An Insatiable Appetite for Profit

American Poet Robert Frost once remarked that a bank is a place where they’ll lend you an umbrella in fair weather and ask for it back when it begins to rain. 

When it comes to our national discourse on social and economic matters, Namibia’s commercial banks have largely escaped scrutiny over their role in uplifting the most vulnerable in society.

This despite the fact that they generate billions of dollars from a society grappling with high levels of poverty, unemployment, hunger and inequality.

Among others, commercial banks sponsor some sports events, donate computer equipment to rural schools, or finance an SME organisation that promotes entrepreneurship.

These are all welcome gestures that we think make a difference in the lives of the beneficiaries.

Nonetheless, these corporate social responsibility (CSR) undertakings are disproportionate to the profits commercial banks generate and the potential impact they can have on society.

They do not engage in CSR activities out of largesse, but for economic and opportunistic reasons.

Commercial banks seem to be guided by the Namibian Financial Sector Charter of 2009, which states that “each financial institution shall contribute to corporate social investment at least 0,25% of its estimated after-tax income…”. 

As per FirstRand Namibia’s business model, channeling at least 1% of net profit towards CSR constitutes their commitment to the communities they serve.

The Capricorn Group allocates 0,75% of its net profit while its subsidiaries give 0,15% to their own CSR activities.

Standard Bank Namibia Holdings pledges 1% of net profit to corporate social investment.

In terms of the Financial Sector Charter, these banks are doing ‘very well’ as their CSR disbursement is above the prescribed 0,25%.
The Bank of Namibia (BoN) does not have regulations on commercial banks’ CSR spending.

PROFITS

In 2022, the Capricorn Group (Bank Windhoek) and FirstRand Namibia made a colossal combined profit of N$2,3 billion.
Together they control 70% of the country’s banking activities.

Their bosses, Thinus Prinsloo (Capricon) and Conrad Dempsey (FirstRand), earned a combined amount of N$13 million.
Assuming each is paid N$6,5 million a year, this equates to N$541 666 a month.

Banks’ profits do not necessarily increase as a result of better management, but the continuing rise in fees for products and services and BoN increasing the repo rate.

In mid-February 2023, a BoN monetary policy committee meeting raised the repo rate from 6,75% to 7%. Two months later, it was increased again – to 7,25%.

This has financial implications for commercial banks when it comes to the interest rates they charge on their various offerings.

BoN’s ‘Banking Fees and Charges Comparison Report of 2022’ highlighted that Namibian commercial banks make more than N$310 million a month from the fees they charge for anything and everything.

This has led Namibians on various social media platforms to jokingly assert that a particular bank charges clients for merely walking past an ATM.

Humour aside, these are the same institutions that will repossess your house even after you’ve honoured more than 90% of the mortgage.

HUMANITY…

Namibian banks have an insatiable desire to maximise profits.

Banks are human institutions and should develop a spirit of solidarity with their clients.

Instead of engaging in frivolous attempts at changing the age limit of bank directors, BoN should develop a CSR policy and strategy that compels banks to dedicate at least 7-11% of their net profit to CSR activities.

This should be in strategic sectors of the economy and should complement the country’s overall national development agenda.

For instance, direct grants to tourism start-ups coupled with mentorship programmes facilitated by the bank, or earmarking funds for promoting food security.

Ascertaining whether or not central banks in other jurisdictions dictate how much commercial banks should spend on CSR is beyond the purview of this piece. What is clear is that a country as unequal as Namibia should act on this issue.

We are by no means suggesting that commercial banks do nothing.

FNB recently offered N$7,5 million in sponsorships towards the Women Soccer League over three years; Standard Bank’s Buy-a-Brick initiative has been running for some time; Nedbank’s Go Green Fund continues to support education on biodiversity conservation; Bank Windhoek invests in various community projects.

These are all laudable interventions, but more should and can be done.

FAIR SHARE

As the custodian “committed to a prosperous Namibia” as encapsulated in their mission statement, BoN has a moral, social and economic responsibility to ensure commercial banks invest a fair share of their net income in the communities they derive huge profits from.

In his book titled ‘Capital and Ideology’, French economist Thomas Piketty, argues “every human society needs to justify its inequalities, and every justification contains its share of truth and exaggeration, boldness and cowardice, idealism and self-interest”.

Banks’ interests should be aligned to those of the public in which they operate, and we should not expect them to do so meaningfully without intervention from our central bank.

• Rui Tyitende is a political scientist. Ellison Tjirera is a sociologist.

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