The exclusionary practices of South African banks: A call for 'radical rethinking'

South Africa’s financial sector was in the spotlight for perpetuating systemic inequalities that threaten the ideals of inclusivity and transformation that should guide this nation.

During the joint sitting of the Standing Committee on Finance and the Trade, Industry, and Competition Portfolio Committee, parliamentarians noted with concern that South Africa’s banking services remain exclusionary, unjust, and plagued with anti-competitive behaviour.

The activities of South Africa’s top banks, from the blatant preferential treatment of certain companies to the arbitrary closure of accounts, reveal a sector that continues to perpetuate historical injustices.

MK Party MP Sanele Mwali, bluntly asking why controversial corporate giants like Steinhoff and Glencore are continuously serviced by banks while shutting down the accounts of smaller, often black-owned entities, gets to the heart of the matter. This practice brings to light not only the hypocrisy of banking operations but systemic racism that persists in the country, stubbornly resistant to all post-apartheid attempts at transformation. Finally, the banks assert that they do not discriminate in their operations. However, the reality is that they set out to accomplish the goal of pretending that a non-discriminatory environment exists.

The random suspension of accounts may be the most outrageous example of the violation of the rights of consumers in the banking sector. Most Black South Africans and other sanctioned businesses are utterly defenceless, having been shut without any appeal process. As Brian Molefe, MK Party MP, pointed out, the reasons for these closures are often based on non-South African laws, which renders these institutions devoid of any responsibility. This poses significant problems regarding consumer protection within an industry that is supposed to operate for the benefit of the people. What will happen to an individual's most basic economic rights when there is no substantive justification or way to complain about restricting their access to their money? The failure to put in place an independent body that would be responsible for account closures is a blind spot that allows and, at the same time, deepens the injustice.

Molefe’s plea for legal measures to manage the sector is vital. The lack of regulation exposes consumers to harsh treatment from banking monopolies. As Molefe rightly points out, public service banking in South Africa is a government prescription. The service is treated like a private club with high entry hurdles and secretive processes designed to sustain the status quo. Banks' continued refusal to provide even basic explanations for account closures hints at their contempt for those who sustain these institutions.

This ongoing exclusion cannot be ignored. EFF MP Omphile Maotwe's criticisms of the Reserve Bank and the Financial Sector Conduct Authority (FSCA) also shine a light on the failure of regulatory bodies to enforce genuine transformation. Despite the persistent rhetoric from the South African Reserve Bank (SARB) and bodies like the Banking Association of South Africa (BASA) that progress has been made, the lived experiences of marginalised communities tell a different story. High fees, poor customer service, and a reluctance to support black-owned businesses are rampant across the industry. It is unsurprising, therefore, that the banks continue to be dominated by a white minority, a reflection of the apartheid-era inequities that have never been fully addressed.

While some within these institutions claim to have embraced transformation, the evidence is scant. BASA's response to the criticisms, claiming that its members have never been found guilty of discriminatory behaviour, is little more than lip service. They fail to acknowledge the inherent power imbalance between these banks and the majority of South Africans, particularly Black South Africans. In its written presentation to the committee, the association said that the law prohibits banks from discriminating and victimising customers. It goes as far as to say if credible allegations of discrimination by banks are brought to light, they should be fully investigated. 

However, there is little evidence and insufficient examples of banks being held accountable for their actions. 

One of the most revealing aspects of the banking sector is the glaring lack of meaningful transformation. Only 11% of Black women are top senior bank managers. When smaller, black-owned businesses are denied financial services, the institutions that do so hide behind vague legal jargon and red tape processes. South Africa’s banking sector serves the privileged few and the majority financially marginalised.

The answer lies in significant regulatory and legislative reform of banking laws from apartheid. If South Africa is to meet its transformation goals truly, it cannot afford to have a financial sector that continues to operate above the law. The government must prioritise developing policies that hold financial institutions accountable. Maotwe's suggestion of a nationalised bank or state-run alternatives could be part of this solution. But more urgently, the sector must undergo a radical rethinking, where financial services are seen as a right for all rather than a privilege for a select few.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.