CAPE TOWN, 18 September 2005 — South Africans, whether ordinary consumers or corporates, are seething in anger over what they perceive as the outrageous bank charges and fees levied by the country’s five main banking groups, Absa, Standard Bank, FirstRand, Nedcor and First National Bank (FNB). Together the groups control almost 90 percent of all bank deposits in South Africa. And to add insult to injury there is a 14 percent value added tax (VAT) lumped on top of the charges. According to reports, the operating costs of a South African bank account have fallen from more than R1,850 a year in 1998 to below R1,600 a year. Yet during the same period the average service fees for a current account holder doubled.
Ordinary South Africans are also complaining about the inertia and the lack of urgency the country’s Competition Commission is showing in investigating allegations of profiteering by the South African banking cartel. The commission apparently is conducting a preliminary probe into fees and charges in the banking industry to determine whether a full investigation is required. Some of the banks, however, stress that they are unaware of such a probe being conducted.
One Cape Town wholesale business executive stressed: “Our banking charges are outrageous. In every transaction we are hit with not one but two or three sets of charges. In addition we have to pay VAT on each of these charges. As a company whose business is based almost 80 percent on imports of commodities such as rice, spices, sugar and so on, we are also subject to a fluctuating exchange rate environment between the US dollar and the South African rand. As such we are often hit twice.” South African banking, nurtured under the patronage of decades of protectionist apartheid practices, is one of the last bastions of corporate South Africa still in need of urgent consumer-friendly reforms. Political and consumer pressure, however, is growing to rein in the banks, who even in a post-Apartheid era have been behaving as if they are a law unto themselves, oblivious of the social and financial inclusion policies gaining momentum in Europe and some of the newly-industrialized countries of Asia. Last week the leader of the opposition Independent Democrats (ID), Patricia de Lille, called on the government to impose a supertax on the major South African corporates, including the diamond giant de Beers and the banking sector.
De Lille is former member of the radical socialist Pan-Africanist Congress (PAC), one of whose leaders in the past was the late Robert Sobukwe, detained and jailed for many years by the former apartheid regime.
The Falkena Report investigated competition in South African banking. According to the report, Absa in 2004 derived an astonishing 67 percent of its non-interest income from transaction costs. And yet, Barclays Bank would never countenance charging many of the fees in the UK which its South African subsidiary is charging its customers, In a country such as South Africa, it would seem that social and financial inclusion policies would be prime movers of government policies. The logic of South African bankers is that the less high net worth the customer, the less the profitable they are to the bank. This is not unique to South African banks. In the UK too banks have been urged to be more socially and financially inclusive. Barclays, and for that matter other banks such as HSBC, National Westminster and Lloyds TSB, for instance have closed thousands of branches in rural and inner city areas which are deemed not profitable. Low income earners still find it difficult to open accounts at some banks because they too are seen as not profitable.
