LAWS OR INCENTIVES?
Getting South Africans to save
2012 CARD FRAUD LOSSES DOWN Industry action is paying off
SA Edition 4 2013
Magazine of The Banking Association South Africa
Standard Chartered Bank’s CEO Ebenezer Essoka
‘Positioning South Africa as a global player’
Unsecured Lending We’ve got to get it right
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05 MD’s Message
The Banking Association South Africa MD Cas Coovadia
Ebenezer “Ebby” Essoka: the road ahead Standard Chartered Bank’s Chief Executive says African banks must develop a clear plan of action
Helping South Africa to save The National Treasury’s proposals for incentivising saving
18 Special Focus
Unsecured Lending: let’s get it right There are lessons to be drawn from the plight of Marikana
27 Banking IT Technology
Advanced payment technologies for SADC’s needs
2012 card fraud losses down Co-ordinated action is forcing card fraud patterns to change
33 Banking Association Members Introducing
Ithala Development Finance Corporation Limited
Repositioning itself to remain relevant in the ever-changing financial services market
35 Banking Association Members Introducing Ubank Limited Ubank is focused on increasing its distribution channels to ensure accessibility for its target communities
37 Business Life
Technology Faster tech tools for better mobile productivity
Growing sector skills
BANKSETA’s audit of the financial sector’s skills needs
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40 Banking News: South Africa
What – and who – is making news in South African banking?
43 Banking News: International
News bites from banking and the financial sector around the world
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Meet the Bankers JP Morgan’s John Coulter and the reminiscences of a stockbroker
48 Product News
New products for the business of finance – and for financial people
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2012/12/14 11:01 AM
MD’s Message Uniting South Africa around a common vision to achieve prosperity and equity
he year 2012 is coming to a close, and as we approach 2013, we continue to grapple with our role as individuals and society in addressing the country’s critical challenges and enabling South Africa to reach its full potential. The country will be, to some extent, engulfed in the robust debates, disputes, engagements and, sometimes, battles leading to Manguang. However, we need to rise above that and come together around a common vision and plan for the country. I believe the National Development Plan (NDP) is that vision and plan! South Africa still faces three major challenges, namely, poverty, unemployment and inequality. The recent Census data, as provided by Statistics South Africa, suggests that much progress has been made since 1994, but that the three challenges still exist, and in the case of inequality, the trajectory points to worsening disparities. The country now needs to address the human development challenges of education, infrastructure, health, inequity, and so forth. While also implementing the hard decisions, we need to promote investment and economic growth. I am convinced the NDP gives all sectors of South African society the platform on which to collaborate around a common vision to address these challenges. Its release elicited widespread support among divergent groups such that every stakeholder in SA Inc. has had to reflect on what role they might play to ensure that South Africa succeeds. This broad acceptance is an indication that the NDP has transcended politics and ideology to concentrate on the real hard issues facing the country. The two key challenges though are to ensure leaders in government, business, labour and broader civil society lead by example, and that the same common spirit that characterised the formulation of the NDP informs the implementation phase. All South Africans must, together, be seized with the question of how we can contribute to the realisation of the six NDP priorities, namely: • uniting all South Africans around a common vision and programme to achieve prosperity and equity; • promoting an active citizenry to strengthen development, democracy and accountability;
• bringing about faster economic growth, higher investment and greater labour absorption; • focusing on key capabilities of people and the state; • building a capable and developmental state; • encouraging strong leadership throughout society to work together to solve problems. For its part, the banking industry is looking at innovative ways of responding to the calls as espoused in the NDP, and to make its contribution to enabling South Africa to achieve sustainably high growth rates that must result in equity and development. We will also invite commentators to express their views on the NDP through this magazine, so that public debate on the plan and vision inspire innovation, effort and inspiration. For the banking industry, the formulation of the country’s vision, through the NDP, is an important development indeed. One of the key areas in the NDP is arresting the decline in infrastructure as well as the infrastructure needs that have arisen as a result of economic and population growth. The Banking Sector held a Banking Summit in August 2012 to explore innovative ways of financing infrastructure. Post-Summit, the banking sector, the Development Bank of Southern Africa, the Department of Public Enterprise and ASISA have held discussions to give practical meaning to infrastructure financing where the commercial banking sector, the Development Finance institutions and the government clearly spell out different, but complimentary roles in innovative infrastructure financing models. As this is our last edition for 2012, The Banking Association South Africa would like to wish you a happy festive, and a prosperous 2013. Cas Coovadia Managing Director, The Banking Association South Africa Edition 4
An African financial engineer Ebenezer Essoka has big plans for Africa and for Standard Chartered
ow-tie clad Ebenezer Essoka has a nuance, detailed knowledge of the continent whose banking system he has helped to transform for almost three decades. Apart from being the Chief Executive of Standard Chartered Bank South Africa, ‘I’ve been at the centre of commercial activities in Africa for a very long time, [having] started businesses, closed businesses, restructured businesses that were in a terminal state of decline, and repositioned many companies for sustainable growth,’ says the confident, proudly immodest Essoka, who, before joining Standard Chartered South Africa, held executive positions in eight of the bank’s African operations through time. He wants to be remembered as one of the “African financial engineers” who will construct a metaphorical super highway to link and consolidate the economic strength and potential of Africa’s 54 countries and one billion people. Essoka has brought this pan-Africanist stance to Standard Chartered South Africa and is emphatic that South African companies can use the bank’s extensive networks, connections and knowledge to successfully expand into Africa. But first, the rest of Africa needs to see the worth of a South African presence. ‘It is part of my job to promote South Africa as a reliable and trustworthy partner to the rest of Africa,’ he says. ‘In working with diverse business leaders and governments across the region, I have noticed there is a distinct gap in the continent’s understanding of the role South African business plays, and the potential role it can play in supporting and contributing to the continent’s collective prosperity.’ Essoka, or “Ebby”, as he is known to his colleagues, adds that South Africa is certainly taking steps to improve its competitive position and maintains that it is important to acknowledge this country’s progress. Citing two industry surveys – The World
Bank’s Doing Business Report and the World Economic Forum’s Global Competitiveness Report, he notes that there is significant improvement in the ease of trading across borders through the South African-led campaign to improve African customs processes. ‘South Africa has reduced the time, cost and administration required for international trade. It remains the most competitive market in sub-Saharan Africa. Markedly, South Africa is fortunate to have a sound financial services sector, which meets global standards, with a robust and transparent regulatory framework.’ On doing business in Africa and the benefits for South African business, Essoka explains that Africa shows greater resilience to global influences, notably the concerns around the economic outlook of more mature economies. ‘It’s still very much Africa’s time. Much of the growth on the continent remains domestic in nature, and with the progress the continent is making in improving the regulatory environment, infrastructure and fiscal stability, intra-African commercial activities are bound to increase. This will further fuel trade and investment opportunities with the rest of the globe.’ Cameroonian Essoka doesn’t believe that South African business has enough awareness that some of the world’s fastest growing economies are found in Africa. Sierra Leone, for instance, grew 30% in 2012 resulting from increased iron-ore production. He says that in 2011 Ghana grew over 14% with the discovery of oil. East Africa has also managed to grow rapidly, despite the global economic crisis, and is now set to be the world’s new energy hotspot, he maintains. ‘Standard Chartered is supporting the development of these key regions in Africa. For example, we were the official advisors on the sale of Cove Energy, an AIM-listed company with gas assets in Tanzania. Many industry watchers have referred to this as the largest upstream oil and gas deal in Africa this year.’
A critical success factor in expanding or investing in other regions is to find the financial partner who can assist them in carving a successful path of expansion.
South African companies looking to expand (which Essoka sees as an imperative for economic growth) should heed the fact that there is potential in Africa that is not easily replicable elsewhere. These include: the wealth of natural resources, dormant economic potential, the entrepreneurial zeal of the small-medium-sized enterprises, and gaps in infrastructure development, from real estate, to roads, bridges, airports and seaports. He is however aware of the problems of publicsector red tape and political instability in Africa, which may slow down the pace at which potential and development can be unlocked. Essoka also notes that the banking industry will ‘naturally do more’ with key sectors like metals, mining and agriculture.
