Banker S.A. April 2014 | Page 55

OPINION South Africa’s banking sector a catalyst for economic growth South Africa’s financial regulations and banking industry are world-class. They are pioneering growth and advancement, not only here on local turf, but well into the continent. Donna Oosthuyse, Managing Director, Citi Country Officer South Africa, calls on all growth industries to collaborate for economic viability. S outh Africa boasts one of the world’s most sophisticated financial systems. It provides a platform to hundreds of domestic and foreign institutions conducting business here, and throughout the African continent. However, for South Africa’s economy to fully meet the needs of both its citizens and enterprises in a sustainable manner, an appropriate regulatory framework and contributions from all sections of the economy must be in place. South Africa’s government has clearly defined the objectives and plans required to achieve this vision of an adaptive economy characterised by growth, employment and equity. The South African banking system has been through some dramatic changes in the past two decades. It is, however, well developed and comparable to those of industrialised countries, according to the last World Economic Forum (WEF) Global Competitiveness Report conducted for 2013/14. It is generally viewed as world-class, with adequate capital resources, technology and infrastructure and a strong regulatory and supervisory environment. The banking sector has many opportunities, such as improving efficiency by investing in technology, expanding reach by focusing on mobile banking, growth by expansion into Africa and targeting lower income market accessibility. Currently, South Africa’s financial sector has over R6 trillion in assets, of which the banking sector assets represent just over 50%. The financial services sector contributes about 10.5% to overall GDP. According to the WEF Global Competitiveness Report, South Africa rated third out of 148 countries for financial markets development, and did well in terms of its financial institutions. Over the past 20 years, the financial sector has pioneered transformation and growth through consolidation, technology and legislation. The result has been a number of foreign banks establishing branches or representative offices in the country and others acquiring stakes in local major banks. Competition and Foreign Direct Investment (FDI) – both from a domestic and an international front, are healthy. FDI into South Africa not only encourages economic growth but also positions South Africa favourably for tourism, trade and investment. Ultimately, it also works towards alleviating the ‘evil triplets’ of poverty, inequality and unemployment. These issues have fostered great debate in the country as to the future of economic policy, the role of the state in the economy and the standards that should be applied to employment, procurement and inward investment. For job creation to start, a GDP rate has to be approximately 3% – South Africa’s GDP is currently around 2.4%. As an important economic frontier for international companies South Africa is not only a compelling market in its own right, representing over 25% of Africa’s GDP, but it is also a staging ground for international business into the rest of the continent. Just as South Africa’s banking and financial sector is showing a propensity for growth, so too are other sectors of the economy. Africa currently represents a unique opportunity for this growth. But banking cannot do it alone. There is probably no other place in the world where a partnership for business engagement is more important than here in South Africa. Government policy is beginning to add thrust to their development plans. In the Minister of Finance, Pravin Gordhan’s last budget speech, he announced the proposed relaxation of a number of cross-border financial regulations, and tax requirements on companies will make it somewhat simpler for banks, financial institutions and foreign companies looking to invest in African countries. A d