(Photo by Sipho Maluka/Sunday Sun/Gallo Images/Getty Images)
South Africa’s big banks have recently reported stellar earnings growth as part of their spirited bounceback from the Covid-induced slump. But not all is back to where it was prior to the pandemic, as banks continue to shed jobs to adapt to the digital era.
Earlier this week, Absa reported that in the first half of 2022, the banking group increased its headline earnings by 27% to R11-billion. The bank has more than recovered from Covid-19’s onslaught, with all of its key measures above the pre-pandemic levels recorded in the first half of 2019.
A deeper look into Absa’s results shows that it, like many of its competitors, has also grown its digitally-active customer base. Absa now has 2.8 million digitally-active customers. In the first half of 2019, less than half that (1.3 million) were using its digital banking platforms.
Covid-19 pushed banks to invest more in their digital offerings, as customers opted to forgo making transactions in branches. According to the World Bank’s recent Global Findex survey, the share of adults making or receiving digital payments in developing economies grew from 35% in 2014 to 57% in 2021.
Absa increased its investment in new digital, data and automation capabilities to R9.7-billion, compared with R7.7-billion in the same period last year. The bank’s cash transportation costs decreased by 5%, reflecting “lower merchant cash volumes supported by a migration towards digital banking”.
With less people visiting branches, something has to give.
Absa’s total employee numbers have fallen to 35 074 in the first half of 2022 from 39 763 during the same period in 2019.
Absa told Mail & Guardian this week that the role of its customer-facing staff “has evolved in response to customers’ increasingly digital preferences, a trend that was amplified during the pandemic”.
Few staff members, Absa said, now have jobs as tellers and most have multifunctional roles “as part of our data-led design for a future-fit branch network”.
When asked whether Absa has any plans to significantly expand its workforce, it said, “as we pursue growth across all of our business units in alignment with our strategy, there may be an effect on employee numbers, although employee number growth does not always follow revenue growth”.
A similar trend is laid bare in Nedbank’s interim financial results, released last week. Like Absa, the bank’s headline earnings grew 27% compared to the first half of 2021, to R6.2-billion.
Nedbank’s digitally active clients also increased, from 26% of its customer base in 2019 to 37% in 2022.
But its staff numbers dwindled. In the first half of 2019, Nedbank employed 30 335 workers. It now has 26 791 permanent and temporary employees on its payroll.
The changing world of work
Werner Terblanche, managing executive of Nedbank Integrated Channels, noted that the bank had seen a 20% to 30% reduction in over-the-counter service volumes year-on-year, as clients opted for more convenient alternatives.
Nedbank expects this trend to continue. Terblanche emphasised, however, that Nedbank strives to be “digital when you want it and human when you need us”.
The bank is, therefore, focusing on multi-skilling its workforce “to unlock exponential value for us and our clients alike. Growth in our workforce is therefore more aimed at growing the capacity available to clients for things that add value to them, rather than growth in absolute workforce numbers. Where demand fundamentally changes, we right-size through natural attrition.”
Employee numbers of other banks also indicate workforce reductions — except for Capitec, which has bucked the trend by steadily increasing its staff numbers as it adds more branches.
Prior to the pandemic, in July 2019, finance union South African Society of Bank Officials (Sasbo) warned of higher job losses in the sector.
“We made it clear that we are not oblivious to the changing world of work, the impact of technology, and the introduction of the digital and data transformation; but enough is enough,” Sasbo general secretary Joe Kokela said at the time.
“Sasbo cannot continue to be an innocent bystander in seeing our members losing their jobs on a regular basis, contributing to the high unemployment and then expect them to survive in a wilting economy.”
One only needs to look at the data to see that the reduction in the finance sector’s workforce has been a long time coming.
According to Statistics South Africa’s quarterly employment data, total employment in the sector grew significantly between 2010 and about 2013. Employment continued to grow, though at a slower rate, until 2016, when jobs started to decline.
In the first quarter of 2016, there were 327 447 jobs in the sector. By the first quarter of this year, almost 82 950 of those had disappeared.
As Kokela pointed out in 2019, job losses in the sector are at the centre of South Africa’s unemployment crisis.
The acute rise in unemployment after the 2008 global financial crisis was decades in the making. Prior to that recession, there was a long-term decline of labour-intensive sectors such as mining and agriculture. Post-1994, there was also a considerable increase in demand for services, once restricted by apartheid-era laws, leading to a change in the structure of South Africa’s economy.
‘Disruptor’
Since 1993, the size of South Africa’s finance and business service industry has increased massively, becoming a major driver in the country’s GDP growth. In the first quarter of this year, the industry contributed 0.4% to the 1.9% growth in GDP. Manufacturing is the only industry to contribute more than that, adding 0.6% to the GDP.
Construction and mining each recorded negative growth in the first quarter.
Even as South Africa’s GDP recorded growth after the pandemic, which caused the economy to contract 6.4% in 2020, the unemployment rate increased. Analysts have warned that, unless there is significant growth in South Africa’s labour-intensive industries, the unemployment rate will remain stubbornly high — especially as services become even more prone to digitalisation.
StatsSA is set to release new jobs data next week, which will show whether the country’s unemployment rate has continued to decline after recording its first true retreat since the last quarter of 2018.
Speaking to M&G this week, Kokela said that many of the banking jobs lost during the course of the pandemic were the result of natural attrition. Some employees also lost their jobs after not complying to now-reversed mandatory vaccination policies, he said.
The turn to digital banking will continue to threaten jobs, unless banks find ways to re-skill their current employees, Kokela added.
“It will carry on. It is a disruptor that is taking jobs … Digital is really doing its part in reducing job numbers, and it will do so unless the banks become innovative and look at how to move people around and ensure they get into other positions.”
[/membership]