The extent to which banking services are available freely between SADC states differs across the various products offered and the clients served by banks. Credit: Kristin Palitza/IPS

By John Fraser
JOHANNESBURG , Aug 14 2013 (IPS)

Leading bankers are concerned that the regulatory environment in some southern African states is preventing them from offering a full range of services to individuals and companies across the region.

Efficient and affordable financial services are crucial to both the development of businesses and infrastructure projects within the Southern African Development Community [SADC] – and in expanding the reach of banking to the millions who are currently outside the system.

The concerns are being raised ahead of the SADC heads of state and government meeting in Lilongwe, Malawi, on Aug. 17 and 18.

The group chief executive officer of BancABC Douglas Munatsi told IPS that, on the surface, the banking rules in SADC states are similar, as they all stem from the Basel guidelines, an international regulatory framework for banks.

“However, the reality is that some regulators don’t apply the rules the same way, on issues such as the minimum capitalisation of a bank,” he said.

“Sometimes the process is not as transparent as it should be. A country may have very positive investment rules, but labour laws can be very rigid, such as those covering expatriates in Botswana.”

The group chief executive officer of BancABC Douglas Munatsi said that banking rules in SADC states are similar on the surface. But in reality all regulators did not apply the same rules. Credit: John Fraser/IPS

He said that if a bank extended its reach across the region, it needs to be able to deploy people into new territories, but this is not always easy.

“This affects us, as we find limited skills in some places, but we are only allowed to move in a certain number of staff,” he said. “The regulatory environment in some countries is still relatively weak...Political uncertainty in countries like Zimbabwe is another matter of concern.” -- Cas Coovadia, the managing director of the Banking Association of South Africa

Mike Brown, the chief executive officer of Nedbank, one of South Africa’s biggest banks, agreed that there are inconsistencies.

“The extent to which banking services are available freely between SADC states differs across the various products offered and the clients served by banks,” he told IPS.

“In wholesale banking [bank services for companies] for example, the growing trade between SADC countries has resulted in banks developing trade finance solutions to facilitate the ease of intra-regional trade.”

Brown noted that there has been “more limited” progress in providing banking services to ordinary customers because of a failure to harmonise regulations across SADC. He also cited exchange controls as an obstacle to expansion.

Brown said that migrant workers, such as miners from neighbouring countries who work in South Africa, need to be able to send funds across borders to support their families back home.

“Companies have emerged that provide cross border money remittance solutions. These include mobile operators and money remitting companies [such as Western Union and Moneygram]. The cost of these services is still, however, high and prohibitive for many people – and not highly utilised,” he warned.

And in some cases banks are not open to providing services for rural women.

Forty-year-old Vivian Zivira, an agro-dealer from Nyanga in Zimbabwe’s Manicaland province says many women like her with communal land face significant challenges to secure loans to start income-generating programmes.

She says that this is because Zimbabwean banks take too long to process their applications, and charge high interest rates.

“It took me about six months to access my first loan because the banks wanted collateral, which I eventually provided through my husband. They gave me 5,000 dollars with 25 percent interest. Despite a very good repayment record, the bank could not increase the second loan,” Zivira told IPS.

But Cas Coovadia, the managing director of the Banking Association of South Africa, said he believed there were no major issues affecting the offering of banking services between states.

“The SADC Banking Association has been working with the SADC Committee of Central Bank Governors to develop an integrated payments and settlement system, which will improve banking across states substantially,” he told IPS.

However, he did warn that “the regulatory environment in some countries is still relatively weak. Infrastructure is another issue, particularly telecommunications. Political uncertainty in countries like Zimbabwe is another matter of concern.”

The chief operating officer of First National Bank Africa, Leonard Haynes, agreed that sound infrastructure plays a big part in a bank’s ability to make its services available, and he highlighted the importance of telecommunications and stable electricity.

He also suggested that the unavailability in some places “of personal identity documents or similar reliable forms of identification makes it a challenge to comply with ‘know your customer’ requirements.”

“Credit bureaus in some of these countries are generally not in existence, or are not reliable yet as a reference point, to provide customer information on which credit decisions can be based,” he told IPS.

Brown said that the different regulatory environments in different states “present a challenge in managing regional operations, by limiting the economies of scale that can be achieved across the border.

“For example, some countries require banking technological systems to be located in that particular country. This results in the need to duplicate infrastructure across a number of countries and increases the operating costs and eventual costs to customers,” Brown said.

He noted that some countries are changing their regulatory rules, and that this can provide both challenges and opportunities.

“For instance, Zimbabwe and Zambia have increased the minimum capital requirements for banks. An unpredictable regulatory environment contributes to the complexity of managing operations in multiple countries, particularly if this is combined with an unclear level of indigenisation.”

He said that one would expect that as the ease of doing business in the various countries improves, and the operating environment is harmonised, this would result in greater investment across the borders and more substantive regional strategies.

* Additional reporting from Michelle Chifamba in Harare.

First National Bank’s CEO Michael Jordaan was forced to deny he had resigned after the ruling African National Congress took exception to bank ads criticising the government. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG , Jan 30 2013 (IPS)

Hindsight is a wonderful thing. Nonetheless, it is difficult to miss the irony in the following sentence from a news release, sent out by South Africa’s First National Bank on Jan. 17.

It reads:  “At 18:57, on 17 January 2013, FNB launched a new brand campaign with a live broadcast to South Africa. The broadcast carried a message from the voices we don’t often hear, the children of our great country. A message we believe will inspire the nation.”

