard Bank wants to have at least 40% of its executive positions
■ There were gains in the total in South Africa filled by women by 2021. And Capitec has put an executive
number of black managers succession plan in place, creating “development seats” in its executive
15 859
15 000
and in the proportion of black
14 955
committee for black senior employees to be groomed for executive positions.
14 733
15 043
managers. This saw black
13 822
Africans overtaking whites as
12 609
10 000 having the largest representation
in middle management of banks.
8 054
7 991
7 745
5 000
5 710
5 525
5 347
1 082
1 064
1 101
0
African Indian Coloured White Foreigner
2016 2017 2018
10 11
Skills development by occupational levels
■ Junior managers received the Skills development spend (Rbn)
largest portion of spending by
banks on skills development, 2016
followed by middle managers. 2,0
■ However, senior executive
managers are by far the biggest
1,5
beneficiaries on a per capita
basis.
1,0
0,5
0,0
Black spend Black women spend African spend
2017
1,2
1,0
Skills development 0,8
0,6
■ Banks continued to channel more Skills development spend (Rm)
resources towards initiatives aimed 0,4
at developing black skills. 2016
0,2
■ During FY18 banks spent R3.3bn on Black spend 2 512
black skills development, 23% more
1 573 0,0
than the previous year. Black women spend Black spend Black women spend African spend
■ Notably, more than 60% of banks’ African spend 526
expenditure on skills development 2018
of black employees over the past 0 500 1 000 1 500 2 000 2 500 3 000
three years was on black female
1,5
employees.
2017
■ More than half of spending was on 1,2
Black spend 2 730
black Africans.
■ Of the large banks, Capitec (up Black women spend 1 688 0,9
57%), Nedbank (up 35%) and
African spend 1 475
FirstRand (up 30%) reported above- 0,6
average growth in spending on skills 0 500 1 000 1 500 2 000 2 500 3 000
development.
2018 0,3
■ Absa was the only large bank to
report negative growth during 2018. Black spend 3 347 0,0
Black spend Black women spend African spend
Black women spend 1 908
African spend 1 893 Senior and executive managers Middle managers
0 500 1 000 1 500 2 000 2 500 3 000 3 500 Non-management staff Junior managers
Black unemployed people Black people with disabilities
12 13
Socioeconomic development Consumer education
■ Socioeconomic development spending, which Socioeconomic development spend (Rm) ■ Bank spending on various consumer education R190
includes spending on organisations that initiatives increased 24% between 2017 and 2018, R180,1
predominantly benefit black people, increased 670 driven in large part by Standard Bank (which R143
R145,5
6% between 2017 and 2018. R666 spent R13m more than the previous year) and
652 Capitec (R10m more). R115,8
■ Capitec, which increased its socioeconomic R95
expenditure by 100%, had the highest growth, 634 ■ All banks, except Nedbank and Grindrod,
followed by Investec with a 33% increase. increased their spending on consumer education R48
R628
■ Absa, FirstRand and Standard Bank also 616 during 2018.
increased their expenditure on socioeconomic R0
598 2016 2017 2018
development in 2018.
R584
■ Nedbank reported a 26% decline in its 580
socioeconomic development spending to R77m 2016 2017 2018
(2017: R104m).
■ Differences between 2016 and 2017 figures in this report and the previous one are because last year 11 banks Dealing with the student funding crisis
reported figures in this category against 17 banks this year. Further differences were caused by the exit of two banks
and entry of four into the sample.
South Africa is dealing with an for their own employees, most
unprecedented student funding banks are going beyond this,
crisis. Even though it has been two providing bursaries to school
Procurement years since the introduction of children at elementary level,
fully subsidised higher education university students and children
Preferential procurement (Rm) and training for students coming of their employees. To deal with
150 000 from poor and working class the heightened shortage of student
backgrounds, tensions have not funding, banks responded by
140 637
eased as funding available to the
contributing to new government-
120 000 National Student Financial Aid
administered bursaries, creating
119 287
Scheme (NSFAS) is not enough to
new bursary schemes internally
cover all eligible students.
90 000 while those who were already
funding external candidates
While the FSC requires banks
committed more money.
