Submission on Banking Sector to NDP

01 April 2012
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The South African Transformation Monitor
Transformation in the Banking Sector: Ownership of bank
accounts, Credit cards, ATM cards, Debit cards and Mzansi
accounts in South Africa (1994-2009)
Vivian Atud
May 2010
CONTENT
1.1 Introduction
1.1.1.Transformation Monitor
1.1.2.Transformation Index
1.1.3.Background to study
1.1.4.Data Collection Methodology
1.2 South African % Population Increase by Race from (1993-2007 )
2.0 Transformation in the banking sector in south Africa
2.1 The South African retail banking sector as at 2008
2.2 Percentage of South African adult population banked, (1994 – 2007)
2.3 Ownership of bank accounts by race (1994 -2008)
2.4 Mzansi accounts by race (2005-2009)
2.5 Ownership of, Debit cards, ATM cards, Savings/Transaction accounts, Post bank
accounts by race
2.6 Conclusion
2.7 References
TRANSFORMATION MONITOR
1 Introduction
The aim of this project is to measure in an accurate, comprehensive and
objective manner and to continue to monitor Black Advancement in South Africa
as a result of changes brought about by democracy.
What is black advancement? There is no consensus on this topic, but in the
context of this study it will mean true progress in all aspects (economic, social,
political etc) made by Blacks compared to other racial groups since 1994.
1.1 The Transformation Monitor
The transformation monitor will provide statistical evidence of the progress
made by black South Africans alongside other racial groups since 1994.
Research will be broken down into several phases, each phase concentrating
on a certain sector of the economy. In this study, PHASE 2, the sector covered
is the Financial Sector: use of financial services (bank accounts, ATM Cards,
Mzansi accounts, savings/transaction accounts, debit/cheque cards, credit
cards and Post bank accounts) by all racial groups in South Africa
The Transformation Index
Using the above cornerstones as a compass, an index of black advancement
will be constructed.
In order for a sector to achieve a high transformation rating, its data must show
that, since the transition to democracy, there has been a real increase in the
number of Blacks (Africans, Asians and Indians) using various financial services
compared to Whites. Tables and graphs will be used to demonstrate the level
and/or progress made in black advancement in a financial service sector.
1.2 The use of terminology
This study uses data covering the years 1994 to 2008. Over this period there
has been a change in the meaning of given terminology with reference to the
use of ‘Indian/Asian’ and ‘African/Black’. This clarification is very significant for
the understanding of this report.
Before the introduction in 1998 of the Employment Equity Act and new
reporting structures enforced by the government, most government
departments generally used the word ‘Black’ to refer to black (skin colour)
South Africans and ‘Asian’ when referring to South Africans of Asian descent.
After 1998, the reporting structure changed with the specification of ‘African’ to
refer to black (skin colour) South Africans and included two additional
categories, ‘Indian’ and ‘Coloured’. These three classifications make up what
is now called ‘the broad definition of Black’ in South Africa today. White refers
to South Africans with white skin colour.
In this study, the following classification of the various racial groups will be
used, Black, Coloured, Indian (includes all Asians), and White.
1.3 Background to study
Racial segregation has been one of the defining characteristics of South
Africa. Apartheid structures seriously limited the economic and social
opportunities of Non-Whites, leaving few from this vast group able to
participate in the formal1
economy. Since the transition to democracy, new
administrations have taken on various initiatives to adjust this skewed racial
profile. From policy changes in personnel recruitment to how suppliers of
goods and services are selected or what type of enterprise development and
social engagement is to be conducted, these administrations have taken a
keen interest in reorganising South Africa’s social, political, and economic
structures.
However, what have been the benefits of these actions? Have the people
who were previously disadvantaged by the policies of the apartheid regime
gained from new-found freedom and new policies? There appears to be no
consensus regarding the extent to which or the mechanisms through which
previously disadvantaged South Africans have benefited from the transition to
democracy. Some authors argue that freedom from apartheid has not had a
substantial impact on the social and economic development of black South
Africans. Others hold the view that for these people to succeed, they need
further government assistance through programmes such as Reconstruction
and Development Programmes (RDP) and Black Economic Empowerment
(BEE).2
Yet there are others who think that the core ingredients for the true
realisation of human potential is economic freedom and the development of a
strong legal framework, a robust infrastructure, and human security.