ASIA AND THE MIDDLE EAST ‘Of course if South African companies must expand, Asia and the Middle East are also crucial locations for growth,’ says Essoka. He urges that South African companies use this country’s membership of the BRICS community as a valuable platform to identify opportunities in Asia. ‘A critical success factor in expanding or investing in other regions is to find the financial partner who can assist them in carving a successful path of expansion, introduce them to a valuable on-theground network and help steer them through the various regulatory hurdles. Standard Chartered is that ideal partner,’ he asserts. Asia and the Middle East also host the world’s fastest growing economies, and ‘South African companies should make every effort
Can you afford not to? 8
Of course if South African companies must expand, Asia and the Middle East are also crucial locations for growth. to participate in the trade corridors between these regions. It is not an option, but an imperative, as these corridors will spur valuable growth going forward, states Essoka. Invicta Holdings and Mediclinic are examples of South African companies that have positively positioned themselves in these regions. Standard Chartered was the industrial firm Invicta’s exclusive financial advisor in the recent acquisition of Kian Ann Engineering in Singapore – this acquisition looks set to boost Invicta’s revenues by an impressive 20%. Standard Chartered also supported Mediclinic’s completion of their acquisition of the UAE’s Emirates Health. ‘It is examples like these that support the transformation of South Africa’s economy – improving the country’s competitive edge and positioning South Africa as a global player,’ notes Essoka. According to Essoka, we are spoilt for statistics when highlighting the benefits of operating in the Asian and Middle Eastern trade corridors. ‘Take Africa and China, for example: trade between these two regions has grown 15-fold in the past decade to reach $166 billion in 2011, and is expected to increase a further three-fold over the next 10 years. China’s trade with Africa has not slowed as much as its trade volumes with other regions – yearon-year China still continues to increase its trading with Africa.’ Essoka believes that a shift in “economic gravity” from West to East is of great importance to South Africa, and the country must be well-positioned to take advantage of this emerging global dynamic. Writes Beth Shirley ■
Ebenezer Essoka has over thirty years of banking experience behind him. He has an unfailing commitment to the sector and particularly to Standard Chartered Bank. In 1993, he was named Standard Chartered Bank’s first African CEO, having started there in 1986 after a move from the US Bank of Boston. Essoka’s career has seen him managing eight operations at different points: in Gambia, Uganda, Zimbabwe, Côte d’Ivoire and Ghana, as well as the west and central Africa regions. He is a community-minded leader, and notably founded the Ghana Business Coalition Against HIV/AIDS. He has also spearheaded other nationwide initiatives in that country, including the supply of boreholes for clean water access. Essoka has studied all over the world: a Bachelor’s degree in science, an MBA in Finance, as well as a Diploma in International Business from Seton Hall University, New Jersey, USA; and senior development programmes at INSEAD, The London Business School, Oxford University and Cambridge University. He plays the drums and is most relaxed while listening to music (generally rhythm and blues and classical) with a glass of Merlot, preferably a 2001 Meerlust. Essoka loves football and is a devoted Arsenal fan. As a man of diverse interests, he has a penchant for good interior decorating. He is married, with twin teenage boys.
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SOS Save Our Savings! South Africa’s economic growth and well-being must be underpinned by its citizens’ savings – so we urgently need to improve our weak savings performance
outh Africans simply do not save enough – rather, we tend to spend. What is worse, credit is easy to obtain, that we are often spending money we do not have. The worrying reality is that the situation is worsening: household savings as a percentage of disposable income is falling with subsequent rising, debt levels. Savings fell another 0.2% in the first quarter of 2012 and debt as a proportion of disposable income in the same period was more than 75% compared to 53% just 10 years ago. According to the South Africa Reserve Bank (SARB), South Africa’s gross savings at the moment represent only 16% of GDP, compared to key emerging economies such as China and India at 52.3% and 31.6% respectively in 2010. To save South Africa – to grow the economy and to develop the means to deal with the problems like poverty – we must undertake a drive to save our savings. If more consumers opt to save through mechanisms such as retirement schemes, more capital is made available to increase the productive capacity of the country. This is achieved through the underlying investments in the private sector (through shares, for example) and through government schemes (such as government bonds). At present, South Africa’s economic development is heavily dependent on fickle foreign capital.
The only way to get people to save more is if they are forced to do so. This is especially true of a country that has so many people who are not financially literate. What is more, improved household savings will benefit individuals and ease the stressful levels of personal debt among consumers. But how can we save our savings – how can the nation be groomed to become more provident in matters financial? Innovative plans are being made by the Government to encourage a greater sense of awareness among South Africans of the need to save and to make savings and investment simpler and more attractive. The proposals, contained in a series of consultation papers [Technical Discussion Paper D for public comment], would offer tax-free returns in various instances, for example, interest-bearing accounts in bank deposits, retail savings bonds or interest-bearing unit trusts such as money-market funds; or equity accounts, which invest in shares or property unit trusts.
According to the proposals, earnings and capital growth within these after-tax savings schemes would be tax-free with a combined limit of R30 000 each year and a lifetime limit of R500 000 per individual. Welcome as such proposals may be, however, they must be seen in the context of the harsh realities of an emerging economy. The level of joblessness in South Africa is inordinately high, and it is problematic to encourage people to preserve retirement savings when there is no provision for basics like food. Nor can the task of changing attitudes and developing a culture of saving be left to state-driven incentive schemes or advertising campaigns. The financial services industry, which is interfacing daily with ordinary citizens, has a key role to play in educating consumers to the need to save.
Savings – forcing the issue South Africans are resisting to adopting a tradition of saving towards their future that orgnisations are forced to think on behalf of its employees The idea of a compulsory savings or pension scheme has been on the table in South Africa for well over a year, following the release of a discussion paper by National Treasury. This concept is being hotly debated in countries like New Zealand and Canada – where problems of implementation and public resistance have hindered progress. In South Africa, rising unemployment and growing personal debt are serious impediments to hopes of introducing such a scheme. Another factor is that any such pension or provident fund system requires faith in future government's promise or ability to pay workers their savings upon retirement. There is the risk, too, that citizens have no way to prevent the government from stealth confiscation of wealth. A historical example of this was Argentina, which tapped pension funds to stave off financial crisis. There may also be concerns that a compulsory savings scheme would impact negatively on other savings and investment, thus defeating the objective of boosting the country’s savings base.
In spite of all this, some countries have succeeded in introducing compulsory savings schemes – most notably Singapore and Australia. Working Singaporeans and their employers make monthly contributions to a Compulsory Provident Fund, which provides a basic pension for citizens when they reach the age of 55. The fund is also able to cater for such needs as housing, education and medical costs. In Australia, all businesses make a “superannuation contribution” for all employees aged 75 years or under. The minimum amount payable is nine percent of the employee’s earnings. Once a superannuation contribution is made, the employee (or superannuation fund member) cannot access the “preserved benefit” until reaching a specified age, which varies from 55 to 60 years. Alongside its compulsory pension scheme, Australia also has very attractive incentives for voluntary savings and investment. Edition 4
saving ‘We need to create an even more diversified financial service sector that will have a regulatory environment where it makes it possible for different types of financial institutions to service different segments of the market.’ South Africa’s excellent banking and well regulated financial services industry has developed a sophisticated range of products that can be used for saving purposes. These include products such as a life insurance, various pension schemes and retirement annuities, as well as discretionary savings such as savings accounts and unit trusts. Association for Savings and Investment South Africa (ASISA) CEO Leon Campher says his organisation has been working closely with National Treasury on the proposals. Members of ASISA, which includes most of South Africa’s investment fund companies, life insurance companies, investment managers, multi-managers and fund supermarkets, hold total assets of about R4.2-trillion. The financial services sector is estimated to be responsible for about a quarter of the country’s GDP. Large as it is, says Campher, more needs to be done to encourage South Africans to save more and the industry was looking at ways to stimulate savings, including by offering more innovative products and increasing financial literacy among consumers. Vital to this is the banking industry, comprising more than 70 banks – more than half of them foreign banks – which have established a presence in SA or acquired stakes in major local banks. This world-class industry, which has emerged relatively unscathed from the current financial crisis, has the depth of capital resources, the technology and infrastructure, as well as a strong regulatory and supervisory environment to enable it to become an even more powerful engine for growing savings. Cas Coovadia, Managing Director of The Banking Association of South Africa (Banking Association) is emphatic that the industry needs to do more, in particular among the vast numbers of the population who remain “unbanked”. ‘We need to create an even more diversified financial service sector that will have a regulatory environment where it makes it possible for different types of financial institutions to service different segments of the market,’ he said in a recent interview [widely published on the Internet]. ‘So you could have co-operative banks, village banks, savings and credit co-operatives, microfinance institutions. ‘We continuously work with government and the interaction between government and business is reasonably healthy – but we have challenges. While we have a very good policy environment, we fall short on implementation.’ But the issue of boosting savings cannot be left to government and to the financial institutions: a great responsibility also rests on the shoulders of ordinary citizens. The good news is that South Africa is rapidly developing an emerging middle class, 16
with the means and intelligence to manage sound financial affairs however; what’s discouraging is that this segment of the population tends to spend rather than save. It has had very little impact so far in changing the country’s savings profile. This is the challenge facing government, private sector and individuals alike – to change South Africans from spendthrift consumers to thrifty conservers. One example to follow would be the Chinese, whose legendary savings habits are built up by Confucian values of frugality, self-discipline and living within one’s means. A modest lifestyle and avoidance of debt were natural outcomes of this value system. Unfortunately, South Africans tend to be the exact opposite. Status-seeking, easy credit and a tendency towards instant gratification are a destructive combination, which militates against any effort to encourage people to save and pile up future financial problems. So what needs to be done? Quite clearly, the simplified and more attractive schemes outlined in the Treasury proposals are welcome. Innovative financial packages designed by the sophisticated, private financial sector will also be of benefit, but the drive for savings cannot simply end there. Education is vital to develop the culture of saving. The subject should be made part of the curriculum at school level, some experts suggest. Making South Africans more aware of their consumer rights, as detailed in the National Credit Act (NCA), is another key element. In this, the role of the financial services industry is vital – making information to consumers more accessible and easier to understand. Young people in particular need to be taught that the earlier they start saving the greater the long-term rewards. Experts suggest that it is vital that we save at least 10% of our salaries from the start of our working life. Financial institutions need to do better about educating people on the options that exist to save. Some critics are quick to point out that much effort goes into providing credit and promoting consumption and not enough into encouraging savings. This should not be about reducing access to credit but to guiding people away from the wrong type of credit. Banks need to do more to encourage deposits. Due to extremely low or zero interest rates offered by many banks to ordinary customers, saving is not attractive. Banks seem to concentrate on creating attractive credit opportunities but put insufficient emphasis on ways to save. It has been estimated that deposits by companies and financial institutions account for more than 60 percent of total deposits in banks, while retail or household deposits make up only 23 percent. Will all this education, all the attractive new schemes, all the tax incentives and the simplification of relevant tax regimes really help to boost savings?