71 564
71 833
72 135
60 000 to invest in skills development
65 637
28 286
25 932
25 944
21 054
16 480
15 696
14 783
14 783
30 000 How the banks responded
13 173
9 338
9 257
6 034
0 The banks responded in a big way provinces in partnership with the
Total measured All suppliers QSE (same as EME (same as 51% black 30% black to the student funding crisis. Absa Department of Basic Education.
procurement EME for 2016) QSE for 2016) owned women owned spent R8.7m on bursaries for non- Standard Bank has a long-running
QSE: Qualifying small enterprise EME: Exempt microenterprise 2016 2017 2018 employees. That was over and above bursary programme for critical
the R130m the bank has invested in skills. In 2018, it funded 130 local
Between 2016 and 2017 the relevant definitions for small business changed and two categories replaced one: “qualifying small enterprises” and “exempt micro 2,614 student scholarships across university students.
enterprises”. These two sums should be seen as one in comparing with 2016.
21 universities, for employees and
external candidates. But realising All major banks to contributed to
■ Banks’ total measured procurement Banks are moving more of their procurement spending that SA’s poor education outcomes the Ikusasa Financial Aid Programme
spending almost doubled during 2018, with a towards black-owned business and are giving notices to their have much to do with lack of (Isfap), a public-private partnership
large portion of that going to black suppliers. other suppliers to improve their B-BBEE status. For instance, institutional capacity, Absa also between government and the
funds a financial management and private sector aimed specifically at
■ All categories of black suppliers benefited Standard Bank has asked most of its suppliers to submit
governance training programme addressing the funding gap for the
from the increased expenditure. B-BBEE improvement plans and says this consultation is
for school governing bodies and so-called missing middle – families
already yielding positive results. The bank has developed a
■ The small discrepancies in the 2016 and 2017 Department of Basic Education who earn too much to qualify for free
system to help it shift its procurement spending from non-
data between the 2020 and 2019 reports are circuit managers to better equip education but not enough to pay for
compliant suppliers, who currently constitute 48% of the
due to the sample change, where two banks them for managing school finances university. Through Isfap, Standard
exited and four entered. group’s total procurement spend, to black-owned SMEs.
and resources. The programme Bank funded 166 more university
takes place each year in different students.
14 15
Empowerment financing
The bank also became a funder and afternoon classes and holiday Promaths programme has funded ■ Empowerment financing Empowerment financing (Rm)
partner of the Feenix Crowd Funding academies for high school learners more than 7,500 learners from consists of cumulative targeted
Platform, launched in June 2017. from disadvantaged backgrounds. disadvantaged backgrounds since investments and B-BBEE 400 000
The platform allows individuals and At tertiary level, the bank’s Get it was established 13 years ago. In transaction financing for local
enterprises to donate money directly 2018, Investec established the ninth banks. It is measured as total 300 000 318 958
me to Graduation programme
to students to help them complete committed R4,5m to cover gaps Promaths centre in Khayelitsha, balance sheet exposure for new 270 957
their studies. Standard Bank made in NSFAS and to supplement other Cape Town, supporting 210 learners loans written from 1 January 200 000 224 593
a three-year commitment to cover bursaries that don’t cover all 2012 to 31 December 2017 (but
from 11 feeder schools. The Promaths
set-up and operating cost shortfalls including the amounts held on 148 134 154 580
learning necessities. This extended centres produced 267 maths 100 000 120 928
of the project. In 2018, the platform to 600 students at different banks’ balance sheets as at 31
distinctions from 1,176 learners in
raised over R22m, which funded 650 universities. The rationale is to December 2011).
2018 and 412 distinctions in science. 0
students, 75% of whom were black reduce the number of students who ■ The graph shows aggregate Empowerment financing Targeted investments
and 50% women. FirstRand has a staff assistance balance sheet exposures of
drop out because their bursaries do
not give them money to buy food or trust that pays for schooling of six banks – Absa, Capitec, 2016 2017 2018
Nedbank, Capitec and Investec
other essentials. employees’ children, from Grades FirstRand, Standard Bank,
also have strong a focus on funding
R to 12. In 2019, the trust assisted Investec and Nedbank – which
basic education. For instance, R35m Investec, through its internal
6,205 employees with their supplied total balance sheet ■ Large banks have consistenly increased their balance sheet exposure to
of Nedbank’s R63,9m bursaries bursary scheme and its
that were given to non-employees children’s school expenses, to the exposures. empowerment financing over the past three years.
