banker edition 02

Edition 22012

Magazine of the Banking Association South Africa

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CONTENTS

1Edition 2 SA BANKER

6 Economic Realities Seeking a savings culture South Africans are overburdened with hefty tax levels, making it impossible to save

14 Profile Michael Jordaan Carl Momberg speaks to FNB’s innovation-

minded CEO

20 SADC Integration 20 Single SADC payments system The Banking Association South Africa

spearheading efforts for more efficient cross-border payments

24 Retail banking A new era: retail banking sales Like banks themselves, banking sales

professionals are having to do more with less

30 Legal Notes SADC standardised loan

documentation Some progress, some challenges

32 Industry Survey PwC’s Global CEO Survey 200 chief executives in 60 countries – what do

they see ahead?

714 36

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CONTENTS


36 Feature crime:Sabric A unique collaboration

40 Regulation ‘Discriminatory’ lending practices Are they here to stay?

43 Banking Association Member Introducing Citibank N.A. South Africa Conduct that is transparent, prudent and dependable

45 Banking Association Member Introducing Sasfin Bank Limited Diverse yet tailor-made products and services that are predicated on a deep understanding of our clients’ needs

48 Trade training Ledger lessons The need for training service providers and news from BANKSETA

51 Tech page Gadgets office Speed and power: the latest mobile business tools

53 Banking News:South Africa What – and who – is making news in local banking

55 Banking News:International News from banking and the financial sectors

around the world

Copyright: Picasso Headline and The Banking Association South Africa. No portion of this magazine may be reproduced in any form without written

consent of the publishers. The publishers are not responsible for unsolicited material. SA Banker is published quarterly by Picasso Headline Reg:

59/01754/07. The opinions expressed are not necessarily those of Picasso Headline. All advertisements/advertorials and promotions have been paid for

and therefore do not carry any endorsement by the publishers.

Publishers: Picasso Headline (Pty) Ltd 105–107 Hatfield Street, Gardens,

Cape Town 8001, South AfricaTel: +27 21 469 2400 Fax: +27 21 462 1124

Head of Editorial and Production Alexis Knipe [email protected]

Editor Charles Boffard [email protected]

Banking Association Editorial Board Lawrence Khoza Ndivhuho Mafela Thenji Nhlapo Copy Editor June Hare

Proofreader Thomas Castley Production Coordinator Shamiela Brenner

Content Coordinator Michéle Jarman [email protected]

Head of Design Studio Rashied Rahbeeni Designers Dalicia du Plessis Mfundo Ndzo

Head of Sales Robin Carpenter-Frank [email protected] Sales Manager John Dos Santos [email protected] Project Manager Warren Daries [email protected]

Sales Consultants André Potgieter Basil Jones Financial Accountant Lodewyk van der Walt

SUBSCRIPTIONS AND DISTRIBUTIONShihaam Adams

E-mail: [email protected]: 021 469 2400

ADVERTISING: WARREN DARIESE-mail: [email protected] Tel: 021 469 2400

Senior GM: Newspapers and MagazinesMike Tissong

Associate PublisherJocelyne Bayer

48

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BANKING SUMMIT 2012Keynote Address: Deputy President Kgalema MotlantheDate: 21 August 2012Time: 09h00 Venue: The Hyatt Rosebank Please direct your bookings or enquiries to [email protected] or call 011- 645 6730.

MD’S MESSAGE


Welcome to SA Banker – and to the Banking Summit 2012

We’re proud to welcome you to this second issue of SA Banker, a quarterly magazine for all those with an interest in banking in southern Africa. And if you’re interested in banking and the role it can play in southern Africa, we’d

like to use this opportunity to invite you to an important industry forum, the Banking Summit 2012.

Held annually, the summit seeks to position the banking industry as a significant player and catalyst for economic growth, global competitiveness and socio-economic development and transformation. The summits are also aimed at enhancing relations between the industry and its key stakeholders – including government, media, communities, labour and professional bodies – who have a direct and vested interest in the financial services industry.

The 2012 Summit comes at a time when the National Planning Commission has just released the National Development Plan for discussion. We view this as an opportunity to find key areas where the banking industry and government can work together towards a common goal to alleviate the triple ills facing our nation, namely unemployment, poverty and inequality. One such area is infrastructure development.