Warren Ingram, a Director of Galileo Capital and the Financial Planning Institute’s Financial Planner of the Year in 2011, has his doubts. ‘I like the approach that the Treasury is taking,’ he says. ‘Some of the proposals are interesting and a notable step forward, but none of it is really going to be effective. The only way to get people to save more is if they are forced to do so. This is especially true of a country that has so many people who are not financially literate. ‘Even in a sophisticated country like the United States, people are not good savers; America is a prime consumer culture. A country like Singapore, however, has a great savings culture – because employers are obliged to pay the money into compulsory pension schemes. ‘The only sure way to ensure that people save is by making it a requirement of the law for employers to deduct a certain amount, for example 10 percent, from employees’ salaries and to ensure this
amount is not accessible until the employee reaches a certain age. This is the case in nine out of ten of the countries that have built a sound savings base.’ Another factor militating against savings, he says, is the welfare systems that exist in many countries. A case in point is China. While Chinese people have an innate culture of thrift and saving, part of the reason for this is that they do not enjoy the social safety-nets that exist in many countries – they must themselves save and provide for expenses like their children’s education, their medical expenses and their retirement. ‘Once people have got used to providing for themselves through statutory savings, a culture of saving can be developed,’ says Ingram, ‘but let’s start with the law.’ Writes Jonathan Hobday ■ Ref: National Treasury, Incentivising Retirement Savings, Technical Discussion Paper D for public comment, 4 October 2010. Edition 4
let’s get it right Lenders and regulators need to take action
s contentious as it may be to make the argument that unsecured lending contributed to the unrest in the mine village of Marikana in the North West province, there are some lessons that can be drawn from the incident by all stakeholders involved in unsecured lending. Following the death of miners at Lonmin’s Marikana mine, some politicians and certain sections of the media implied that mine workers demanded excessive wage increases partly because of over-indebtedness and microlenders who doled out unsecured loans largely to low-income earners. Bankers dismissed this as too simplistic a point to make about a mining village that battled political and socio-economic challenges, including a migrant labour system that continues to put pressure on workers’ finances. ‘Marikana is an emotional issue. The strikes are now in the Western Cape as well. If the media or the politicians want to use unsecured lending and over-indebtedness as an excuse for other fundamental issues then it’s late in the day,’ says Capitec’s CEO Riaan Stassen. Tami Sokutu, an Executive Director at African Bank Investments Limited, the largest unsecured lender in the country, adds: ‘To connect the incident as a real correlation to unsecured lending is too simplistic for such a complex issue. A point to bear in mind is that the customer initiates the borrowing and therefore it is not appropriate to place the full responsibility on the lenders. ‘What is also worth mentioning is that our model is premised on the fact that the provision of credit to customers is underpinned by the assumption that the customer will have the ability to repay the instalments (affordability calculation must be right) and that he will be employed into the future, hence it is in our best interest that the customer does not overextend himself,’ he says. Sokutu added that when African Bank extended credit the 18
company analysed if the customers had the ability to service the instalments. A glimpse into the National Credit Regulators (NCR) statistics weakens the argument that the growth in unsecured loans is largely driven by lending to the low-income segment. Over the last three years there has been an increase of close to 2 million credit-active customers in South Africa. These clients in the country are now over 19 million as compared to over 17 million in 2009. NCR statistics show that workers earning over R15 000 are the key drivers of the growth in unsecured loans. Unsecured credit granted in the second quarter ended June was R25.8 billion, compared to R21.9 billion in March 2012. About 37% (R9.5 billion), the largest portion of this R25.8 billion, was granted to people who earn over R15 000. This compares to the R2.3 billion granted to those earning up to R3 500, about R2.1 billion given to people whose income is between R3 501-R5 500 and R3.2 billion of unsecured credit granted to people who earn between R 5 501 and R7 500. The statistics show that unsecured credit constituted about 9% of the total outstanding debt, which is currently sitting at R1.3 trillion, undermining any talk of a threat to South Africa’s financial system. Despite the fact that the bulk of the unsecured credit in the countnry was granted to people earning over R15 000, there are lessons to be learned from the Marikana incident. Regulators need to look beyond the big credit providers and pay more attention to the smaller entities known as mashonisas. The National Credit Regulator’s investigations in Marikana revealed some rogue elements among certain credit providers who over-priced loans above the interest cap of 31%, and retained bank cards, personal identity numbers and identity documents in contravention of the National Credit Act.
It is also important to find a way to educate customers so that they understand the dynamics, cost and risk and benefits of credit and its sustainable use.
The Banking Association MD Cas Coovadia: The Banking Association, the NCR and National Treasury are devising a standard to measure affordability.
Capitec’s Riaan Stassen:
It is also important to find a way to educate customers.
Capitec’s Stassen says the Marikana situation showed that more capacity is needed to enforce the National Credit Act. ‘Had the situation been policed, you wouldn’t have had a number of guys out of line,’ he maintains. Sokutu concurs with this view, adding that ‘timeous and rigorous enforcement of the act would assist to curb abuse of lending by those lenders who deliberately break the law by using unlawful methodologies of lending and collecting money from customers’. ‘There is enforcement,’ argues Advocate Zweli Zakwe, the acting manager of Investigations and Prosecution at the NCR. ‘We have conducted 733 investigations since the inception of the NCR and have also referred a number of matters to the Tribunal during this time. A total of 57 compliance notices have also been issued. During the past financial year a total of over R32.5 million has been refunded to consumers due to enforcement action,’ he says. But even with enforcement, Advocate Zakwe believes, there will be those credit providers who contravene the law. Although the NCR could do with more enforcers to police illegal credit activities across the country, perhaps stiffer sentences could be useful in order to discourage providers from contravening the law.
However, Stassen argues that a review of the National Credit Act should caution against making it harder for the big lenders to do business, thus giving an opportunity to rogue forces. ‘It is also important to find a way to educate customers so that they understand the dynamics, cost and risk and benefits of credit and its sustainable use,’ he emphasises. Sokutu maintains that unsecured lending fulfills a real need. ‘For instance, from research that we conduct, we find that many of our customers use their loans to improve their housing situation and for education. This is heartening, as our purpose is to impact peoples’ lives positively through responsible credit,’ he says. ‘What is also evident is that in the unfortunate situation in Marikana many miners take on a lot of credit, resulting in very high levels of debt repayments from their wages. Unfortunately this situation is not only in the mining sector in South Africa. It is across all sectors in the economy. It is also not unique to low-income earners. Even high-income earners are generally highly leveraged, as inflation and a deteriorating macro-economic environment affects everyone. Obviously the impact is more severe on the lowerincome earners.’ Edition 4
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See More | Vision
Marikana: however much or little over-indebtedness contributed, last year’s tragedy focused attention on lenders.
One of the lessons to come out of the Marikana incident is the widespread abuse of garnishee orders by certain credit providers. Sokutu says that credit providers need to put customers at the centre of their lending practices to ensure that customers can afford to repay their loans within the contractual term. ‘We are sensitised to the economic conditions of our customers, and where our customers face hardship, such as some of our mining customers, we assist to restructure loans to help them through their financial hardships,’ he adds. The engagements between The Banking Association of South Africa (The Banking Association) and National Treasury are a good sign that the industry is interested in eliminating unsavory elements in unsecured lending. The Banking Association Managing Director Cas Coovadia has previously stated that banks are working on a draft Code of Good Practice on Unsecured Lending. Coovadia says this would put a stop to certain providers offering unsecured loans for the sake of getting more profit from the interest, rather than a cheaper loan relevant for what needs to be financed.
Agreements between The Banking Association and National Treasury have also called for the review of loan affordability assessments, relief measures for distressed borrowers, limiting garnishee orders and reviewing the use of debit orders. The Banking Association, the NCR and National Treasury have agreed to devise a standard to measure affordability. This standard of affordability could possibly be incorporated into regulations aimed at dealing with over-indebtedness. With regard to providing relief to distressed borrowers, The Banking Association’s member banks are expected to develop a framework that could see qualifying distressed borrowers having their installments reduced without incurring extra costs. One of the lessons to come out of the Marikana incident is the widespread abuse of garnishee orders by certain credit providers. Some employers of indebted workers were allegedly asked by some lenders to pay part of the employees’ debt over to the lender with interest. To deal with this abuse, The Banking Association members have agreed not to use garnishee orders against credit defaulters. To enforce this commitment, National Treasury is expected to engage and suggest to the Department of Justice that garnishee orders be limited to maintenance orders. There are also moves by member banks to start up a consumer education fund that would educate the public about borrowing and other financial matters. The issue of consumer education could go a long way in protecting borrowers from rogue credit providers such as those who retained bank cards in Marikana and other areas in the country. Writes Phakamisa Ndzamela ■ Edition 4
The consumer credit conundrum Enhancing the relationship between regulators, consumers and lenders There are several key areas of consideration that need to be addressed to create a more responsible and sustainable credit environment for both lenders and consumers.
