Postbank to move from Post Office to challenge the ‘big four’
Minister confirms new bank will be aimed at the financially excluded and the country’s poor, but will not be ‘reckless’ in its lending
SA is close to spinning the Postbank out of the post office and using it to lend to the country’s poor and distribute welfare grants, in a bid to loosen the grip of private sector banks.
Financial services, the largest sector of the South African economy at 20% of nominal GDP, has long been perceived as being dominated by the country’s big four banks — Standard Bank, FirstRand, Barclays Africa and Nedbank — which control about 90% of the market. The government aims to address this through "radical economic transformation", which is understood by some to mean nationalisation and ownership transfers to the black majority.
"It’s not going to be a normal bank like the big four. It’s going to be a development bank to deal with the market that is not being served at the moment," Telecommunications and Postal Services Minister Siyabonga Cwele told Reuters on the sidelines of the World Economic Forum on Africa on Thursday. "It’s a higher risk, but we are not saying we are going to be reckless in our lending, but we must take the risk of funding entrepreneurs with small loans."
Unsecured lending in SA is seen as lucrative but risky after the collapse of African Bank in 2014 triggered a central bank bailout, but giving a banking licence to SA’s Post Office (SAPO) would allow it to use its 1,500 branches to provide credit and other financial services to millions of people without assets.
"We are going to need a very strong risk management system," Cwele said. "The issue of financial inclusion is part of radical economic transformation. We are not talking about reckless access to finance."
A 2016 survey by FinScope found that about 11% of the adult population were "financially excluded" or "unbanked", accounting for more than 4.3-million adults. SAPO’s Postbank has about R1.4bn in excess capital, already enough to meet regulatory minimum requirements for a bank. SAPO plans to list the business as a bank by July.
Its positive financial position contrasts with SAPO as a whole, which is supported by a R4.4bn state guarantee and is set to record a loss of more than R1bn in the 2015-16 financial year. In the previous financial year it lost R1.5bn after industrial action prompted major clients to pull out.