Banking
During Apartheid those that could use banks were severely limited due the separation of Whites and non-Whites, this continues to lead to South Africa having a large population of, mainly black, citizens who are unable or unwilling to open accounts with banks. However, apart from the higher prevalence of bank accounts in the post-Apartheid era banking as a sector was less affected by the politics of racial separation as the infrastructure and banks have remained largely unchanged.
South Africa’s oldest bank dates back to 1862 when the Standard Bank of British South Africa was formed with its Memorandum of Association having been signed on the 13, October 1862 becoming an LLC on 15, October 1862 in London. It was the first bank to establish branches away from “Das Kap” and the Cape Province opening establishments on the Witwatersrand gold vein and in the Diamond mines of the Transvaal. It was formally spun-off as The Standard Bank of South Africa Limited in 1987. It is now 60% South-African held while 40% is held by the Commercial Bank of China Limited (Peoples Republic of China). It is also the largest South African bank with total assets valued at $184bn, while not small it is a small player on the world stage as the largest, non-government backed, competitor, HSBC, has assets valued at $2410bn, and even comparable banks such as JP Morgan Chase, comparable based on age, has assets valued at $2352bn. Absa, which is really Barclay’s Africa($99bn), FirstRand, owning the First National Bank, Rand Merchant Bank and WesBank, is the third largest bank with $89bn in assets, Nedbank($81bn), Investec($62bn), and Capitec($4bn), comprise the largest banks, in terms of assets.
When dealing with aggregate bank health the news for 2016 is largely positive. While Non-Performing Loans(NPL) are up 10.8% from 2014, though down 1.9% compared with Fiscal Year(FY) 2015 thanks to loan restructuring, this remains a worrying sign of the stagnant economy. All other indicators appear more positive. Net-interest growth of 7.8% on the back of an increase in loans and advances is also healthy. Furthermore, aggregate loan growth of 12.5% in FY2015 compared with FY2014 indicates general stability in the sector. Gross loan growth of 13.5% for Q1-Q2 of FY2016 is also encouraging. Generally encouraging in the economy is that the percentage of those with bad Fica ratings has shrunk by 6% compared with comparable periods of FY2015. Also encouraging is that the quarterly growth for Q1 FY2016 between retail and corporate lending has been much more similar than in previous years with retail loans growing 5.4% and corporate loans growing 5.6%.
Nonetheless the percentage of South Africans without a bank account remains shockingly high. Only 54% of South Africans have formal business dealings with a bank. Furthermore, only 9% of South Africans and 25% of small businesses use formal credit. This demonstrates a vast underutilization of the South African financial industry by the average consumer and demonstrates that there is still a lot of work that needs to be done.
South Africa’s oldest bank dates back to 1862 when the Standard Bank of British South Africa was formed with its Memorandum of Association having been signed on the 13, October 1862 becoming an LLC on 15, October 1862 in London. It was the first bank to establish branches away from “Das Kap” and the Cape Province opening establishments on the Witwatersrand gold vein and in the Diamond mines of the Transvaal. It was formally spun-off as The Standard Bank of South Africa Limited in 1987. It is now 60% South-African held while 40% is held by the Commercial Bank of China Limited (Peoples Republic of China). It is also the largest South African bank with total assets valued at $184bn, while not small it is a small player on the world stage as the largest, non-government backed, competitor, HSBC, has assets valued at $2410bn, and even comparable banks such as JP Morgan Chase, comparable based on age, has assets valued at $2352bn. Absa, which is really Barclay’s Africa($99bn), FirstRand, owning the First National Bank, Rand Merchant Bank and WesBank, is the third largest bank with $89bn in assets, Nedbank($81bn), Investec($62bn), and Capitec($4bn), comprise the largest banks, in terms of assets.
When dealing with aggregate bank health the news for 2016 is largely positive. While Non-Performing Loans(NPL) are up 10.8% from 2014, though down 1.9% compared with Fiscal Year(FY) 2015 thanks to loan restructuring, this remains a worrying sign of the stagnant economy. All other indicators appear more positive. Net-interest growth of 7.8% on the back of an increase in loans and advances is also healthy. Furthermore, aggregate loan growth of 12.5% in FY2015 compared with FY2014 indicates general stability in the sector. Gross loan growth of 13.5% for Q1-Q2 of FY2016 is also encouraging. Generally encouraging in the economy is that the percentage of those with bad Fica ratings has shrunk by 6% compared with comparable periods of FY2015. Also encouraging is that the quarterly growth for Q1 FY2016 between retail and corporate lending has been much more similar than in previous years with retail loans growing 5.4% and corporate loans growing 5.6%.
Nonetheless the percentage of South Africans without a bank account remains shockingly high. Only 54% of South Africans have formal business dealings with a bank. Furthermore, only 9% of South Africans and 25% of small businesses use formal credit. This demonstrates a vast underutilization of the South African financial industry by the average consumer and demonstrates that there is still a lot of work that needs to be done.
Regulation-
South Africa has moved to adopt what is internationally known as the Twin Peaks model that it hopes will help address the issues exposed with the banking system in the post-2008 crash; however, others fear that this will lead to onerous and unecessarily complicated regulation that will make the system more convoluted and not better.
The Johannesburg Stock Exchange
The Johannesburg Stock Exchange is the oldest stock exchange in Africa having been founded in 1887 to list and sell stock in early diamond mining companies in the Transvaal. It has since grown to be worth nearly 1 trillion U.S. dollars-around 934bn USD- with 37o companies, this is very impressive and a testament to the value of the diamond market given that, by comparison, the New York Stock Exchange has an aggregate value of $15 trillion with 2800 companies. -Nicholas Polansky