The global financial crisis, caused in part by an asset price bubble, has meant that the rapidly growing unsecured lending sector has come under scrutiny. Most experienced unsecured lenders in the country have robust risk and governance frameworks and regulators have been proactive in developing strong credit regulations, such as the National Credit Act, which contributed in sheltering South Africa from experiencing the full might of the global financial crisis. Yet there still remains a tension point â€“ concerns regarding consumer indebtedness amongst more vulnerable consumer segments may need further exploring in the sector. Mgcinisihlalo Jordan Partner I Financial Services Deloitte firstname.lastname@example.org
We contend that unless key interventions are introduced, significant losses by credit lenders could occur. This is in part due to our view that the rise in unsecured lending is supply-side driven, in that the sector has been identified as one of the few growth areas by both existing and emerging unsecured lenders. With the rapid growth in the sector, preventative measures against future stress in the system may need to be considered in the event growth rates continue at an accelerated pace. The opportunity presents itself to further strengthen the current legislative framework and provide more guidance to both lenders and consumers.
Enhancing existing Consumer Regulation The National Credit Regulator has noted that additional regulation will not reduce the current levels of debt stress in the market. However the National Credit Act (NCA) does have some limitations that may need further consideration. Rather than promulgating additional regulation, the solution may lie in the better utilisation and issuing of guidance notes in respect of existing consumer protection regulations and compliance standards such as the Consumer Protection Act (CPA) and Treating Customers Fairly (TCF) in protecting the consumer. When reviewing current consumer regulation, regulators should consider focusing on creating more guidance to lenders in terms of where the threshold between indebted and capable-to-repay consumers is. More holistic customer understanding and segmentation A more comprehensive and overarching understanding of customers will increasingly become needed not only for better understanding customers, but maintaining competitive advantage. Lenders need to truly know their customers and this requires an understanding of customersâ€™ total credit records.
Stress Testing & Risk Appetite More lenders may need to develop scorecards and make use of stress testing to ascertain if certain customer segments will be able to afford current unsecured lending products should macro-economic conditions vary.
An APR is the cost of funds or interest rate for an entire year expressed as a single percentage. An APR represents the total cost of borrowing, which includes not only the interest but also other charges and fees that the credit provider requires the borrower to pay, including credit insurance.
When testing risk and governance processes, unsecured lenders should particularly focus on the following questions:
Increasing consumer education and incentives to save Consumer education is critical in ensuring underserved and financially vulnerable consumers are empowered to make financially responsible borrowing decisions and limit over-indebtedness.
1. What is the lender’s unsecured lending exposure as a percentage of book and how much revenue currently comes from this source? 2. Is there a view as to a maximum cap for growth in this regard – and should there be? 3. What is the likely knock on effect of a bubble? 4. Are there customer exposure and concentration measures in place? 5. If credit assumptions are shocked, what would be the likely impact on bottom line, non-performing loans and coverage ratios? For example what would happen if the probability of default (PD) doubled and the loss given default (LGD) went to 90 percent or even 100 percent?
Deloitte maintains that at high school level, government and regulators need to play a greater role in determining the standards that need to be considered in terms of content, curriculum and channel to improve the financial literacy of consumers, particularly regarding credit products. Lenders need to ensure they know their customers and should ensure there are uniform “due diligence” standards to assess customer and potential customer profiles in place, and that these are mandatorily used as part of the underwriting process.
6. Is there a common and documented understanding around affordability, indebtedness, delinquency and as importantly cure? 7. Are these real living definitions leading to consistent treatment or merely a documented taxonomy for archival purposes only? Define product, pricing and marketing governance One way in which lenders could increase simplicity and transparency is in the way in which they quote their pricing. The current interest rate approach does not provide for a simple comparison of unsecured lending products on the market for consumers, South Africa might benefit from adopting an Annual Percentage Rate (APR) approach, as is already adopted by the United States, European Union and the United Kingdom.
© 2012 Deloitte & Touche. All rights reserved. Member of Deloitte Touche Tohmatsu Limited
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Build software for the user – not just for the new platforms Interface design is crucial for users
s mobile computing continues its rapid growth in both the consumer and enterprise environments, software developers are faced with a new challenge. Not only do they need to cater for new platforms for their applications, but also a new concept in design. In the past, engineers would develop software based on the technicalities involved in the back end; the users had little choice in the interface used. Now the interface is fundamental to the mobile software development process. Users demand an engaging consumer interface for mobile devices that meets their needs and expectations, not what the engineers decide to provide. This is forcing the development industry to tackle an element of design it has never had to deal with before. Software is no longer simply an engineering project. The look and feel as well as the functionality of the interface is as important as the back end. To capture users’ interest in the final product, the interface must be designed to provide a “sticky” experience. Today’s interface has to “dazzle” from the moment the application starts. An example of this can be seen in the difference between the interface design of the two most popular mobile interfaces: Apple’s iPad and Google’s Android operating systems. In articles published by Business Insider and Mashable, the authors show that Apple’s design is more popular because its focus is on the user’s experience, not technology. The user experience is critical to Apple, while technology and what the data says is important to Google. That is not to say that the technology underpinning either of the systems is better or worse, but users have given usability the thumbs up and this is why Apple seems to command their hearts and minds. While BBD has a long history of developing applications for the
enterprise market, to cater for the mobile space, we have retained the services of a dedicated design company tasked with crafting the interface into something users will identify with. Of course, while the interface is paramount, the development standards focusing on security and integrity of the system and data can’t be forgotten. Two examples of modern design come from Apple and Microsoft. Apple’s mobile design is based on an immersive concept, in which the interface is easy to use because it reflects what users are already used to doing. Microsoft uses a modernist tile system in its new Edition 4
Metro interface. The idea is to keep the process of using the system clear and concise. The ideal interface will allow the user to navigate through the application almost without thinking because it looks and feels like any other application. The challenge is that it is not possible to develop one interface for all mobile devices as one does for a PC, but to optimise the application to bring out the important aspects of each platform. There is no one operating-system winner in the mobile platform space, so we expect this to be a challenge for quite some time. The simple fact of mobile applications is that “good enough” doesn’t cut it. Applications need to be designed for the platform they are running on as well as to meet the users’ expectations. Writes Peter Scheffel, Chief Technology Officer at software development company BBD. ■
Using the new Instant Money International money transfer system developed by Standard Bank South Africa, Zimbabwean residents can receive and collect their money at any of OK Zimbabwe’s 55 stores. The recipient in Zimbabwe does not need to have a bank account to receive their money. The service is currently available online to Standard Bank South Africa’s Internet Banking customers, but will be expanded to Standard Bank South Africa’s more accessible AccessPoint network in future. At a cost of R50 per transaction, it is the quickest and most cost-effective way to send money to Zimbabwe. ‘There is huge potential for a successful and widespread uptake of the Instant Money International service, with five million Zimbabweans living and working in South Africa, and having family based in their home country,’ says Ngoni Simelane, Head of Innovation at Standard Bank South Africa.
BANKER SA Edition 4
FNB LAUNCHES MOBILE CROSS-BORDER PAYMENTS TO LESOTHO AND SWAZILAND FNB has enabled cross-border payments to Swaziland and Lesotho via a cellphone using its Pay2Cell service. FNB’s Pay2Cell, launched in 2011, allows cellphone banking customers to make payments directly into other FNB accounts using only the recipient’s cellphone number. ‘Traditionally, making payments to other African countries has been limited to internet banking for senders or making a deposit or withdrawal through a branch or via an international money transfer company. We needed to have a simpler solution for our customers,’ says Ravesh Ramlakan, CEO of FNB Cellphone Banking. ‘Offering cross-border payments from a cellphone allows our customers to send and receive money instantly. In addition to this, the use of only the recipient’s cellphone number makes the payment process extremely simple for our customers,’ says Dione Sankar, COO of FNB Cellphone Banking. With the launch of Pay2Cell cross-border payments, the service will benefit South African FNB customers as well as customers in Swaziland and in Lesotho. In South Africa, Pay2Cell has seen in excess of 400% growth in transaction values since inception. To access Pay2Cell, registered Cellphone Banking customers can either go to FNB.Mobi site or dial *120*321#, select the banking option and opt for Pay2Cell from the list. Thereafter, an option to transfer funds from South Africa to Swaziland or Lesotho may be chosen. All that is then required to complete the transaction is the recipient’s cellphone number and the value to be paid. The maximum transaction value is R1500 per day.