Entrepreneurship Development
were for elementary schoolchildren. value of R46.5m, R8.6m more than
Trust, provided high school
Nedbank has been supporting the bursaries to underprivileged in 2018. It also provides extensive
Maths and Science Leadership high school students so that they funding through the FirstRand
Academy, an initiative in Kimberley can attend well-established and Foundation and the FirstRand
that, since 2010, has been funding high-performing schools. And its Empowerment Foundation.
Transformational infrastructure spending
■ Banks’ balance sheet Transformational infrastructure spend (Rm)
exposures to transformational
infrastructure financing was
largely flat. This includes debt
financing, other forms of
credit or equity investments
in South African projects in
areas where gaps or backlogs
68 481 47 100
in economic development and in 2016
in 2018
job creation have not been
adequately addressed by financial
institutions.
■ Absa (up 57%), FirstRand (up
6%), Nedbank (up 5%) reported
positive growth while Standard
Bank (down 16%) and Investec
67 331
in 2017
(down 13%) reported declines.
For this category we report aggregate
data for four large banks: Absa, Nedbank,
Standard Bank and FirstRand.
16 17Black agricultural financing Affordable housing financing
Black agricultural financing (Rm) ■ This graph incorporates data Affordable housing financing (Rm) ■ Aggregate data of large banks
from Absa, FirstRand, Nedbank included: Absa, Capitec,
and Standard Bank. Investec 60 000 FirstRand, Standard Bank
and Capitec have no exposure and Nedbank. Investec has
50 000
2 648
EME to black agricultural financing. no exposure to the affordable
301
52 853
512
52 148
(R0 - R10M) housing market.
■ The banks’ balance sheet 40 000
43 564
exposures to black farmers rose ■ Balance sheet exposure to the
41% on the back of significant 30 000 affordable housing market
31 781
14 058
QSE
10 987
increases in financing by increased slightly as growth
880
524
10 109
471
20 000
9 602
(R10M - R50M)
23 983
24 421
Standard Bank (862%, albeit in mortgage loan books and
17 035
4 311
off a low base), FirstRand 10 000 residential development loan
1 211
483
583
(40%) and Absa (23%). books was offset by declines in
0 non-mortgage home loans and
Generic
2 029
2 351
■ Exposure to EMEs and QSEs
942
Total Personal/ Non- Residential Wholesale
(>R50M) affordable household mortgage develop- loan wholesale loans.
increased sharply at the
expense of generic companies. housing mortgage home loans ment finance/
financing (Home (Personal equity
Black ■ EMEs accounted for more than loan) loans) (PPHL)
3 012
3 176
4 471
agricultural half of banks’ advances to
2016 2017 2018
financing black farmers.
0 2 000 4 000 6 000 8 000 10 000 12 000
QSE: Qualifying small enterprise EME: Exempt microenterprise 2016 2017 2018 Stepping into the gap
Helping people buy homes is one can substantially improve buyers’ has seen more customers earmark
of the most important roles banks ability to become homeowners. personal loans for housing
Black small and medium enterprises play in uplifting society. Unlike FLISP is now worked into their improvements or low-cost
work done by their foundations affordability assessment models to housing purchases.
and corporate social investment, boost home loan lending to low- FNB’s Affordable Housing
Black small and medium enterprise total financing (Rm) ■ Absa, Investec, FirstRand, banks for a long time looked at this income earners who do not qualify Insights report shows that the
Nedbank and Standard Bank as an operational matter rather for RDP houses. Not all banks affordable housing segment
are included in this category. than as a powerful means through report their share of home loans has displayed resilience to the
which they could contribute to linked to FLISP, but Nedbank,
■ Banks’ balance sheet exposure depressed property market
transformation. which has granted more than 30%
12 772 to black SMEs jumped 13% conditions.
