SARB needs to assess unbanked quandary through the ‘lens of trust, trauma and money’
THE SA Reserve Bank (SARB) needs to delve much deeper into the psychology of why so many people in South Africa remain unbanked. This also has its roots in trauma towards money.
According to the World Bank as many as 12 million South Africans do not have a bank account, and many others have limited access to banking.
Earlier this year I attended an HR masterclass where one fabulous black entrepreneur related how she was scared to go to a legacy bank as she felt they would reject her business case. She didn’t want a white banker.
She found a sympathetic banker and cleverly changed her banking habits to get a business bank account. But not so many entrepreneurs can think outside the box to do what she did. So they don’t try to hack what is perceived as an unsympathetic banking playing field stacked against them.
The question is how closely associated are the legacy banks with racism, apartheid and being anti-black.
Legacy banks include Standard Bank, Nedbank, Absa and FNB.
As a white person, with associated privilege, I don’t really understand the fears in South Africa felt towards what legacy banks represent from apartheid days and bank with a legacy bank.
But clearly these fears exists and is most strongly prevalent in rural areas and townships.
I recently started reading Vangile Makwakwa’s book, “What’s your money personality? Changing the way black families manage their finances, exposing the trauma and relationship to money engendered during apartheid that has led to psychological trauma.
Makwakwa writes, “Ancestral trauma is why the current generation responds in much the same way to money (at a nervous system and emotional level) as the previous generation did.”
She writes, “It’s impossible to have a proper or fruitful conversation about money, trauma or family dynamics without considering systems of oppression.”
The book gains more relevance if one considers a study by the SARB, the Payments Study report, released this week.
The report found that South Africans used cash most often as a payment method. Many people did not use a debit card as they thought they did not make enough money to qualify for a card or that the qualifying criteria was too stringent.
People’s main transactions were for groceries, transport and data.
Business Day reports SARB deputy governor Rashad Cassim as saying at the report’s release that, “Given this sort of information, we can help educate people so they can make more optimal choices, which supports our financial inclusion work.”
He said the study would also assist focus on payment modernisation and its digitalisation initiatives. It will assist in ensuring that consumers are afforded appropriate products and services.“
However, SARB has a lot of leg work to do into looking into banking fears, financial inclusion and the unbanked.
This is why it is so devastating the criminality at VBS Mutual Bank, the failure of small lender Ubank and the recent suspension of Ithala Bank’s licence due to non-compliance issues.
While I find it reassuring that there are checks and balances in the financial system. I see the relevance of Zulu King Misuzulu kaZwelithini’s concerns over the services of Ithala bank, which services rural and township entrepreneurs in KwaZulu-Natal, being suspended.
And the government understands only too well why the unbanked needs a state-owned bank.
President Cyril Ramaphosa’s vision of a state-owned Postbank - to offer affordable financial services to communities not catered for by traditional retail banking, SMEs and the public sector - is not off the mark if one considers the psychology of money in this country.
Nedbank’s Mike Brown earlier this year argued against a state-owned bank due to bad mismanagement and because other state-owned entities have been badly mismanaged, which is quite telling.
While Brown is not off the mark about bad management, as demonstrated by the money stolen at Postbank, more should be done to ensure that these type of entities are fiscally sound with good corporate governance and can thrive.
For any reader not in the know, an investigation by auditing firm KPMG, presented to parliament this week, found that criminals used privileged access to Postbank’s database systems and managed to steal R109 million from state-owned Postbank due to weak logging and monitoring controls, lack of accountability and consequence management. Communications and Digital Technology minister, Solly Malatsi has referred the report to the Hawks to bring criminals to justice.
However, I think Brown is fundamentally overlooking South Africans psychological fears towards money.
And while the plethora of banking licenses recently approved by the Prudential Authority is to be welcomed it perhaps does not talk to South African’s perceptions of confidence and trust in whom they can bank with.
This is not helped by the lack of transparency around bank closures.
Sekunjalo and banking, racism
As the editor of Business Report, part of the Independent Media stable, I find it very interesting that the Constitutional Court of South Africa (Concourt) did not hear the case Sekunjalo presented. It dismissed Sekunjalo’s appeal to prevent Nedbank from closing its accounts, deeming it not worth their consideration.
While the Concourt says Sekunjalo has little chance of success, surely it is in the public’s interest that the case be heard? After all, Sekunjalo will have to bear all costs if it loses. Why can’t it have its day in court?
Sekunjalo said in a statement, “Sekunjalo believes that apartheid oligarchs (families who amassed wealth during apartheid), apartheid-era media, and banking institutions, in collaboration with certain political factions, are determined to block legitimate Black entities from competing and participating in the broader economy. These groups seek to be the sole arbiters of the country’s political and economic future, and anyone outside their sphere of influence must be excluded from the economy.”
I firmly stand behind Sekunjalo on this call for the Concourt to reconsider the case being heard for the sake of transparency around banking and allegations of racism.
Five months ago the Pietermaritzburg High Court found that the Prudential Authority had treated Ithala Bank unjustly by having its deposit activities essentially placed under administration in “secret” as reported by Business Day.
At the time Sphithiphithi Evaluator (@_AfricanSoil) posted, “It wasn't just 'mistreatment'; and unfairness on Ithala bank. It was deliberate. The plan is to destroy all banks that largely provide services to Africans. VBS, Ubank, Postbank now Ithala. It's an evil, racial system. Ithala must sue and recover the losses.”
This is just a small example of how upset many South Africans are at the closure of banks who were supposed to be more financially inclusive. I won’t even get into the uproar around people’s personal bank accounts.
Then the Prudential Authority didn’t even have the courtesy this week to show up before the Parliament’s standing committee on finance meeting with Ithala Bank regarding the suspension of its financial services provider’s licence.
This scant lack of regard by the Prudential Authority gives credence to the concerns around the “boys club” and revolving door policy of the SARB, its other organs and legacy banks. Is it in this boy’s club's interest that banks like VBS and Ithala fail?
South Africans need to have a sound Postbank and entities like Ithala back on its feet. Experts and industry need to figure out a way to help these entities find the right success formula.
On another note, this is why after my recent interactions with Capitec, I think their management is spot on the money with a focus on the lower LSM, and recent expansion into business banking with a focus on entrepreneurship and small business.
I recently wrote, “Capitec gears for strategic market disruption in lucrative business banking segment,” after a media round table with Capitec CEO Gerrie Fourie.
They have earned South Africans trust on the ground.
At the time Fourie spoke about how any Capitec customer at an ATM could use other banks’ ATMs with no extra charges, However, despite long queues they chose not to.
Fourie said, “I was sitting in Thembisa (a large township situated to the north of Kempton Park) the other day. Standard Bank and Nedbank ATMs were empty. And we (Capitec ATM) had 20 people, I personally went to the clients and said, ‘You know you can draw money at those ATM’s for the same price. You don’t need to stand in the queue’. ”
The customers told Fourie ”No this is my bank.“
At the time that Fourie said this, I wasn’t really paying attention to this part of the conversation. But thinking about it some more, no wonder Capitec is eating other banks' lunch.
More head space needs to be given to issues around trust, trauma and money. The SARB and the Prudential Authority need to look at banking through this lens. Only then will more of the unbanked feel comfortable enough to bank.
Philippa Larkin is the executive editor of Business Report.
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