SOUTH AFRICAN MOBILE ENABLEMENT GIANT TARGETS AFRICAN CELLPHONE BANKING AND TRANSACTIONAL SERVICES BUSINESS
South African mobile enablement giant has become one of the first and biggest service providers in Africa covering over 1000 networks in more than 220 territories and countries. What was once a local South African start-up company is now growing its business by targeting the development of Africa’s fast-growing mobile banking and financial services sector. Clickatell has extensive reach into the African mobile communications market, which enables it to deliver financial transactions alongside its traditional messaging business. They already operate in Nigeria and Rwanda, with Kenya and Ghana to follow shortly. They differentiate themselves by enabling banks to reach and transact with their clients securely through cost-effective channels, thus reducing the bank’s cost to serve. Simultaneously, they can also drive the bank’s cost to serve down further by building additional revenue streams into their offerings, such as the convenience of selling prepaid airtime and other value-added services. Clickatell sees the mobile market as the number one area for growth in the banking and retail sectors, especially in Africa where not everyone has access to a computer or to a local bank branch. The growth of mobile networks across Africa has been exponential. A recent study showed that by 2015 more people in Africa will have access to a mobile network than will have electricity in their homes. An independent study by ABI Research expects mobile phone subscriber penetration levels to pass 80% in the first quarter of 2013, up from 76.4% or 821 million subscribers in the last quarter of 2012. ‘Clickatell is primarily a mobile enablement company. It helps businesses connect, interact and transact with their customers on mobile devices. We can deliver our services reliably, efficiently and over a wide geographic footprint. That’s our competitive advantage,’ says Pieter De Villiers CEO and founder of Clickatell. Clickatell is already in partnership with several banking and financial
institutions where they deliver their preferred mobile solution. They work with these banks to address their channel cost to serve needs, while functioning as a preferred mobile enabler. The company has direct access to all the major mobile networks in South Africa and the majority of networks across the continent. Clickatell’s approach is unique in that their channels do not replace each other but rather complement each other. In one case study, which demonstrates their ability, they can deliver 98.9% of their transaction services and messages in less than a second. Pieter can be proud of what the company has achieved since he cofounded it in South Africa with three others, including his brother Casper, in 2000. Initially they wanted to start their own dot-com business to inform customers by SMS about last-minute discounted airfare deals. In their search for a mechanism that would enable them to do this they spotted a gap in the market. Clickatell was launched to provide an interface between the internet and telecommunications services. With an initial startup capital of R180 000 in Cape Town, they grew via acquisition and venture capital backing from Sequoia Capital (one of the early investors in Apple and Google amongst others) to become an international mobile enablement company, head quartered in Redwood City, California. Clickatell has high hopes for its push into Africa, where it already generates about half its revenues. It hopes to increase revenues beyond $100 million in the next three years and is ramping up its mobile enablement services to be the driving force behind this. ‘We are very excited about the prospects for growth in Africa,’ says Pieter. ‘The African continent presents a wonderful opportunity and we are happy that we can be a part of this continents progress.’ For more information:Please visit www.clickatell.com or contact Clickatell Enterprise on +27 21 910 7700 or alternatively via email at firstname.lastname@example.org
2012 CARD FRAUD LOSSES DOWN Security efforts of the banking industry, law enforcement and consumers are changing card fraud patterns.
he latest figures for banking industry card fraud losses released by the South African Banking Risk Information Centre (SABRIC) show that credit card and debit card fraud levels have decreased. The banks’ gross credit card fraud losses for January to September 2012 amount to R300,4m, an 18% decrease from gross losses of R367,4m in 2011. Debit card fraud gross losses amounted to R204m in 2012, compared to R219,9m in 2011, a 7% decrease. Gauteng, Western Cape and KwaZulu-Natal account for 91% of credit card fraud losses recorded in 2012, as was the case in 2011. The bulk of debit card fraud losses during 2012 occurred in Gauteng, KwaZulu-Natal, the Eastern Cape and the Western Cape. ‘The downward trend in card fraud losses this year is attributed to the efforts of the banking industry, law enforcement and most significantly, bank customers, who are seemingly responding to the industry’s calls for safe banking practices,’ said SABRIC CEO Kalyani Pillay. ‘We encourage all bank customers to continue this trend as it supplements the banking industry’s efforts to achieve a safe banking environment.’ Lost and stolen credit card fraud decreased by 15%, from R18,3m in 2011 to R15,6m in 2012. The downward trend in incidents of credit card fraud due to lost and stolen cards began in 2009 and this reflects the impact of the rollout of chip and PIN cards and other banking industry’s card fraud prevention strategies. Counterfeit card fraud decreased by 45% in 2012 and contributes 38% of overall credit card fraud gross losses. This is a significant trend shift as counterfeit card fraud was the single biggest contributor to the banking industry’s card fraud losses for the past three years. However, SABRIC says that Card Not Present (CNP) fraud increased by 16%, from R133,4m in 2011 to R154,8m in 2012, and contributed 51% of the total credit card fraud losses in 2012. CNP is now the single biggest contributor to credit card fraud losses on SA-issued credit cards. In addition, the banking industry’s credit card fraud losses from false-application fraud increased by 226%, from R4,1m to R13,4m. Losses related to account-takeover fraud have also increased by 38%, from R0,8m in 2011 to R1,1m in 2012. ‘CNP fraud losses have been on the rise steadily over the past few years,’ Pillay explains. ‘This is not an unusual trend, as a similar pattern is witnessed in most EMV-compliant countries such as the UK and Australia. Criminals tend to use stolen card information to perform online purchases as they are deterred by chip and PIN technology. ‘The percentage increase in false-application fraud should also be seen in the context of the low-base figures representing this crime trend. The banks have recently acquired access to the Home Affairs National Identification System (HANIS), and we are highly
optimistic that the roll-out of this system in bank branches will have an impact on fraud losses due to falsified documentation.’ ‘The banking industry’s debit card fraud losses in 2012 are mainly attributable to “counterfeit debit card” fraud,’ Pillay says. ‘Criminals need a combination of the magnetic-strip information at the back of the debit card and the PIN in order to commit counterfeit debit card fraud. It is for this reason that we urge bank customers to familiarise themselves with the most prevalent card skimming modus operandi, be it handheld or ATM-mounted skimming, since the majority of counterfeit debit card fraud can be directly linked to card skimming. SABRIC says that the banks have made driving down card fraud a priority and will continue to invest customer education initiatives. Pillay advises, ‘Never let your card leave your sight when making transactions, and also make sure to inspect the ATM for any foreign objects on the mouth of the card slot to ensure that your card is not skimmed. Customers should also make it a practice to cover the PIN pad when keying in their card PIN.’ ■ EMV stands for Europay, MasterCard, Visa. It is the global standard for chip-based Debit and Credit Card transactions. It is a joint effort between Europay, MasterCard and Visa to ensure security and global acceptance so that MasterCard and Visa Cards can continue to be used everywhere.
Card fraud trends: • Lost and/or stolen credit card fraud losses decreased by 37% in 2012, and the impact of chip and PIN and other successful banking industry prevention strategies is clearly visible. The changes in business processes linked to chip and PIN card deployment are making it necessary for criminals to change their modus operandi, resulting in an increase in CNP fraud. CNP fraud committed within South Africa increased by 4% from R64,5m in 2011 to R67,1m in 2012. • As the South African market, and markets in other countries, reach saturation levels with regard to chip and PIN cards, criminals will have to find alternative measures for harvesting card information. In recent years syndicates obtained client card details through bulk data compromises, such as the Sony Play Station compromise in 2011. • Criminals are increasingly using counterfeit South African issued credit cards in neighbouring countries, such as Namibia, Botswana, Zimbabwe, and other African countries, such as Kenya, Zambia, and Mozambique. These transactions are mostly fraudulent cash withdrawals at ATMs. Edition 4
WE DONâ€™T EMPLOY STAFF. WE EMPLOY HEROES. These are some of our heroes. Every one of them plays an integral role in ensuring that payment transaction deadlines are met and high-service levels are maintained. From Michelle, who manages our client service desk, to Terence, who keeps our operations centre running, and IT staff like Tilman, Mervin, Ernst, Dina, Mary-Ann and Lebo, who are always on standby; ready to respond to client and industry needs 24/7, 365. Every member of staff is focused on our clients, the banks and their customers too. So you can rest easy during the busy festive season knowing that we are committed to the safety and security of the National Payment System. To find out more about our behind the scenes work as South Africaâ€™s trusted payments transaction partner, visit www.bankservafrica.com or call 0861 111 354
Trusted for simplicity for 40 years.