12 235 Banks were advancing home of all FLISP-related loans, has paid
to R28.8bn, with EMEs There are many factors that this
accounting for the lion’s share loans to previously disadvantaged out approximately 3,000 subsidies
2016 2017 can be attributed to, including
27 253 25 475 of that increase. individuals well before the FSC to date. Absa provided home loans
the fact that many purchases in
guidelines for affordable and “gap” totalling R42m through the FLISP
6 115 ■ Outstanding loans to QSEs this market segment are cash
8 320 housing financing were published programme in 2018 alone.
declined 22%. transactions driven by buy-to-let
in 2017. Capitec has stepped in to serve investors. But banks’ increased
■ FirstRand and Investec The code requires banks the part of the population who involvement in the “gap market”
increased their exposure to to provide funding/loans for might not qualify for FLISP or – properties priced between
black SMEs by 32% and 94% affordable housing for consumers traditional bank home loans. In its R250,000 and R500,000 – also
respectively, while Nedbank’s who earn a gross monthly income area of unsecured credit, the bank boosted activity. Research by the
9 554
exposure of R13bn remains the between R3,500 and R23,300. had granted over R3bn in personal Transaction Support Centre, a pilot
highest. loans by end-FY2019 for purchase, project in Cape Town aimed at
What’s worth noting is how the
2018 big five who offer home loans have extension or improvement of formalising trade of RDP houses,
28 775 improved their systems to better properties. Because Capitec is showed that banks’ involvement,
10 775
incorporate the qualifying criteria now able to offer interest rates through the provision of
for the Finance Linked Individual from 12.9% on personal loans – mortgages, stabilised property
Subsidy Programme (FLISP). FLISP rates which were previously only prices in this segment as houses
is a government subsidy for low- accessible to people applying for sold for cash or through informal
income first-time home buyers, so secured credit – the bank says it transaction fetched far lower prices.
QSE (R10m - R50m) EME (R0 - R10m) Black SME financing
18 19Supplier development contributions Enterprise and supplier development Enterprise development financing
is a tool that banks are using to groom
■ This element was first introduced Supplier development black-owned businesses to qualify ■ Banks have a spending target development and enterprise Enterprise development
in 2017. Prior to that, related contributions (Rm) for a big share of their procurement of 0.2% of their net profit after supplier development. These spend (Rm)
spending was accounted for expenditure. The strong growth was tax on enterprise development, changes may have caused a 400
under enterprise development. 800 which includes funding of new significant drop in enterprise
795,12 driven by the likes of Standard Bank
businesses and small businesses development figures as some 352,01
■ Banks have a target of 700 which hosted 109 suppliers in its ESD 300
contributing an equivalent of programme in 2018. to increase scale and capabilities. of it is now being reallocated
600 to procurement and supplier
1.8% of their net profit after tax An interesting trend in this area is the ■ A significant drop in expenditure
towards supplier development. 500 birth of in-house ESD programmes development. 200
on enterprise development
by players such as Nedbank. It shows between 2016 and 2017 is most ■ Banks’ spending on enterprise 152 178,46
■ Banks’ contributions for 2018 400 402,45 that banks are starting to view ESD likely a result of changes in the development increased 18%
nearly doubled to R795m from 100
300 as a business opportunity rather than between 2017 and 2018, with
R402m, driven by growth from codes. Prior to the gazetting of
another compliance hurdle and this most major banks having
the likes of FirstRand (up R220m 200 the FSC Code in December 2017,
approach is producing measurable increased the expenditure in this 0
– the bank started tracking banks were required to track
results. Since Nedbank decided to move 2016 2017 2018
this element in 2018); Absa 100 their expenditure on enterprise category.
ESD in-house in 2015, its allocation of
(up R48.3m) and Capitec (up development only. Banks are ■ Discrepancies between this report and last year’s are due to the fact that last
0 2017 2018 procurement spend to black-owned
R32.4m). now required to track their year 12 banks reported figures in this category against 17 banks this year.
businesses has increased to
24,4% from 14,9%. expenditure on three elements: Further differences were caused by the exit of two banks and entry of four
procurement, enterprise into the sample.
