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.
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