South Africa’s banking sector is under intense scrutiny as Parliament demands accountability from the South African Reserve Bank (SARB) and major financial institutions over allegations of rand manipulation, discriminatory practices, and the lack of transformation in the industry.
These issues came to the forefront during a joint meeting of the Portfolio Committee on Trade, Industry and Competition and the Standing Committee on Finance (SCOF) on Tuesday.
Transformation and discriminatory practices under fire
The meeting, which included major banks and regulatory bodies such as the SARB, Prudential Authority, Financial Sector Conduct Authority (FSCA), and the Banking Association of South Africa (BASA), focused on the slow pace of transformation in the sector. Co-Chairperson Dr. Joe Maswanganyi emphasised that transformation is not optional but a constitutional requirement.
Committee members expressed frustration over the lack of meaningful progress, particularly in ownership patterns and senior management representation. Mzwandile Masina, Chairperson of the Portfolio Committee on Trade, Industry and Competition, questioned why major banks still dominate African Bank and why ownership remains predominantly white and male.
“The Reserve Bank is the best banking institution in Africa, but it is not transformed,” Masina stated, criticising the institution for allowing superficial reports on transformation to pass as progress.
Brian Molefe, another committee member, highlighted the stark economic divide in South Africa, describing it as “two economies in one” – a marginalised black majority and a privileged white minority. He accused banks of discriminatory practices that favor the smaller white economy over the larger black population or purely black owned bank.
Account closures and lack of transparency
The issue of unexplained account closures also drew sharp criticism. Members of Parliament (MPs) raised concerns about banks refusing to provide reasons for shutting down customer accounts, leaving many in the dark. BASA representative Bongi Kunene defended the sector, stating that banks follow clear processes and that customers can escalate disputes to the Financial Ombudsman. However, she acknowledged the need for better financial education to ensure the public understands these processes.
Rand manipulation and Ithala bank liquidation
MPs also grilled the SARB over its handling of rand manipulation by major banks, a scandal that came to light in the early 2000s. Mzwandile Masina questioned when the Reserve Bank became aware of the manipulation and why it failed to act decisively.
“The banks exonerated themselves in a report, but we want to know when the Reserve Bank knew about this issue,” Masina said.
The liquidation of Ithala Bank, a state-owned entity, further fueled the debate. MPs sought clarity on whether legislative policies are needed to govern associations within the banking industry and prevent similar collapses in the future.
Calls for urgent action
Soviet Lekganyane, another committee member, warned of serious social unrest if the banking sector fails to address its untransformed ownership patterns. “We are not interested in whether there is a black CEO, or their number is growing; we have to amend the law to make things happen. If we are to achieve inclusive economic growth, we want you to help us resolve ownership patterns and not how many black managers are there in the system.”
He cautioned that there would be a serious uprising in the future if ownership patterns remained untransformed. “We could not continue like this,” Lekganyane said.
The Reserve Bank has committed to responding to MPs’ questions in writing or at a follow-up meeting. However, the pressure is mounting for tangible changes in a sector that remains critical to South Africa’s economic stability and growth.
What’s next?
As the banking sector faces increasing scrutiny, the call for transformation, transparency, and accountability has never been louder. Parliament’s demands for answers on rand manipulation, discriminatory practices, and the closure of Ithala Bank signal a pivotal moment for South Africa’s financial institutions. Will the Reserve Bank and major banks rise to the challenge, or will the status quo prevail?
Stay tuned as this story unfolds, and share your thoughts on whether South Africa’s banking sector is doing enough to transform and serve all its citizens equitably.
