Bridging the financial divide

The financial services sector stands at the heart of the South African economy. It is the cord that binds consumer, corporate and company. Yet the economy is lacklustre and access to financial services remains limited for most individuals and small businesses. These imbalances introduce challenges that continue to press against the barriers of inclusion and transformation. The question that weighs on the mind of the financial services sector is what role it can play in redressing these gross imbalances and how it can make a fundamental difference going forward. This sector is, after all, vital in achieving full economic transformation.

“This world is made of two classes — the citizens of somewhere and the citizens of nowhere,” says Khaya Sithole, political commentator. “Just look at the juxtaposition of Sandton and Alexandra township — their geographical proximity is the direct opposite of their social and economic situations, and this points to a broken compact. We need to look at how the financial sector can play a role in shifting this dynamic.”

There is a divide between those who have and those who do not. The person in Soweto purchasing and insuring their car will pay more than the person in Bryanston because their home is seen as a security risk. This places an even heavier financial burden on those who are already struggling, those who need that car to ensure they get to work, to help them avoid the four-hour commute each morning and evening, a commute that’s unreliable and can lose them their jobs if they are late. The financial sector is under pressure to step into this morass of inequality to create solutions that create a real impact.

“We are an economy of two worlds, one that is developed and sophisticated and one that is not,” says Phumzile Langeni, investment envoy, South African Presidency. “If we are just in pursuit of profit we are ignoring the development requirements that we should be focusing on as a developing nation. We need to talk about sustainability, communities, employees and the supply chain — the key tenets of a sustainable society. If we [just] took a hard-line approach that says every man for himself, we would be a much poorer nation.”

One of the first steps to inclusion is to make financial services more accessible on the grassroots level; take the verbiage and the complexity out of what it can offer and use a more universal language so ordinary people can make informed financial decisions. It is easy for those who work in the industry to understand the impact of macroeconomics, microeconomics, insurance, investment and financial planning, but this is not an easy landscape to navigate for many South Africans.

“Those who work in financial services have a responsibility to explain how the industry and economy work to the ordinary South African,” says Lesiba Mothata, chief client officer, Alexander Forbes. “We need to construct ideas that are more inclusive. We need to take these ideas even further and demonstrate inclusion, and have a clearer understanding as to what this means for the average South African.”

The reality is that change has not benefited all people and communities. The fruits of success and inclusion haven’t been eaten by all South Africans. There remains the perception that the economy only caters for an elite and it has never been more important for those in the financial sector to change this view and enhance understanding, to make tangible changes in how the financial sector approaches smaller entities, inclusion and diversity.

“If you look at Saudi Arabia, they have similar challenges to us in terms of how their economy is driven by set resources and their need to diversify into other things for long-term success,” says Mothata. “They have developed a Vision 2030 that looks at diversification and channels of growth and I think we need to do something similar. We must be clear on where we are going and not accept the status quo. Growth comes from the same places, locations and sources right now and this cannot happen indefinitely. There are alternatives that we can consider when it comes to inclusive growth such as moving the wealth out of the tier-one cities – Cape Town, Johannesburg, Durban and Bloemfontein – and looking at the opportunities that lie within the tier-two cities where growth can be nurtured.”

It is also incumbent on business to drive the change it wants to see. It isn’t useful for enterprises to sit back and wait for the government broom to sweep the economy clean. The passive mentality won’t make any difference to the inclusion and growth required to benefit South Africa. One area in which big business can already make a difference is in the small business sector. The small business and the entrepreneur are vital components of economic growth and financial inclusion, and enterprise can be more proactive in supporting their growth.

“Smaller businesses are the engine of many economies and we need to establish how we can empower them and make them part-and-parcel of the value chain in South Africa,” says Ndabe Mkhize, chief investment officer, Eskom Pension and Provident Fund. “In South Africa, unlike most developed countries, the value chain does not support participation of the small, medium and micro enterprise (SMME). We should be making space for these businesses.”


The reality is that the SMME faces an uphill red tape battle and limited access to enterprise supply chains or investment funds. Early stage businesses need assistance and there must be a commitment from both the financial sector and the enterprise to catalyse growth and investment. There has to be a knock-on effect that flows down the value chain, driving growth from the enterprise to the SMME.

The financial services sector is the backbone of the economy and influences the daily lives of the South African people. There is little doubt that it can have a significant impact on strategic economic growth, inequality and inclusion. It is, however, not just the facilitator of economic growth: it is a sector that’s crucial to the success of the country and can contribute to an equal society. But within all this lies the question — can the financial services sector devise a compact that will show how it can catalyse private investment to spur economic growth?

“We must frame any compact in a way that is accessible to all South Africans and define the scope of the investment, where it is focused and which cities will benefit,” concludes Mothata. “We need to look at areas of potential growth and which commodities and value chains should be the centre of our focus and devise a compact that is clear, easily understood and without jargon. It would be a great tragedy to not bridge the divide between Sandton and Alex. This disconnect is the biggest threat our country faces today.”

If there ever was a time for the financial services sector to step up and remove the barriers that prevent South Africans from realising their full potential, it is today. This is crucial to transforming economic performance, reducing inequality and shifting the growth parameters of the country. 

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Tamsin Oxford
Tamsin Oxford
I am a professional editor, journalist, blogger, wordsmith, social junkie and writer with over 19 years of experience in both magazine publishing and Public Relations.
Advertising

‘Tenderpreneurs’ block the delivery of protective equipment to schools

Protests by local suppliers have delayed PPE delivery, which according to the DBE, is one of the reasons the reopening of schools has been pushed back until June 8

‘Soon he’ll be seen as threatening, not cute’: What it’s...

There is no separating George Floyd’s killing from the struggles black people have faced ever since the first slave ships landed on these shores

How schools could work during Covid

Ahead of their opening, the basic education department has given schools three models to consider to ensure physical distancing
Advertising

Press Releases

Mining company uses rich seam of technology to gear up for Covid-19

Itec Direct technology provides instant temperature screening of staff returniing to the workplace with no human contact

Covid-19 and Back to School Webinar

If our educators can take care of themselves, they can take care of the children they teach

5G technology is the future

Besides a healthcare problem Covid-19 is also a data issue and 5G technology, with its lightning speed, can help to curb its spread

JTI off to court for tobacco ban: Government not listening to industry or consumers

The tobacco ban places 109 000 jobs and 179 000 wholesalers and retailers at risk — including the livelihood of emerging farmers

Holistic Financial Planning for Professionals Webinar

Our lives are constantly in flux, so it makes sense that your financial planning must be reviewed frequently — preferably on an annual basis

Undeterred by Covid-19 pandemic, China and Africa hold hands, building a community of a shared future for mankind

It is clear that building a community with a shared future for all mankind has become a more pressing task than ever before

Wills, Estate Administration and Succession Planning Webinar

Capital Legacy has had no slowdown in lockdown regarding turnaround with clients, in storing or retrieving wills and in answering their questions

Call for Expression of Interest: Training supply and needs assessment to support the energy transition in South Africa

GIZ invites eligible and professional companies with local presence in South Africa to participate in this tender to support the energy transition

The best local and international journalism

handpicked and in your inbox every weekday