B-BBEE transaction financing
Financial inclusion
B-BBEE transaction financing (Rm)
200 000 One of the transformation goals
of the financial sector is to make
financial services more accessible
150 000 to everyone. To achieve this, the
sector has committed to delivering
certain services to the previously
100 000 unbanked and underserved
segments of the population.
The established retail banks,
50 000 despite challenges presented
by legacy systems and the costs
of running brick-and-mortar
0 branches, have found ways
Pharmaceuticals
manufacturers
Manufacturing
Construction
to make great strides towards
B- transaction
Agricultural
Information
technology
Mining and
Chemicals;
Financial
Consumer
resources
Cement
financing
clothing
Textiles;
Retail
Others
goods
increasing greater access. Some
have launched new entry-level
bank accounts that either charge
no monthly fees or subsidise the
2016 2017 2018 fees by giving customers monthly
■ BEE transaction financing tends to be volatile from year to year as large transactions can lead to significant changes data, among other things.
in total values. Progress on this element is
■ Banks’ balance sheet exposure to BEE deals stood at R164bn, 34% higher than the previous year. measured on three key aspects:
geographic reach, electronic
■ Banks’ exposure to the financial services sector declined markedly. However, the sector remained the largest access and product-related access.
recipient of BEE transaction funding with over R19bn, followed by mining and resources with about R10bn. We present the major retail banks’
■ Discrepancies in figures between this report and last year’s are due to some technical changes: one bank changed scores on each of these below.
its verification agency, which brought in a different calculation method, while another bank changed its base year.
Eight banks submitted data last year compared with six this year.
20 21Geographic access Product access
Geographic reach assesses penetration into low-income markets defined as those where 50% or more of households This element is measured according Number of active accounts for qualifying products (millions)
fall in the LSM 1-5 categories. to the number of accounts with
activity within the last 180 days, 20
Progress on geographic access is measured on three points of representation: transaction points, service points and
sales points. based on the level of conformity
allocated by the Financial Sector 16,52 16,33
Transaction points are points at which customers can take cash or make a purchase from their accounts. Service Transformation Council. 15
points are points where a customer can reset a pin, execute money transfers, get a statement or initiate account 14,72
queries. Sales points are points at which customers can replace a card, deposit cash into their accounts or acquire a Banks remain well ahead of the 13
12 12
transaction account, a funeral policy, a savings account or a loan. targets on this aspect. However, 10
there was a slight dip in the number
90
of qualifying accounts between 2017
83 85% and 2018. 5
84% 84% 84%
82% 82%
79% 80%
76 78% 77%
0
69 2016 2017 2018
70%
Actual accounts Target accounts
62
60%
55
Transaction points Service points Sales points
2016 2017 2018 FSC target
Trying to keep it simple
■ The banking industry’s performance on service points and sales points is largely ahead of sector targets.
■ In contrast, achievements on transactions points lag the sector target and have declined over the three years Bank fees and access points are Banks have come to realise that bank accounts to use it as one.
under review. extremely important in the debate costs, access and complicated Improving access is one of many
about transformation in a country product structures contribute to this areas in which banking changed
where the FinMark Trust Finscope trend of low-income consumers not to benefit communities in 2018,
keeping their money in the banks. the period under review. The
survey found that although 80% of
Electronic customer infrastructure access: population penetration As a result, many have tried to find 2016-2017 transformation report
consumers had bank accounts in
simpler solutions that work better for published last year showed how
2018, many use them only as a type banks were already shifting from
the entry-level market.
■ Here the focus is on expanding access 100 of post box, withdrawing funds as looking at transformation as a
to services such as internet banking 94% Two examples are the conversion of
92% 91% soon as they come in. policy and compliance issue to
and cellphone/telephone banking, FNB’s e-Wallet into a bank account
viewing it as a catalyst for growth.
or any new electronic product and/ Finscope’s research also found that in 2018 and the addition of a “wallet”
80 In 2018, retail banks continued to
or technology, for account holders more people are moving their savings into Standard Bank’s Instant Money uplift communities beyond what is
who earn less than R5,000 a month to the informal sector. product, allowing people without required of them by the FSC targets.