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Member Banks Introducing Banking Association Member Ithala Development Finance Corporation Limited Q&A Name of bank: Ithala Development Finance Corporation (IDFC) Limited. The IDFC was established in terms of the Ithala Development Finance Corporation Act, 2 of 1999. The head office of the Group is located in Umlazi, Durban. The entity is managed by a board of directors who is supported by an executive team. Who owns the bank: Ithala Development Finance Corporation Limited is a wholly-owned entity of the KwaZulu-Natal (KZN) Provincial Government. IDFC Limited is the holding company and under it resides Ithala Corporation and a wholly-owned subsidiary – Ithala Limited. Ithala is a retail financial institution whereas the corporation is responsible for developmental finance in the form of debt funding to SMMEs and co-operatives. The Group also has a subsidiary, the Growth Fund Managers (Pty) Ltd. This is a fund manager for a fund capitalised by the government and private sector. The fund offers loans to entities that require funding of more than R30 million. Core business: Ithala is a development finance institution operating within KwaZulu-Natal. The structure at high level is as follows:
Corporation – through business finance – offers financial support (loans) to SMMEs and co-operatives that are domiciled in the KZN region. The maximum loan amount is R30 million. Further business finances offers non-financial support services such as training and mentorship to SMMEs and co-operatives within the province. The Corporation, through properties, is the owner of the largest property portfolio within KZN. Ithala owns Industrial and Commercial properties. The Industrial property portfolio comprises of industrial estates in Isithebe (Mandeni), eZakheni (Ladysmith), and Madadeni (Newcastle). It also owns industrial parks situated in Durban and Pietermaritzburg. The commercial property portfolio For further information contact: Ithala Development Finance Corporation (IDFC) Limited on 031 907 8611 or visit www.ithala.co.za Address: 17 Isilo Drive, Umlazi, Durban, 4066
consists of shopping centres and office block situated throughout the province. Ithala Limited (subsidiary) offers retail banking services such as deposits, savings and loans, and insurance services. Target market: The IDFC operates within KwaZulu-Natal. Business finance supports SMMEs and co-operatives that are domiciled within the province. Businesses that are not located within the region, but where the development impact will be in KZN, may be considered for funding. Ithala Limited mainly targets the previously disadvantaged communities and the previously unbanked. The Corporation has a branch network of 49 branches, in most cases located in the deep rural areas of KZN, as it aims to provide accessible financial services to all the people of the province. Core values or differentiators: Underpinning our operations is the deep understanding of the culture and communities that we operate in. The majority of staff can speak the local language and are able to interact with the community. Ithala is also the only bank that offers mortgage bonds in rural areas under the Permission to Occupy (PTO) security of tenure. Business finance on the other hand offers funding to start-up businesses as well as established businesses. Any newsworthy changes in the bank’s structure or business in the near future? Ithala is repositioning itself to remain relevant in the ever-changing financial services market. Whilst it has been mainly associated with the lower end of the market, Ithala is working towards retaining this core market as well as attracting new markets in the higher LSMs. The critical vacancies have been filled both at senior management as well as at board of directors level. It’s all systems go for the group. Is there a key product or initiative you wish to highlight? Mortgage bonds for permission to occupy land. Industrial properties in smaller towns, rural and semi-rural areas with attractive rentals stimulate economic activity in these areas. Name/s of the CEO and/or chair: Group Chairman, Dr Mandla SV Gantsho; Ithala Group CEO, Yvonne Zwane; Ithala Limited CEO, Simphiwe Khoza; KZN Growth Fund CEO, Siddiq Adam. ■
the cEO: Yvonne Zwane
Prior to her appointment as CEO, Zwane was FNB’s Provincial Director managing the Public Sector Banking portfolio, operating with a R20-billion budget and driving FNB’s banking strategy in KwaZulu-Natal. She holds an MBL, a BCom Accounting, a University Educational Diploma and a CAIB (SA) – Institute of Bankers South Africa. Her assertive, decisive and results-focused capabilities have seen her rise through the ranks with 27 years of banking experience in Retail, Commercial, Risk Management, Credit, Insolvent Estates and Corporate Banking.
Member Banks Introducing Banking Association Member Ubank Limited Q&A Name of bank: Ubank Limited Who owns the bank? Ubank is wholly owned through a holding company, which in turn is owned by a Trust. The trustees are elected by NUM and the Chamber of Mines. The Trust’s primary mandate is to invest in community development projects in areas where mineworkers live, utilising dividends paid by the Bank to the Trust. Core business: Ubank has always been a savings-led bank and this will continue as we focus on providing holistic banking services to our existing and future markets. Our strong presence, mainly in mining and rural communities in South Africa, has been key to our existence to date. Having rejuvenated ourselves from being referred to in the industry as a “pay-master” to being a fully licensed bank, we provide a full suite of banking products and services to our customer-base. As a bank that has been in the industry for over 30 years, we pride ourselves in working closely with our customers, stakeholders and the community to provide the best possible service. Ubank is focused on increasing its distribution channels to ensure accessibility for its target communities. Target market: Ubank (previously known as Teba Bank) has a rich history in providing basic financial services to mineworkers, their families as well as the rural communities our customer call “home”. Over the years, Ubank has managed to entrench itself within the gold and platinum mining communities and is currently implementing a mandate to provide affordable financial services to the broader working market in South Africa. Core values or differentiators: Ubank is a unique banking institution that is driven by a social consciousness that underpins all we do. Our customers are our owners and we exist to serve them through the provision of financial services that meet their needs and improve their lives. Throughout the 30 plus years of Ubank’s existence, the Ubank brand has grown and established acceptance, affinity, trust and loyalty with its customers in the mining communities, through focusing on an approach of customer understanding, customer education, commitment, community participation and dedicated relationships. Ubank’s core values drive the essence of our existence and include: • Passion – Going the extra mile, being bright and attentive, showing positive energy and commitment with pride and enthusiasm. • Empowering – Through enabling, inclusive and supportive practices, the bank strives to encourage, develop itself and others, through teamwork and sharing responsibility. • Excellence – Being the best, achieving with speed, growing the business through performance, helping everyone succeed, accuracy, thoughtful and considerate actions. For further information contact Ubank on 011 518 5000 or visit www.ubank.co.za.
• Respect – Remaining open minded and considerate, listening and hearing others out; equality, engaging fully and treating each other with dignity. • Sincerity – Delivering on our promises, having caring, open conversations and always being there and being easy to talk to. Is there a key product or initiative you wish to highlight? Ubank provides a full suite of banking products that includes: • Transactional Accounts (stand alone and packaged options) • VISA Debit Cards; Loans (Personal Loans, Home Loans) • Savings (Fixed Deposits, 32-day notice, Group Savings) • Funeral Insurance • Cellphone Banking • SMS notifications • Airtime Contracts Additional products and services that will better serve our existing and future markets are in the pipeline, as we embark on our expansion. International links: Operating in Southern Africa (South Africa and on a limited basis through Teba Limited agencies in Botswana, Lesotho, Mozambique and Swaziland), our market has primarily been in selected mining and rural communities in South Africa. The Banking Association South Africa’s Teach Children to Save campaign (TCTS SA™) is an annual national savings campaign that usually takes place in July. Ubank employees have been participating in the programme since its inception by teaching children the importance of saving. Ubank’s CSI: One of the pillars driving Ubank’s business strategy is community development. Ubank strives to make meaningful and life-changing contributions towards the well-being, uplifting and development of its communities. Education is the key focus in our community investment and initiatives. In 2009, the Bank launched its first Bursary Programme in partnership with JB Marks, which was targeted at mineworkers’ children in need of funds to further their studies at tertiary institutions. Name of the CEO and chairperson/s: CEO, Luthando Vutula (appointed 1 November 2012); Chairman, Jacob Henry de Villiers Botha. ■
the cEO: Luthando Vutula
Vutula grew up in Idutywa in the former Transkei and has an MBA from the University of Stellenbosch. Prior to joining UBank he was involved in finance, marketing and information technology at Absa, where he was sectoral head of the retail and business banking division. Vutula was previously also managing executive of Absa home loans, MD of the Absa Development Co and an executive of the National Housing Finance Corp. Edition 4
High performing technology for business that is on the run.
By Charles Boffard HIGH FIVE
APPLE IPHONE 5 Price tbc apple.com/za iPhone launches are hyped like the Oscars (we’re waiting for Blackberry to be called onstage to collect a career-ending lifetime achievement award, then shuffle offstage into oblivion), but what’s really different about the iPhone 5? There’s the same Retina Display, enlarged to 4 inches/10.1cm, with a wider 16:9 ratio that’s better for video and allows an extra row of icons. It’s thinner (7.6mm), lighter and faster, with iOS6, RAM doubled to 1GHz and a faster new A6 chip. The new textured surfaces and bevelled edges boost the iPhone’s executive feel by two pay grades. Some features are incrementally improved: Siri is smarter, with better local search. The 8MP camera offers low-light and panorama modes. Battery life – where we’d like to see a real improvement – is still claimed as eight hours 3G talk time, with 3G browsing boosted from six to eight hours and standby time by 10%. In short, what the iPhone 4S did well, the iPhone 5 does better. It’s the best iPhone yet. PS: the new, smaller Lightning connector replaces Apple’s 30-pin plug. You’ll need an adaptor, at a little over R200, to plug the iPhone 5 into your old docks.
SHOOT AND SCOOT
SANDISK EYE-FI 4GB/8GB R560/R780 sandisk.com There’s something about iPad owners. It’s hard to get them to admit to a flaw in their tablets, or in themselves. That changes when they go on holiday and discover that, because iPads are too high and mighty to have USB or SD card slots, they can’t upload anything from their cameras until they get back home again. An Eye-Fi card is a blissfully easy way to get video and JPG image files from your camera into any tablet, smartphone or Wi-Fi-equipped device. It’s an SD card with built-in Wi-Fi, and it slips into your camera like any other SD card. Load the software onto your computer, register online at www.eye.fi, and the Eye-Fi can upload your pictures whenever your camera’s switched on and within range – even while you’re shooting. Really useful.