In this study, Phase 2, the actual progress made by the different racial groups
in the financial sector (ownership of bank accounts, Mzansi accounts, credit
cards) since the transition to democracy is analysed. First, it examines
historical data on racial disaggregation of the ownership of various bank
accounts to assess what changes have occurred in the racial profile of these

1
Formal economy refers to all economic activities that are officially registered to operate and counted/recorded in
government statistics, while informal businesses are often not registered, do not pay tax, and yet contribute to the
economy.
2 Broad definition of Black includes Indian and Coloured.
account holders. Second, it considers the impact of these changes on the
broader political economy.
1.4 Data collection methodology
The financial sector
According to the FinMark Trust, since the end of the apartheid era in 1994, the
South African retail-banking sector has been dominated by four privately owned
banks (FNB, ABSA, Standard Bank and Nedbank) that serve various market
segments with a variety of banking products. These four banks constitute 84%
of the total banking sector assets and will be the focus of our analysis. Other
banks include the state-owned Post bank, Capitec bank and Teba bank.
According to the Financial Service Charter, all financial institutions must commit
to measurable goals with respect to access provision, whereby these banks
commit to provide accessible, affordable financial services for the wider
population (Blacks, Coloureds, Indians and Whites). The financial sector has
acknowledged that access to first-order retail financial services is fundamental
for black advancement and for the development of the economy as a whole.
The sector has also committed itself to increasing access to transaction and
bank savings products for all racial groups. This report will aggregate and
analyse data on financial services access by different racial groups in South
Africa since 1993 to 2009.
The Charter’s access commitments and definition brought about the creation of
Mzanzi accounts in October 2004. This product was rolled out to satisfy the
access commitment for lower income groups of all races in South Africa. This
was a sole initiative of the private banks; the government-owned post bank was
not a signatory to this. An analysis of access to Mzansi accounts by all racial
groups since its inception to 2009 therefore will also be analysed in this study.
Data for the study
The data for this study has been obtained from various sources since no single
organisation/institution has comprehensive documented information on access
to financial services in South Africa. Data used for this study has been obtained
from the Financial Services seta, FinScope, FinMark Trust, Bankable Frontier
Associates, AMPS. The graphs used were drawn by the author to illustrate the
racial transformation in access to various banking products.
Two levels of analysis are presented. The first is of Black representation as a
percentage of the total population that has access to savings and transaction
accounts compared to Whites. The second examines access to Mzansi
accounts by race.
1.5 South Africa’s population racial analysis
Figure 1 shows that since 1993 there has been growth in the SA population in
all racial groups. The Black population increased by 2.3%, the Coloured
population by 1.68%, the Indian population by 1.19%, and the White
population by .01%.
Figure 1: SA percentage population increases from 1993-2006
1.6
1.7
Source: South African survey 2008 Stats SA
2 TRANSFORMATION IN THE BANKING SECTOR IN SOUTH AFRICA
2.1 The South African retail banking sector as at 2008
According to FinScopeTM South Africa 2007, the percentage of South Africans over the
age of 16 who use banks has increased to 60% from approximately 36.2% in 1994. It is
estimated that the increase in access to bank accounts has been greater than the
growth in population over the same period. The South African retail banking sector has
long been dominated by four large, privately owned, commercial banks. These banks,
ABSA, FNB, Standard Bank and Nedbank, own 84% of banking products in South
Africa. This is illustrated below.