(starting from 2017 and escalated by
inflation). 60
■ Similar to geographic access,
electronic access is measured at 49%48%
industry level but with agreed
40 42%
targets per individual organisation.
The sector has set a target of reaching
19% of the target market. 30%
■ Banks’ electronic penetration within 20
19% 19%19% 19% 18%
low-income groups is still low and 12.4%
all banks reported declines on this 13% 11.7%
10%
measure between 2017 and 2018. 6% 5%
0
FSC Target Absa Capitec FirstRand Nedbank Standard
Bank
2016 2017 2018
22 23Black economic empowerment scores
■ Most banks improved their black economic empowerment scores, based on the Financial Sector Code
scorecard.
120
100
80
60
40
Non-compliant
Not verified in 2018
Not verified in 2018
20
BEE level 8
BEE level 6
BEE level 4
BEE level 4
BEE level 2
BEE level 5
BEE level 3
BEE level 5
BEE level 2
BEE level 1
BEE level 1
BEE level 1
BEE level 1
N/A
N/A
0
Absa
African Bank
Al Baraka
Bidvest Bank
Capitec
China Construction Bank
Citi
Finbond
FirstRand
Grindrod
HBZ
Investec
Mercantile Bank
Nedbank
Sasfin
Standard Bank
Ubank
GroBank
2016 2017 2018 2016 2017 2018
B-BEE recognition levels B-BEE recognition levels
B-BBEE status Qualification B-BBEE recognition level B-BBEE status Qualification B-BBEE recognition level
Level one > 100 points 135% Level five > 75 but < 80 points 80%
Level two > 95 but < 100 points 125% Level six > 70 but < 75 points 60%
Level three > 90 but < 95 points 110% Level seven > 55 but < 70 points 50%
Level four > 80 but < 90 points 100% Level eight > 40 but < 55 points 10%
24 25Beyond scorecards
Banks are increasingly striving to make a national impact through the initiatives they fund
Outside of their core operations and says: “We believe that through that the learnerships graduates among other things, supporting system. In 2019, 564 high school
beyond the initiatives linked to BEE effective, collaborative efforts are placed to cover scarce skills. the implementation of the National learners, 45 university teaching
scorecards, the banks contribute between the private and public “Through effective, Specifically, 10 skills the World Development Plan. students, 63 in-service maths
massively to socioeconomic sector we can achieve the tasks Economic Forum identified as teachers and 199 principals and
FirstRand’s two foundations,
upliftment — both directly and
through their charitable and
before us. We must work together to collaborative necessary for the fourth industrial the FirstRand Foundation (FRF) senior management teams were
sculpt and refine the regulation and revolution were incorporated into supported through the Capitec
empowerment foundations. More through policy advocacy and
and more, they are seeking to
policies that govern transformation
in South Africa. This will help
efforts between the programme, which the bank
designed in partnership with a
the FirstRand Empowerment Foundation’s initiatives.
make a national impact through Foundation (Fref) through the Investec prioritises promoting six
to ensure we are as effective as
the initiatives they fund. There is possible.” the private and leading business school. NECT, have been instrumental in of the UN Sustainable Development
also a welcome trend emerging of There has also been much progress improving educational systems for Goals: quality education; clean water
Each of the big six banks run
collaboration – between banks and
other big companies – to increase learnership programmes for their public sectors we outside of the review period of this
report. Early in 2019, Nedbank
early childhood development. The
FRF, through its support of ilifa
& sanitation; affordable & clean
the effectiveness of their initiatives, employees to meet regulatory sponsored 3,315 unemployed Labantwana, a nongovernmental
both on the ground, making a requirements but they also offer can achieve the youth to complete 12 months of organisation focused on early
difference to people’s lives, and at learnerships to external candidates work experience training under childhood development, has
policy level. and run graduate programmes to tasks before us” the YES programme. This was the achieved some successes in terms of Each bank’s
achieve their internal skills targets. biggest intake to be sponsored influencing ECD policy, including
A good example is the National
Education Collaboration Trust There are numerous noteworthy under the YES programme at the a second year of compulsory early foundation has its
initiatives. Absa and Investec time. And Absa’s YES programme, learning before school that kicks
(NECT), formed in response to
government’s call for collaboration were among the five corporations
that co-sponsored the start of
FirstRand launched its FirstJob
programme in the same year, also
implemented by development
agency Catalyx in December 2019,
in this year. The FRF is also a major
contributor to Isfap while Fref
own focus area but
to accelerate the pace of national
in response to Ramaphosa’s plea supports the NECT.