Government has since established the Presidential Infrastructure Coordination Commission (PICC) to oversee infrastructure development. But the challenge has remained with the funding of infrastructure projects with no clarity and clear signal to the financial markets of the extent to which government might look to funding solutions and partnerships with private financial institutions. This brings into focus the potential for public-private partnerships and deal structuring

that can be pursued between the government, development finance institutions and the banking sector.

The financial services sector and banks in particular are willing to explore innovative ways of funding infrastructure. The 2012 Annual Banking Summit will seek to unpack these innovative models and ideas.

The Summit will be a strategic forum in which the banking sector and government, together with development finance institutions (DFIs), can concretely develop infrastructure development financing packages to enhance investments for the economic development of South Africa. Therefore the summit’s theme is ‘Public Private Partnerships: how can South Africa fund major infrastructure projects better?’

The Banking Association South Africa would like to wish the South African icon, Nelson Mandela a very happy birthday. Madiba, our hope is that on this birthday, you realise how much you mean to South Africa and get to feel the glory that you have given us.

Cas CoovadiaManaging Director, Banking Association South Africa

6

ECONOMIC REALITIES

THE BANKER Edition 2

South Africans spend more than they earn. That’s the sad reality, a fact laid bare by the country’s extremely low savings rate. In the first quarter of this year, South Africa’s gross savings ratio measured 17.1% of GDP, from an average of 15.4% in 2008.

‘Household savings accounted for just 1.5% of GDP and is on a long downward trend,’ says Lullu Krugel, a senior economist at KPMG. ‘A low domestic savings rate means the country must rely on foreign money to finance growth – money which can be withdrawn at the first sign of market instability.’

It’s a problem which government is the first to acknowledge. Speaking at the launch of Savings Month in July at the South African Savings Institute, Deputy Finance Minister Nhlanhla Nene admitted that the country relied heavily on foreign capital to fund its current account deficit. ‘It is crucial to raise the level of our national saving in support of both short-term economic stability and long-term productivity growth and prosperity,’ Nene commented. ‘Higher domestic saving makes an economy less vulnerable to sudden reversals in capital flows.’

LOW EARNERS, BIG SPENDERS Krugel believes that the current low savings rate can be attributed to a combination of low disposable incomes and a low propensity

to save. ‘A major contributor to South Africa’s low average incomes is the high level of unemployment,’ she states.

‘The official unemployment rate was 25.2% in the second quarter, but with a labour force participation rate of just 54.7%, it is clear that the true number of people out of work is much higher. A rising tax burden on the working population reduces disposable incomes, and rising inflation prevents incomes from stretching as far as they did previously.’

It’s a situation that’s compounded by the rising cost of living. ‘Factors contributing to the steady increase in inflation include rising electricity prices, rising fuel prices and rising food prices,’ comments Krugel.

‘In addition, those living in Gauteng will also have to fork out significantly more in future for the use of the highways in and around the province. This could put upward pressure on inflation, further eroding the disposable income of South Africans and their corresponding rate of savings.’

But rising prices are not the only contributing factor. Debt is also a looming spectre. Says Tendani Mantshimuli, consumer economist at Liberty Retail South Africa, ‘Part of the reason why households are unable to save is that their debt levels are so high. During the first quarter [of 2011], household debt as a percentage of household disposable income was 76.8%.’

Seeking a

savings cultureThe finance minister has lamented a poor savings culture in South Africa, but just how bad is a rate of 17 percent of GDP in this financial climate? Katherine Graham investigates

Continued »

7Edition 2 THE BANKER

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ECONOMIC REALITIES

A low domestic savings rate means the country must rely on foreign money to finance growth.

She is convinced that working down high debt levels, while interest rates are still low, is the first step towards financial freedom.

ACROSS THE BOARDSome analysts argue that it isn’t only those earning low incomes who battle to save. John Field, CEO of FedGroup, comments: ‘High-income earners are usually overburdened with hefty income tax levels. This leaves very little in their pockets for saving.’

Field maintains that South Africa has become a consumerist society – with people in all income brackets extending their debt to acquire what they desire. ‘Instead of saving for big purchases, South Africans look for the quickest way to get what they want,’ he says.

It’s a topic that Tobie van Zyl, the CEO of Moneysmart, feels passionately about. Together with co-founder Zulfiq Isaacs, he’s developed a free online tool that enables individuals to keep track of their spending and find ways to invest. ‘Unfortunately many people use their disposable income to calculate the amount of credit they

can access to fund a lifestyle that keeps up with the Joneses,’ Van Zyl says. ‘In the short term, these people become part of the 13 million credit-impaired South Africans, 94% of which cannot retire in the long term.’

