JOHANNESBURG – South Africa’s banks are facing increasing criticism over the emotive issue of banking charges, as debate continues over whether allowing foreign players into the market will make it more competitive.
An official study last year confirmed the suspicions of many irate South Africans – it found that local banks charge much more for basic transactions than those in Australia, Britain, Canada, Germany, Ireland, New Zealand and the United States. The “Competition in South African Banking” report also found that South Africans pay for services which are free in developed countries – such as depositing money in their accounts – while charges have been rising at a rate well above inflation.There was outrage when newspapers published excerpts from the report on the internet late last year, before they were mysteriously withdrawn – testimony to sensitivity over any talk of official intervention in the lucrative financial sector.”It is quite painful to check your statement and see all those charges,” said Thami Bulani, chairman of the independent National Consumer Forum (NCF).”I really feel the banks are exploiting us big-time, it is something we have to respond to.”The report said that between 1999 and 2003 service fees on current accounts doubled, while annual credit card fees rose 29 per cent.It also pointed out that the cost of these charges were often not communicated effectively to customers.One of South Africa’s four biggest banks, FirstRand, was so concerned by the furore it came out with a full page newspaper advertisement saying: “Bank charges? What Bank charges?” Sources close to the report – carried out by experts from the Treasury, the central bank and the private sector – say it will eventually be made public, and a “dialogue” on the issues raised will take place this year.Bulani said he did not think anything would change without pressure from activists.The NCF had researched the topic which would be the focus of the first edition of a newspaper it was launching in February, he said.The country’s main watchdog, the Competition Commission, also says that banking is a priority in 2005, but it has not yet decided whether to launch a formal investigation into the issues highlighted by the report.”We are doing preliminary research into the industry this year to see if there are anti-competitive issues,” the watchdog’s compliance manager Zodwa Ntuli told Reuters.She said the Commission had not yet decided whether to act on the report’s recommendation that South Africa’s payment system be investigated as complex monopoly, as it is owned by the four main banks and sets prices for the entire industry.Financial services account for a fifth of the continent’s biggest economy and South Africa’s four biggest banks – Absa, FirstRand, Nedcor, and Standard Bank control more than 80 per cent of the banking sector.”The report’s recommendations have not yet had a formal response although … there have been some changes in the landscape, most of them for the good,” said Penelope Hawkins, an independent researcher who helped compile the official report.She was referring to a series of initiatives by the big four to introduce special products for low-income earners, amid a growing outcry over the fact that more than half of the country’s adults could not afford bank accounts.”At the crux of the issue is the access of the average South African to payments and transfers and a safe store of money,” Hawkins told Reuters.”Ensuring this is improved is linked to the recommendation that the payment system be investigated as a complex monopoly.”South Africa’s banking council, an independent industry body, told Reuters it had made “positive and constructive” responses to issues raised by the report in a submission to the Treasury at the end of December.It declined to elaborate.Absa, the country’s biggest retail bank and mortgage lender, was more forthcoming.Its media manager Errol Smith told Reuters that it was unfair to compare South Africa’s banking system to those in fully developed economies.”We are a highly sophisticated banking system operating in a third world country. The best places to compare South Africa with would be Brazil and Argentina,” he said.Banking fees had to be higher in South Africa because of high costs – particularly from crime, fraud, and the expense of rolling out services to customers in remote areas, he said.Banking analysts tend to agree.They say any official intervention in the sector would have to be handled carefully to avoid spooking domestic and foreign investors, which could hurt the economy.But hopes are rising that if talk of potential foreign bank takeovers become reality, banking costs may start to fall.Barclays may be South Africa’s first foreign player, as it is in talks with Absa to take a majority stake and has applied to the banking regulator and finance minister for approval of a formal offer.Central bank chief Tito Mboweni said the presence of internationally-owned banks in South Africa would introduce more competition, which should benefit consumers.- Nampa-ReutersThe “Competition in South African Banking” report also found that South Africans pay for services which are free in developed countries – such as depositing money in their accounts – while charges have been rising at a rate well above inflation.There was outrage when newspapers published excerpts from the report on the internet late last year, before they were mysteriously withdrawn – testimony to sensitivity over any talk of official intervention in the lucrative financial sector.”It is quite painful to check your statement and see all those charges,” said Thami Bulani, chairman of the independent National Consumer Forum (NCF).”I really feel the banks are exploiting us big-time, it is something we have to respond to.”The report said that between 1999 and 2003 service fees on current accounts doubled, while annual credit card fees rose 29 per cent.It also pointed out that the cost of these charges were often not communicated effectively to customers.One of South Africa’s four biggest banks, FirstRand, was so concerned by the furore it came out with a full page newspaper advertisement saying: “Bank charges? What Bank charges?” Sources close to the report – carried out by experts from the Treasury, the central bank and the private sector – say it will eventually be made public, and a “dialogue” on the issues raised will take place this year.Bulani said he did not think anything would change without pressure from activists.The NCF had researched the topic which would be the focus of the first edition of a newspaper it was launching in February, he said.The country’s main watchdog, the Competition Commission, also says that banking is a priority in 2005, but it has not yet decided whether to launch a formal investigation into the issues highlighted by the report.”We are doing preliminary research into the industry this year to see if there are anti-competitive issues,” the watchdog’s compliance manager Zodwa Ntuli told Reuters.She said the Commission had not yet decided whether to act on the report’s recommendation that South Africa’s payment system be investigated as complex monopoly, as it is owned by the four main banks and sets prices for the entire industry.Financial services account for a fifth of the continent’s biggest economy and South Africa’s four biggest banks – Absa, FirstRand, Nedcor, and Standard Bank control more than 80 per cent of the banking sector.”The report’s recommendations have not yet had a formal response although … there have been some changes in the landscape, most of them for the good,” said Penelope Hawkins, an independent researcher who helped compile the official report.She was referring to a series of initiatives by the big four to introduce special products for low-income earners, amid a growing outcry over the fact that more than half of the country’s adults could not afford bank accounts.”At the crux of the issue is the access of the average South African to payments and transfers and a safe store of money,” Hawkins told Reuters.”Ensuring this is improved is linked to the recommendation that the payment system be investigated as a complex monopoly.”South Africa’s banking council, an independent industry body, told Reuters it had made “positive and constructive” responses to issues raised by the report in a submission to the Treasury at the end of December.It declined to elaborate.Absa, the country’s biggest retail bank and mortgage lender, was more forthcoming.Its media manager Errol Smith told Reuters that it was unfair to compare South Africa’s banking system to those in fully developed economies.”We are a highly sophisticated banking system operating in a third world country. The best places to compare South Africa with would be Brazil and Argentina,” he said.Banking fees had to be higher in South Africa because of high costs – particularly from crime, fraud, and the expense of rolling out services to customers in remote areas, he said.Banking analysts tend to agree.They say any official intervention in the sector would have to be handled carefully to avoid spooking domestic and foreign investors, which could hurt the economy.But hopes are rising that if talk of potential foreign bank takeovers become reality, banking costs may start to fall.Barclays may be South Africa’s first foreign player, as it is in talks with Absa to take a majority stake and has applied to the banking regulator and finance minister for approval of a formal offer.Central bank chief Tito Mboweni said the presence of internationally-owned banks in South Africa would introduce more competition, which should benefit consumers.- Nampa-Reuters
