The broader context to this assessment is that the savings and investment industry — the principal custodian of South Africa’s savings — makes an invaluable contribution to socio-economic growth and development. It provides long-term capital of about R1-trillion by investing in government bonds, municipal bonds and infrastructure projects necessary to grow the economy and extend basic services to more people.
Since 1994, enormous progress has been made in improving access to financial services. Industry players have expanded their footprints and elevated the quality of financial advice available to consumers. According to the annual Finscope survey, 30.7-million South Africans were making use of financial products and services in 2013, 800 000 more than in 2012.
This indicates that financial inclusion is steadily becoming a reality, therefore moving towards the National Development Plan (NDP) goal of providing 90% of adult South Africans with access to regulated financial services by 2030. There is no doubt that the Financial Sector Charter, which came into effect in January 2004, has made and will continue to make a definitive contribution to addressing the imbalances of the past and making South Africa a more inclusive society.
To this end, the industry has set up an enterprise development fund to assist in job creation and a foundation to promote much needed financial literacy and consumer education. The focus has shifted to the consumer with improved disclosure, transparency, flexibility and innovation, a deeper understanding of clients’ needs and value for money. In 1994, the industry was more product and distribution focused.
SA a global centre of excellence
Our industry peers from other countries often seek to learn from us; our creativity and experience in operating in a complex risk environment is world class. From the perspective of financial product innovation, South Africa has become a global centre of excellence.
In this regard, individual life insurance products and the latest investment product ranges are prime examples of product innovation. Underpinning the progress in our industry has been the resilience and stability of our local financial services environment, especially when one considers the turmoil that has engulfed financial markets in many parts of the world.
It is a feather in South Africa’s cap that our financial services industry, across its different facets, is so highly rated internationally and that our compliance, governance, efficiency and security is right up there with the best in the world. In the latest World Economic Forum Global Competitiveness Index, we rank third in the world in financial market development and second in the accountability of our private institutions.
I am confident that the implementation of the NDP, if undertaken with wholehearted collaboration by government, industry players and individuals alike, is potentially a game-changer. With financial wellness a pre-requisite for any healthy society, the NDP can act as a stimulant for boosting the savings rate in South Africa. It can also help to make the savings and investment industry even more competitive than it already is, providing more cost-effective services and greater value for money for consumers.
Finally, the regulatory environment will continue to have an enormous impact on the industry. Much of what is happening on the regulatory reform front originates from global developments, but these changes need to be customised for the specific development needs of our country.
A raft of regulations has been introduced over the past few years, most of it aimed at protecting the consumer, such as the Consumer Protection Act, National Credit Act, Protection of Personal Information Act and more recently the Treating Customers Fairly initiative. It is in this spirit that the industry continues to collaborate closely with regulatory authorities to seek certainty in relation to the solvency assessment and management framework and the so-called Twin Peaks compliance model aimed at separating market conduct and prudential requirements.
The progress made in the financial services arena has provided the springboard for the development of a highly competitive savings and investment industry, which continues to play its vital role in building a more prosperous and equitable society.
Nicolaas Kruger is the chief executive of MMI Holdings.
This article is part of a larger supplement. All contents have been sourced independently by the Mail & Guardian's Supplements editorial team.