It is debatable whether the nation was inspired, but certainly the governing African National Congress (ANC) party was incensed.

For, as well the messages from the children of South Africa in the advertisement itself, there were far more outspoken video clips posted by FNB on YouTube with children expressing strong criticism of government, and of one government minister – to which the ANC took strong exception.

On Friday Jan. 25, the bosses of FNB and of its parent company Rand Merchant Bank (RMB) were summoned to the ANC’s headquarters in downtown Johannesburg – which is just a few minutes stroll from FNB’s own headquarters.

The bankers apologised, fully aware that the ANC and the South African government at national, provincial and municipal level, is a multi-billion dollar customer of FNB.

The apology might have been intended to end the matter, but it didn’t. Controversy raged on.

First National Bank’s charismatic CEO Michael Jordaan was forced to deny he had resigned over the issue, and the bank still insists its campaign – entitled “You Can Help” – will continue.

As discussion has raged on the media and elsewhere, there has been debate about whether the criticism of the politicians by the children who appeared in the YouTube clips had been scripted.

The bank said the TV commercials were scripted, and the child actors were paid for these, but the more outspoken interviews which the bank posted on YouTube were not. These have been characterised by FNB as “research clips.” First National Bank has been keen to point out that its apology was specifically related to the YouTube clips, and that it stands by the TV campaign, which it does not believe is offensive.

However, the incident has highlighted once again the uneasy relationship between business and government in South Africa, and the extent to which business needs to tread carefully if it wishes to avoid irritating the ANC government.

The current clash has brought back memories of February 2007, when the then head of RMB Paul Harris was forced to axe an anti-crime advertising campaign because it was perceived by the politicians to constitute an attack on government.

Petrochemical and synthetic fuels company Sasol has also been at the receiving end of ANC anger for appearing to criticise black economic empowerment in South Africa, in a document which it filed with the New York Stock Exchange.

And there have been frequent tensions between the mining sector and ANC ministers, with London-based mining house Anglo American having been a target for particular criticism.

Helen Zille, the head of the opposition Democratic Alliance party, in a statement on Jan. 30 suggested that: “FNB buckled and withdrew the video clips after the ANC argued they could deter investment.

“That is deeply ironic. The ANC’s bullying of a private company, its apparent ability to influence state tenders, and its failure to understand the constitutional right of free speech, will do far more to kill investment than anything a child might have said in a YouTube clip.”

Zille suggested that the ANC put pressure on the bankers, by threatening to withdraw government business, a suggestion that was dismissed by ANC spokesman Jackson Mthembu.

“It is only people like her who have such a simple-minded approach,” he told IPS.

And FNB’s head of corporate communications Virginia Magapatona also shrugged off the suggestion.

“To date, it’s been business as usual,” she told IPS.

Jordaan himself was unwilling to continue discussing the issue when he was approached by IPS.

“After nine days of discussion on one advertisement, we consider the matter closed,” he stated.

Mthembu also insisted that the matter is now over, despite the continuing flurry in the South Africa media and social media.

“We are done,” he said. “The matter is closed. We have resolved the matter and we are happy.”

Pretoria-based businessman Mario Pretorius, who is CEO of JSE AltX listed telecommunications company Telemasters, told IPS that he believes there has been permanent damage to relations between business and government from the FNB-ANC clash.

“I think the ANC has over-reacted,” he said. “The constitution allows freedom of expression, but if there is something which breaches the law, the ANC should say what it is.

“If not, the law allows us the right to express our opinion.”

Pretorius suggested that following the apology from the bank to the ANC “the ANC now thinks it can get anyone to run away.”

He agreed with Zille that FNB has put its business interests above principle.

“I am appalled you can put the expediency of having (a government) account above principle,” he said.

“I think business is now on the back foot, and maybe in a permanent way.”

However, the head of the Johannesburg-based Brenthurst Foundation research and advisory body, Greg Mills, suggested that tensions exist elsewhere in Africa between governments and business.

“Of course this will happen elsewhere in Africa – as elsewhere in the world – but usually in those countries with autocratic systems, where governance and choice is subject not to law, but to political whim,” he said.

And when asked whether such a clash would have been as public elsewhere in Africa, he responded: “In some other countries, yes.

“But it’s also an indication of South Africa’s great strength in its free press, civil society and business community.”

There have been few signs of the debate dying down just yet, with the relationship between business and government in South Africa also being highlighted in the recent election of businessman Cyril Ramaphosa as deputy president of the ANC.

If he can provide an effective bridge between the politicians and business people in South Africa there may be fewer public spats.

And in the short-term, it is almost certain that business will tread more carefully, having seen once again how sensitive the Pretoria government is to criticism.

“There isn’t a complete understanding of how business operates,” said Neren Rau, the CEO of the South African Chamber of Commerce and Industry, a business organisation.

“What is sometimes lacking is an understanding of the objectives of business, the manner in which businesses are governed and performance-managed.

“I believe the ANC’s reaction could have been more restrained.  It would be foolish for FNB to compromise their relationship with a key client (government) so there can be little doubt that they had bona fide intent in eliciting views toward a better South Africa.”

Rau said that initially the clash has had a negative impact on relations between government and business.

“But it was positive in respect of how this was amicably resolved,” he added.

“The ANC at least is becoming sensitive to investor perception and business confidence, which was sometimes discounted in the past.  It will remain a positive outcome if business does not lose heart in continuing to pursue constructive engagement toward a better South Africa and if we can more actively engage on matters of investor and business confidence.”