Postbank could speed up change
Creating a state-owned bank is seen as being central to the speedier transformation of South Africa’s financial services sector. It was an issue that came to the fore again this week when Parliament heard presentations on transformation in the industry.
Labour federation Cosatu, for one, bemoaned the slow progress in forming a state bank to serve the working class and the poor.
Instead of being primarily driven to generate profits and returns for its shareholders, a state bank would be equipped to cater for the government’s development agenda.
But one is on its way. After years of due process, the South African Post Office is embarking on what it hopes will be the final stretch before becoming the Postbank, a fully fledged banking service provider.
Postbank currently serves as a savings bank, but legislation was passed in 2010 to allow it to offer transactional facilities. Seven years later, its banking licence is finally within reach. At the end of January, the Post Office told Parliament it would submit an application to become a fully fledged bank by mid-2017.
Research house Intellidex, in its submission to Parliament, said the call for a state-owned bank was “at least in part motivated by the view that the existing market fails to cater adequately for black customers.
“We think these calls are ill-founded, given that the state is already heavily involved in the financial services industry.”
It suggested that the country should turn to existing state institutions in the financial services sector, including Postbank, and support their capacity in order to fill any gaps in the market.
“All of the issues raised in debates about a state-owned bank can be addressed by expanding and supporting existing state institutions,” Intellidex said in its submission.
“These institutions have experience and skills that would be difficult to replicate in new institutions.”
Shaheen Adam, acting Managing Director of Postbank said the bank already had R2.7-billion capital to draw on, much more than the R1.1-billion required for the licence.
Postbank currently holds deposits and offers basic transaction services to low income South Africans. Adam said the bank offers low fees, but they are not the lowest overall as private banks are able to cross-subsidise transaction fees with lending income.
The next step for Postbank will at last allow it to offer formal lending products.
Adam said Postbank would drive radical economic transformation through providing cheaper financial products to largely unserved market. Unlike private banks, Postbank has a financial inclusion mandate and is less concerned with generating returns for its shareholders. It would still have to be careful not to take on unnecessary risk Adam said.
The bank will start small, and will be able to fund itself through current deposits and investment totalling R7.6-billion, Adam said.
In time Postbank could seek funding from the market or government, “but it’s not meant to be a drain on the fiscus,” he said.