ACER ASPIRE S7 11.6-INCH Price R25 000 acer.co.za Acer’s new brushed-aluminium S7 ultrabook makes the competition look dull and overweight. At only 12mm thick it’s the world’s thinnest ultrabook, designed to run the new touchscreen-interface Windows 8 and a great showcase for it. Inside is a Core i5 processor with up to 4GB RAM and a choice of 128/256GB solid-state drives, but the star of the show is the truly excellent HD touchscreen. It adds some lustre to the Windows 8 experience. Battery life, sacrificed to reduce size and weight, is five to six hours, though an optional add-on battery slice will boost that to 9.5 hours. Acer offers good proprietary software, including Instant On, which gives the S7 a startup time of 7.8 seconds. If you want to try a touchscreen notebook, this is a very good package.
BIGGER IS BETTER
TomTom Start 60 R2 100 tomtom.co.za Any TomTom device will get you where you want to go, but the Start 60 brings a little extra to the table. For one thing, it’s huge, with a 6-inch/15cm screen and a higher screen resolution than any other TomTom. Yes, this makes a difference: every time you need to glance at it you’ll take your eyes off the road for less time than you’d need for a smaller, lesssharp screen. The Start 60 features also include the TomTom’s new dual-mounting system, which gives you the choice many of us have been waiting for, between mounting it on the windscreen or the dashboard. And it’s one of the first sat nav’s to offer lifetime free daily map changes, which eliminates the hassle of renewing a subscription every year.
Determine the Impact If DTI were a given, how would you select learnerships? Any learning intervention must successfully produce and encourage the retention of competent bankers, managers or leaders, who: perform better, produce better business results, and who are prepared for more advanced business roles.
To have this business impact, a number of barriers to deriving value from learning investment must be overcome. Overcome practical learning challenges in demanding and hectic operational environments
Focus precisely on the underlying competencies that actually drive value
Translate theory into practice Be scalable to deal with large numbers effectively
Enabled frazzled employed learners to succeed
To actually deliver value, any learning intervention must
Produce a clear and tangible impact on business results
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Spelling out the skills scenario
BANKSETA Sector Skills Plans (SSP) Manager Shaheen Buckus’s audits – the banking industry’s skills needs.
ccountants, economists, business analysts and investment bankers remain among the scarcest skills in the banking sector, while loan officers, National Credit Act counsellors and information technology officers are in short supply in the microfinance industry. These preliminary findings are contained in the draft 2013-2014 update of BANKSETA’s Sector Skills Plans (SSPs), pivotal documents in the life of any sector education and training authority (SETA). The BANKSETA has compiled two draft SSPs – one for the banking and the other for the microfinance sector. The SSPs map out the skills requirements for the sector and sets the tone for skills planning at sector level. Driving this crucial component of BANKSETA’s work is the research and Skills Planning Manager Shaheen Buckus. ‘The preparation of the five-year SSP is a core SETA function and the document must be updated annually to be relevant to stakeholders in our sector and to inform the targets in the SETA’s strategic plan through evidence based research. The Sector Skills Plan should be seen as a valuable resource, Shaheen adds, as it analyses the demand and supply of skills and identifies areas where there is a shortage of skills. In this respect, it guides investment in training and development in the sector. ‘The SSP dissuades companies from overinvesting in areas where there is no shortage of skills and underinvesting in the development of scarce and critical skills. There is a tendency for these terms to be used interchangeably, says Shaheen, but they differ. ‘Scarce skill refers to an absolute or relative demand for skilled people to fill particular occupations in the labour market,’ he explains. ‘Critical skills refer to skills gaps or shortages within occupations. In compiling the draft SSPs, the latest version of which forecasts skills needs from 2013 to 2014, in depth interviews, a survey was conducted and focus groups held around the country. Significant
input came from the Workplace Skills Plans (WSPs), which show the planned and actual training interventions coupled with the scarce skills needs across the sector. The willingness of banking institutions to complete their WSPs with thought and accuracy means that the data supplied may be relied on, says Shaheen. The draft 2013/2014 Banking SSP reveals a meagre improvement in the levels of African representation and employees with disabilities in the banking sector relative to previous years, and a sturdy concentration of banks in Gauteng. Opportunities for greater expansion into rural areas and extended reach across other provinces could be considered and should be linked to economic realties.
The audit of skills levels in the banking sector reported in the draft 2013-2014 Banking SSP shows that 51% of employees in the sector have a matric, 20% hold a certificate and 12% hold a BA or a similar degree. Further, in relation to the supply of skills the draft hints at certain disturbing trends as depicted in the table above, only 48% of students at further education and training institutions passed finance, economics and accounting in 2010 and that only 46% of matriculants passed maths and 53% physical science in 2011. Both draft SSPs have been submitted to the Department of Higher Education and Training and will be finalised upon receipt and integration of comments. ■ Edition 4
The South African South African Reserve Bank’s snappy News new Mandela notes Banknote upgrades planned every seven years
President Zuma admires our new banknotes.
After years of planning and an international awareness campaign, South Africa’s new banknotes were launched in Johannesburg’s Lynwood Housewife Market, a small fruit and vegetable shop in Pretoria, on Tuesday November 6, as South African Reserve Bank (SARB) Governor Gill Marcus made a modest grocery purchase – the first-ever transaction using our new “Mandela money”. Watermelon, almonds, aubergines, beetroots and a cucumber, in case you were wondering. The new banknotes feature an image of former President Nelson Mandela on the front, with images of different “Big Five” animals on the back of the various denominations (R10, R20, R50, R100 and R200). 40
‘Our currency is a unique symbol of our nationhood, with many of us handling banknotes every day,’ Marcus said. ‘The Reserve Bank is proud to be able to honour South Africa’s struggle icon and first democratically elected President in this way.’ An education and public awareness campaign preceded the circulation launch, with ads flighted on commercial and social media platforms. The SARB undertook a programme of road shows and public outreach events throughout the country and also in the Common Monetary Areas of Swaziland, Namibia, Lesotho, Mozambique, Botswana and Zimbabwe. It also wrapped its head office building in Pretoria with a 25-storey high billboard to create further public awareness.
We’ve come a long way.
‘Our currency is a unique symbol of our nationhood, with many of us handling banknotes every day.’ In line with international best practice, SARB aims to upgrade or develop completely new banknote series every seven years, incorporating new security, technical and design features to ensure that the country’s money remains among the safest currencies in the world. The Mandela notes incorporate various high-tech security features and the SARB maintains that they are among the most difficult in the world to counterfeit. “Look” security features include watermarks, see-through print registration, micro-printing, unique numbering and a security thread. “Feel” features include pronounced raised printing, a different feel to previous series, and a feature for visually impaired: one raised line on the R10 note, two on the R20 note, and so on, up to five raised lines on the R200 note. “Tilt” features include security thread, colourchanging ink for the denomination numerals, and hidden images. They also make a different sound when snapped between your fingers. Try it. For more information visit www.resbank.co.za Our new banknotes, with added security and pride.
Banked population up by 1.3 million Finscope survey shows 67% banked FinMark Trust’s FinScope South Africa 2012 survey results show an increase of 1.3 million people in South Africa’s banked population since 2011. The annual FinScope survey has measured access to financial services among South African individuals for ten years. Altogether there are now 22.5 million banked adults in South Africa, or 67% out of a total 16+ population of 33.7 million (StatsSA 2011 mid-year population estimate). There are now almost 10 million more adults in the banking system than in 2004, when 13 million adults, or 46% of the population, were banked. The survey found that the key banking development in 2012 was the roll-out of the new South African Social Security Agency (SASSA) MasterCard. Three in four social grant holders, or 7.4 million, are now banked – up from 60% or 5 million in 2011. There is further room for growth, with 7% or 2.4 million, of the adult population in South Africa being unbanked social grant holders. Nine out of ten (88%) banked adults claim to withdraw money from an ATM at least once a month and 25% claim to get cash at a store till using a bank card. Only 13% claim to use cellphone banking. The big challenge is to get people, including banked people, to meaningfully engage financially by transacting frequently rather than withdrawing all their money at once. A third (34%) of the banked, or 7.3 million people, agree with the statement ‘as soon as money is deposited into your account, you take all of it out’. There are 9.8 million people in South Africa who have basic transactional bank accounts and no other kind of formal financial product. ■ Edition 4
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banking news international
African banking “too concentrated” The financial services sector in many African countries was extremely concentrated and the high costs inhibited the flow of credit, Finance Minister Pravin Gordhan said at the inaugural summit in Africa of the Institute of International Finance, a global association of financial institutions including banks, insurance companies and asset managers. Gordhan told delegates that there is a need for greater competition to be introduced into the sector. ‘A determined effort will have to be made to increase competition in the financial sector. High levels of concentration lead to excess liquidity and risk aversion. The World Bank estimates that the average market share of the three largest banks in Africa is about 73%. ‘These oligopolistic banking sectors have a number of negative consequences, including high interest rate spreads and banking fees which crowd out credit to the private sector by making loans too costly.’ Gordhan said deeper and more liquid financial markets needed to be created across Africa. Capital markets were largely underdeveloped on the continent, but would deepen as income levels rose and savings rates increased. The Economist estimates that 60 million African households are now middle class and that by 2015 there will be 100 million. Minister Gordhan said that innovative answers were needed to address the inaccessibility to credit of most African households because assets which could act as collateral, such as livestock, commodity stocks or property, were often held without proof of ownership (title deeds). According to the World Bank, the main reason why people in Africa did not get credit was because they had insufficient collateral. Gordhan stated that collateral requirements in Africa were extremely high compared to other regions, and at an average of 137% of the loan value, they were the second highest in the world, according to the Africa Competitiveness Report 2009.