-8
-6
-4
-2
0
2
4
6
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
BLACK COLOURED INDIAN WHITE
Table 1: The Banking Sector in South Africa
Bank Ownership Total Assets Total
Clients
ABSA Majority owned by Barclays, listed
on the JSE
$70 billion 10.0 million
Nedbank Old Mutual Group, listed on the JSE $50 billion 4.0 million
Standard
Bank
Standard Bank group listed on the
JSE
$85 billion 8.6 million
FNB First Rand Group, listed on the JSE $61 billion 7.5 million
Big Four
Total
84% of total banking
sector
30.1 million
Post
bank
State-owned N/A 6.0 million
Capitec
Bank
Widely held, listed on the JSE $455million 1.6 million
Teba
Bank
Private Trust Controlled by mining
industry
$312 million 0.5 million
African
Bank
Widely held, listed on the JSE $1.7 billion 0.4 million
loans (not
necessarily
client based)
Sources: Bankable Frontier Associates’ Report on the Mzansi account in South Africa, 2009,
2.2 Figure 2: Percentage of South African population banked, 1994-2009
Source: All Media and Product Surveys (AMPS), as presented in fig 2.1 in Porteous, D.,
Banking on change and TNS Research/FinMark Trust press release March
2008 , FinMark Trust 2009.
Figure 2 shows that the number of people banked in South Africa increased from about
36.5% in 1994 to over 60% in 2009. But, these aggregate figures may be misleading as
0
20
40
60
80
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Percentage of South Africans
banked 1994-2009
they do not indicate the racial composition of bank account owners. In the following
section, bank account ownership will be decomposed by race to highlight the changes
that have taken place.
2.4: Figure 3: Ownership of bank accounts by race (1994-2008)
Source: Various (TNS Research Survey press release March 2007, FinScope 2009
Figure 3 shows that between 1994 and 2008, there has been an increase in ownership
of bank accounts for all racial groups in South Africa. White ownership of bank accounts
increased from 80% in 1994 to 94% in 2008, Coloured ownership from 33% in 1994 to
61% in 2008, Indian ownership from 46% to 84%, and Black ownership increased from
20% in 1994 to 57% in 2008.
Blacks, Indians and Coloureds have been the clear winners in terms of gaining greater
access to bank accounts since the transition to democracy. The average percentage
increase in ownership of bank accounts for Blacks is 37% while for Whites it is 14%.
Therefore, there has been significant transformation in ownership of bank accounts
since the transition to democracy in 1994 to the present day.
0
20
40
60
80
100
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Black White Coloured Indian
Nonetheless, a significant portion of the black population is still unbanked. This problem
was the reason why the commercial banking sector launched Mzansi accounts in 2004.
The Mzansi initiative is analysed below.
2.5 Mzansi Accounts
The Mzansi initiative was launched by the commercial banking sector in 2004 to provide
affordable banking to the bankable but unbanked portion of the population as part of the
Financial Sector Charter commitment. Prior to the introduction of the Mzansi initiative, it
was estimated that about 17.8 million individuals of banking age had no access to basic
financial services and were mostly from previously disadvantaged population groups.
Mzansi is a savings account. Although its pricing structure differs from bank to bank, it
includes such free services as electronic deposits, two ATM withdrawals, two cash
deposits, one balance enquiry, one debit order, one rejected debit order, and has no
minimum monthly fee. The pricing of this bundle of services should be less than or
equal to 1.7% of the average presumable monthly income of R1000 (CPIX adjusted
annually).
The aim of Mzansi was to ensure that those individuals falling into the lower income
group could have first-order retail banking products that would provide them with entrylevel
banking services. According to the Financial Sector Charter, access meant that
banking services should be available to all South Africans within 20 kilometres from
their place of residence.
Figure 4: Mzansi Accounts Opened (2005-2009)
Source: FinScope South Africa 2009.
Figure 4 shows that the number of Mzansi accounts opened more than doubled (a
158% increase) between 2005 and 2009. This shows that the banks are committed to
ensuring access to banking services to the greater population of South Africa. In figure
5, the number of Mzansi accounts are decomposed to highlight the racial distribution of
their ownership.