As emerging markets go, South Africa does not compare favourably when it comes to savings. ‘According to the Institute of International Finance, South Africa’s gross national savings rates have averaged about 15.5% of GDP since 1994, as compared to 24% for emerging countries,’ states Mantshimuli. ‘This is primarily because of the differences in the rate of household saving.

In 2008, for instance, household saving in China amounted to 28%, while that of India was 32%. Here at home, household saving as a percentage of GDP was just 1.5% during the first quarter.’

An underlying cause could be the country’s low life expectancy. ‘Globally, one of the biggest incentives for individuals to save money is to provide for their old age,’ says Krugel. ‘However, South Africa is one of the few countries in the world to have experienced

Tendani Mantshimuli says one of the reasons households are unable to save is because their debt levels are so high.

John Field says high-income earners are usually overburdened with hefty income tax levels, leaving little in their pockets for saving.

Continued »

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ECONOMIC REALITIES

Part of the reason why households are unable to save is that their debt levels are very high.

a reduction in life expectancy in the past few decades, diminishing the impact of this incentive. Furthermore, the means test component of the state old-age pension creates a disincentive for those on low incomes to save.’

AN INCENTIVE TO SAVE With 11 million of the population’s 48 million receiving grants, it’s crucial that government finds ways to make saving money more attractive. As Nene has pointed out, ‘Low levels of individual saving adds to the burden on government to provide retirement assistance and increase the need to raise taxes for this purpose. Building a culture of savings in South Africa is vital in ensuring that higher economic growth is sustainable.’

But how? Field believes the process of saving should be streamlined, especially for the poor who are paid in cash: ‘While banks have made significant progress with cellphone banking, there is a substantial portion of the population who are still unbanked,’ he

says. He points out that the habit of saving, no matter how small, is as important as saving itself.

Mantshimuli’s advice is for consumers to get a handle on their debt in order to save. ‘Since inflation is beyond anyone’s control, the first thing to do is to reduce your debt to manageable levels. That way you can use the income freed up to cushion yourself from higher prices.’

Van Zyl adds a different perspective: Visualise what it is you want to save for. ‘Savings can be a tedious subject and [this] loses its value in the long run,’ he says. ‘But it is still a subject that needs to be taught, as it forms part of the marathon planning process to become an investor and, ultimately, financially independent.

‘The root of this problem is that the knowledge and skills to invest are not being shared in our educational system and even less within our working environment. I believe people cannot bank their success into a savings vehicle without knowing what they are ultimately saving for.’ ■

Lullu Krugel says a low domestic savings rate means the country must rely on foreign money to finance growth.

Nhlanhla Nene maintains that low levels of individual saving adds to the burden on government to provide retirement assistance.

The EEPF Programme was initiated as an intervention for the

affordable housing market. Black property entrepreneurs have

to date experienced a number of constraints in entering this

market. This partnership provides a funding solution to address

the capital gap experienced by these property entrepreneurs.

Global financial woes have unabatedly continued to pound on the

confidence of the banks to increase their quantum of funding in the

low end of the housing market and have continued to frustrate our

programmes. However, we have shown great resilience and innovative

design capabilities in our funding models, said GPF CEO Kutoane Kutoane.

In its efforts to promote the sustainable entry of BEE participants in

ownership of medium density property in the inner cities, the NHFC has

partnered with GPF to enable the radical transformation of the affordable

rental property market, said Samson Moraba, CEO of the NHFC.

These participants are selected through a public call and vigorous

selection process on an annual basis, says GPF’s Chief Investment Officer

Boni Muvevi. He further stated that this partnership would ensure that

EEPF projects would have up to 95% project funding available.

The GPF mandate has evolved over the years in line with the evolving

provincial government housing objectives. Thus GPF have extended

their funding facilitation reach to cover the wider affordable rental

housing market. It is estimated that 25% of families in South Africa have

no access to housing due to affordability challenges. These would be

households that earn above the government housing subsidy threshold

while at the same time do not qualify for bank mortgages due to

perceived high risk and low credit rating. The percentage could be much

higher in Gauteng.

GPF launched EEPF in 2010. After a public proposal call is made,

prospective entrepreneurs are shortlisted and put through a rigorous

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and resources management. Once a project is approved, a dedicated

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The first proposal call yielded 11 successful participants, of whom eight

secured projects after their proposals were approved. In total, the Board

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agreement. Additional funding will be considered, depending on the

programme’s success.