Libor threatening public trust The time when the public will trust the banks again looks further away than ever. The recent Libor raterigging scandal has taken ethical distaste and contempt for the industry to new depths. Sub-prime lending, payment protection insurance mis-selling, inappropriate hedging products sold to small businesses, the reckless pursuit of commercial loans, among others, tended to fall into the area avarice and bad judgement rather than skulduggery. But, Flanagan writes, manipulation of Libor catches bankers ‘going knowingly into unethical, nay criminal, territory’. The scandal is another in a long line of cautionary tales on bad business ethics. ‘But will anything really change as a result?’ asks Walter Baets, Director of the UCT Graduate School of Business and a member of the Principles for Responsible Management Education Global Forum, in Business Report. He quotes Judith Samuelson, Executive Director of the Aspen Institute Business and Society Program as saying that as long as earnings per share are the guiding principle, money will trump ethics. Craig Smith, INSEAD Chaired Professor of Ethics and Social Responsibility, compares banking industry ethics and the Olympic Games, in The Huffington Post. The expulsion at the recent London Games of the badminton players who were judged not to have used their best efforts to win qualifying matches in order to secure a more favourable draw, was grounded in values: winning at any price is counter to the ethos of the Games. In business, while personal financial success is important, there are other values that preclude cheating to get ahead. ‘Equally, while making a profit is essential to business survival, that is not the same as profit maximisation at any price,’ writes Smith. As bankers, business people, regulators or business school professors, the Olympics remind us that how you compete is as important as the outcome. The view of Raphael Sassower, professor of Philosophy at the University of Colorado, in The Colorado Springs Business Journal, is that we are in trouble because fines against bad banking practices (such as Libor) are regarded by many as another deductible cost. He adds that the enforcement of laws is being challenged daily by the titans of finance and that they have lost their moral compass along the way. ■ Martin Flanagan in The Scotsman; Source: GIBS News
Virtual Card Services Virtual Card Services - was established in 1996 to offer a solution to the mail order market which found conventional methods of securing large volumes of credit card payment cumbersome and costly. With more than 50 years’ collective experience in developing and implementing credit, debit and smartcard processing systems for all of the major card issuers in South Africa, Virtual Card Services was quick to identify the niche presented in providing a solution which exactly meets these needs. The “Virtual Vendor” system, which was developed out of this need interacts with a bank’s existing legacy systems, while meeting the vendor’s increasing demands for automated, electronic transaction systems. The company’s client list today boasts a cross-section of businesses who have realised the benefits of automating their credit card transactions.
Today’s growing e-commerce market has raised the demand for secure payment mechanisms. Virtual Card Services (VCS) has become
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Fifty-one-year-old John Coulter is Managing Director and head of sub-Saharan Africa for JP Morgan, responsible for growing the company’s franchise in South Africa and subSaharan Africa. He has a broad investment banking background, including derivatives, commodities and structured finance, extensive experience in emerging markets in South Africa.
How did you become a banker? I studied law at Trinity College, Dublin, and then did an MBA at University College, Dublin. I enjoyed the banking and finance parts of the course. I was interested in finance, and I thought if I was going to be in finance I’d want to be a revenue generator making finance happen rather than recording it in an accounting function. JP Morgan came to university to recruit, and I joined them there. They sent me to New York for six months of training – we did a long period of training then – I facilitated the following course after that, which brought my stay to nearly a year. After that I went to London. How long have you been in South Africa? We came to South Africa on what was supposed to be just an assignment in 1999; we’ve been here for over 13 years. My children have had a good education here. What sources do you use for business news? Well, I read Business Day – both the actual newspaper and the online version – and I read the Financial Times online. I also get a lot from the JP Morgan research sites. Those are the sources I go to on a regular basis. Edition 4
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Scarce skill refers to an absolute or relative demand for skilled people to fill particular occupations in the labour market.
The classic Reminiscences of a Stock Operator – one of John’s favourite books.
Do you follow anyone’s blogs or Tweets, or do you blog or Tweet yourself? I’m embarrassed to say I’ve never tweeted, and I have a fairly full day without following tweets and blogs. What personal technology do you use? I have a BlackBerry and an iPhone. I use my iPhone, with a South African SIM card, as a phone. The BlackBerry is for e-mail and other work communications. Which sport and leisure activities do you enjoy? I used to run. I’m trying to get back into it but it’s not so easy these days. I used to play rugby at university and I enjoy watching it. I enjoy watching sport generally. And I play golf. I’m not too good around the greens and I’m a terrible putter, but I can pass myself off as a golfer. And I also read a lot. What do you read? I enjoy reading biographies and I read a lot of crime stories. I’ve just finished one by Jo Nesbo, and I’m now reading a historical novel by Hilary Mandel. Any recent business books or presentations you’d recommend to colleagues? One of my favourite books that I reread every so often is Reminiscences of a Stock Operator, written in the 1920s by Edwin Lefevre. It’s based on the career of a very well-known trader of that time, Jesse Livermore. It’s fascinating to read if you’re interested in markets.
JOHN COULTER’S CAREER John gained over 20 years of banking experience with JP Morgan, including stints as Chief Executive of JP Morgan South Africa and Chairman of Investment Banking for Central and Eastern Europe, Middle East and Africa (CEEMEA), based in Johannesburg. 2009 – Present Managing Director and Head of sub-Saharan Africa for JP Morgan 2008 – Managing Director of Morgan Stanley South Africa 2005 – 2006: Group CEO of Brait SA, Johannesburg 2002 – 2004 Chairman, Int’l Bankers Association of South Africa; Member of the Board, Banking Association of South Africa 1985 – 2004: JP Morgan 2004 – 2005: Chairman, Investment Banking, CEEMEA (based in Johannesburg) 1999 – 2004: Chief Executive and Head of Investment Banking, JP Morgan South Africa (Johannesburg) 1998 – 1999: Head of Structured Financing, Emerging Markets, EMEA (London) 1997 – 1998: Head of Commodity Trading, Cash and Derivatives (London) 1993 – 1996: Global Head of Commodity Derivatives and Energy Trading (New York) 1990 – 1993: Head of Commodity Derivatives (London) 1985 – 1990: Interest Rate and Derivative Trading (London) Edition 4
product news SOUTH AFRICAN MOBILE ENABLEMENT GIANT TARGETING BANKING AND TRANSACTIONAL SERVICES BUSINESS Clickatell is one of the first and biggest mobile enablement service providers in Africa. It covers over 1 000 networks in more than 220 territories and countries, and is looking to grow its business by targeting the development of Africa’s fast-growing mobile banking and financial services sector. They enable banks to reach and transact with their clients securely through cost-effective channels, thus reducing the bank’s cost to serve their clients. Clickatell has extensive penetration into the African mobile communications market and delivers secure financial transactions alongside its traditional messaging business. For more information, visit www.clickatell.co.za.
National retailers turn to XLink for essential back-up solutions Cash handling – new ways of working Cash in circulation is ever growing and the trend looks set to continue. Handling cash still costs money. The costs associated with cash are linked to robbery risks, time involved in managing cash, shrinkage losses, manual preparation and reconciliation and information. Reducing these costs, optimising cash operations along the whole length of the cash chain – from the store all the way up to head office – as well as streamlining the processes for retailers, banks and CIT (cash-in-transit) involved in the cash cycle, all call for a whole new approach to cash handling. The Gunnebo product portfolio offers a combination of hardware, software and global services, ranging from entry-level systems to complete closed cash-handling solutions – from cash deposit to front-office security and back-office automation. For further information, contact Gail Carew on 011 878 2300 or email firstname.lastname@example.org or visit www.gunnebo.com.
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Retailers understand the importance of uptime for store communications such as card processing, stock file updates and remote support connectivity. Big Blue, Mr Price and Spar are just three that have approached XLink to ensure communications continuity. XLink’s VersaLink router provides the virtual router redundancy protocol (VRRP) that allows for seamless failover from fixed line to the GSM network. The dual SIM feature enables an automatic or remote-managed switchover to a secondary service provider, should the primary network fail. In addition to the EFT back-up, the router provides a failover solution for data file transfer ensuring services like prepaid airtime, balance enquiries and online stock ordering are uninterrupted. Retailers are no longer focusing on primary or secondary communications, but want to ensure that the “99.999% principle” is maintained across all communication. For further information on XLink, contact Celine Patterson from Grapevine Communications on 011 706 9600 or email email@example.com.
VCS introduces improved systems Virtual Card Services was established in 1996 to offer a solution to the mail order market that found conventional methods of securing large volumes of credit card payments cumbersome and costly. With more than 50 years’ collective experience in developing and implementing credit, debit and smart card processing systems for a major card issuer in South Africa, VCS was quick to identify the niche presented in providing a solution that exactly meets these needs. The “Virtual Vendor” system, which was developed out of this need, interacts with a bank’s existing legacy systems, while meeting the vendor’s demand for an automated, electronic transaction system. The company’s client list today boasts a cross-section of businesses that have realised the benefits of automating their credit card transactions. For further information, visit www.vcs.co.za.
Time remaining: unknown
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The fourth edition of the official publication of the Banking Association of South Africa. This edition focuses mainly on the lending bubble...