1,449,363
2,199,805
2,594,917
3,208,636
3,743,054
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2005 206 2007 2008 2009
Mzansi accounts opened 2005-2009
Figure 5: Mzansi accounts by race (2005-2009)
Source: FinScope South Africa 2009
From figure 5, it can be seen that all racial groups have benefited from the
Mzansi account initiative. Although the figure above shows a decrease in the
ratio of Black account holders between 2008 and 2009 (from 90% to 57%), it
must be noted that Blacks still represent the majority of account holders in each
year. White account holders increased from 2% in 2007 to 7% in 2009.
86
72
90
66
57
4 4 4 5 4
6
20
4
27
32
4 4 2 2
7
0
10
20
30
40
50
60
70
80
90
100
2005 2006 2007 2008 2009
Black Coloured Indian White
2.4 Figure 6: Ownership of Debit cards, ATM cards, savings/ transaction
accounts, Post bank accounts by race
Source: FinScope South Africa 2003, 2006, 2007
Figure 6, illustrates that there is a significant increase in the penetration of
banking products such as ATM cards, savings/transaction accounts,
0
20
40
60
80
100
2003 2004 2005 2006 2007
White
ATM Card
Savings/ Transaction Account
Debit/ Cheque Card
Post Bank savings Account
0
10
20
30
40
50
60
2003 2004 2005 2006 2007
Black
ATM Card
Savings/ Transaction Account
Debit/ Cheque Card
Post Bank savings Account
0
20
40
60
80
2003 2004 2005 2006 2007
Indian
ATM Card
Savings/ Transaction Account
Debit/ Cheque Card
Post Bank savings Account
0
10
20
30
40
50
60
2003 2004 2005 2006 2007
Coloured
ATM Card
Savings/ Transaction Account
Debit/ Cheque Card
Post Bank savings Account
debit/cheque cards, and Post bank savings accounts by all racial groups in
South Africa.
Between 2003 and 2007, ownership of ATM cards increased from 42% to 51%
for Blacks; from 47% to 50% for Coloureds, and from 54% to 70% for Indians,
while for Whites there was a decrease from 87% to 83%.
Between 2006 and 2007, ownership of savings/transaction accounts increased
from 34% to 40% for Blacks, from 63% to 66 % for Whites, from 46% to 51% for
Indians, but decreased for Coloureds from 43% to 42%. Debit and cheque card
ownership increased from 11% to 21% for Blacks, from 45% to 55% for Whites,
from 16% to 19% for Coloureds, and from 16% to 30% for Indians.
Ownership of credit cards showed an overall increase from 7% in 2006 to 9% in
2007. For Blacks the increase was from 2% to 4%, 27% to 42% for Whites, 11%
to 20% for Indians, but a decrease from 8% to 5% for Coloureds.
The ownership ratio of Post Bank accounts remained almost static for all racial
groups within this period.
2.6 Conclusion
Between 1993 and 2009 the number of banked South Africans increased
remarkably, especially in the Black population. This has largely been due to
easier access to banking services being provided to people living in informal
urban areas and those earning less than R2000 a month. Undoubtedly, the
products and services offered, such as Mzansi accounts, ATM cards,
debit/cheque cards, credit cards, savings and transaction accounts, as well as
cell phone banking have been the driving force behind the substantial increase
in bank account owners.
It can only be concluded, therefore, that a remarkable transformation took place
in the banking sector in South Africa between 1994 and 2008. Since the
transition to democracy, and the access commitment signed by commercial
banks in the Financial Sector Charter, all South Africans now enjoy equal
access to banking services. Generally, out of a total adult population of
31,589,440, the number of bank account owners in South Africa has increased
from 9 million in 1994 to about 20 million in 2008.
References
1. South Africa 2007. Press release (FinScope, TNS research surveys,
FinMark Trust)
2. Banking Frontier Associates (2009): The Mzansi bank accounts in South
Africa: Final report.
3. FinScope Surveys 2009
4. The South African Advertising Research Foundation: AMPs
5. David Porteous (2005): The access frontier as an approach and tool in
making markets work for the poor. DFID policy division.
6. Summary Report: Findings of the FinScope study into financial access
and behaviour of the South African population 2003. 

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