development. It aims to contribute
to achieving the education targets
the Youth Employment Service
(YES), launched by President Cyril to corporate SA to open doors
will see the bank provide work
experience to more than 3,400 The Capitec Foundation
education is
set out in the National Development Ramaphosa in March 2018. Investec to youth who need work-based youth who will be placed in over 100 focuses on maths tutoring,
Plan. FirstRand, Absa, Nedbank, partnered with 11 organisations training. The FirstJob programme organisations across seven provinces teacher development and school a common
Standard Bank and Investec are all to host 1,200 unemployed youth initially committed to creating work in 2020. management development,
partner organisations – along with under the YES programme and experience for 1,425 youths but by
Each bank’s foundation has among other things. The bank underlying theme
numerous other corporate entities. further donated R2m towards the the end of June 2019, it had given says elementary school staff and
its own focus area but education
establishment of the first YES hub in an opportunity to 1,547 individuals. leadership remain key priorities in
Capitec promotes such is a common underlying theme.
Tembisa, Gauteng. What makes it unique though is efforts to transform the education
collaboration. CEO Gerrie Fourie Nedbank, for example, focuses on,
26 27energy; decent work & economic giving towards community projects
growth; industry innovation & that make an impact in stimulating
infrastructure; and sustainable cities wider social and economic
and communities. upliftment. It focuses on education “While the
CEO Fani Titi says Investec is and skills, enterprise development
trying to do more for empowerment, and financial inclusion. scorecard drives
pointing out that Harvard Business Full details of the socioeconomic
Review last year illustrated how upliftment initiatives of each bank behaviour towards
diversity yields quantifiable are far too extensive to cover fully
dividends in business. “Examples
of this include having an inclusion
here but what is clear is that they go transformation, it
well beyond the requirements of the
and belonging strategy that aims to
achieve a diverse workforce at all
B-BBEE scorecard. Indeed, Capitec’s
Fourie calls for recognition of such
only motivates for the
levels, thinking about unconscious endeavours.
bias and using our platform to
“The current scorecard and its
elements included.”
champion awareness campaigns,
implementation create challenges
such as women and LGBTQIA+
that hamper transformation
campaigns. We have focused on
at times,” he says. “While the
progressive people policies that live
scorecard drives behaviour towards
up to our culture so that you can
transformation, it only motivates to address and further smooth out
thrive in our environment no matter
for the elements included. As a the policies and procedures.”
who you are.”
result, all the initiatives that drive Recognition of all initiatives that
Standard Bank’s Tutuwa transformation, but are not in the are now outside the scorecard
Community Foundation is also code, receive no recognition.” He would certainly validate the “broad-
heavily involved in educational argues that this could encourage based” part of black economic
upliftment, with a focus on youth. companies to overlook many empowerment. Without doubt,
Its programmes incorporate the full important initiatives. however, South Africa’s banks –
education life cycle: early childhood
Another problem, he says, is that along with other corporate entities
development, making the schooling
the scorecard measures expense – are making a marked difference in
system more effective, tertiary
instead of outcome, “which means the country, be that on the ground
education and supporting young at individual level in providing
that digital learning, which has
people’s transition to the work nutritional school breakfasts and
proven to be a highly efficient
environment. scholarships for underprivileged
interactive means of learning, scores
Absa, like other banks including less points due to its cost efficiencies. children or at national policy level in
FirstRand and Standard Bank, has Effective collaboration between the improving educational systems and
shifted its approach from charitable private and public sectors will help access to them.
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