In line with the provincial government objective of delivering 20 000

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current strategy to the objective of facilitating funding for 6 000 of those

units. This calls for over R1.4 billion in funding resources, of which the

government will need to contribute about R470 million.

With the new partnership between GPF and NHFC, as well as the benefit

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economic sense and is therefore a good investment for entrepreneurs.

For further information on the EEPF programme, please contact the Gauteng Partnership Fund (GPF) on (011) 685-6600 or email Immaculate Shembe at [email protected], you may also contact Jamez Manyapelo at the NHFC on (011) 644-9887.

GPF and NHFC partner to fund Affordable Rental Housing Entrepreneurs

CEO of the NHFC, Mr. Samson Moraba (left), and Mr. Kutoane Kutoane, CEO of the GPF (right), on the day the partnership was signed.

The Gauteng Partnership Fund (GPF) has partnered equally with the National Housing Finance Corporation (NHFC) on a R200 million Entrepreneur Empowerment Property Fund (EEPF) programme aimed at HDI-owned companies pursuing rental housing opportunities in Gauteng. GPF and NHFC formally entered into this co-funding agreement on 18 June 2012. The EEPF is an incubator programme designed to promote participation of black entrepreneurs in the affordable rental property market.

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14

PROFILE

SA BANKER Edition 2

Michael Jordaan: the big picture and the detailCarl Momberg speaks to FNB’s innovation-minded CEO

Michael Jordaan (or MJ, as he’s widely known) has a passion for banking combined with a love for technology. ‘I love my job. I’ve said I’d be happy to work for nothing,’ he says.

Where does he come from? ‘I’m a Stellenbosch boy. I went to Paul Roos and did all my studies at the University of Stellenbosch.’ That includes a PhD in Economics focusing on banking supervision. There was never any doubt that he would follow a banking career, because numbers and finance held his interest from his earliest school days.

More recently, he’s gone back to his Stellenbosch roots with the purchase of a wine farm there. His grandfather bought Bartinney in 1952 and Michael was very disappointed when his father sold it about 15 years ago. When the farm came back on the market about six years ago, Michael and his wife – also from Stellenbosch – decided to buy it back.

After trying to run it from Johannesburg with a manager on the farm, they found it just wasn’t working. Over a bottle of red wine and dinner at a restaurant one night, Rose suggested that she and the children move to Stellenbosch to run the farm, and Michael joined a long list of business leaders who spend their weeks in Johannesburg and their weekends in the Cape. ‘So I’m the silent partner. I can

make suggestions but they aren’t always followed, and I do make the internet banking transfers each month,’ he jokes.

ATTENTION TO DETAILThere’s the old adage: ‘If something seems to be too good to be true, it is too good to be true.’ That doesn’t apply in Michael’s case, but one must ask what gave the bank the confidence to appoint Michael as CEO in 2004. He was very young – 36 at the time – which must have posed an element of risk for a bank with 30 000 staff.

Former FirstRand CEO Paul Harris knows Michael very well, since he worked as Paul’s business assistant for some time. So what convinced them? ‘Michael certainly has the intellect and academic qualifications to run the bank. However, what persuaded us was his leadership qualities and ability to see the big picture while at the same time having a great feel for the detail.’

Murray Legg, a more recent member of Rand Merchant Bank’s Class Of programme (which attracts young talent into RMB) wrote in his blog: ‘Michael believes that the best ideas for business can be constructed and realised by the staff, within branches and doing daily work. There is a large amount of focus and energy dedicated to growing and supporting these innovative and entrepreneurial developments.’

Continued »

FNB

Michael Jordaan, CEO of FNB.


Michael Jordaan: the big picture and the detail

FNB

My Protection and Security


PROFILE

Michael emphasises that: ‘FNB’s success is rooted in its corporate culture and the tone of that culture. It’s set at the top but it’s an empowering – not a hierarchical – culture.

‘Within FNB, there are about 100 CEOs who run their own businesses as “owner-managers”. They are operationally autonomous but – as a group – strategically tight.’

Where does this bank gets its innovation DNA? Ever since online banking was introduced in the 1990s, FNB’s website was different to all the others. Even today, when South African banks review each other’s websites, FNB comes out on top in a recent PwC survey.

At ATMs, FNB remembers your preferred language, requires fewer keystrokes and there’s the simplicity of requests like ‘Get cash’ rather than ‘Withdrawals’. FNB does seem to build on its successes.

REVERBERATIONCustomer-centric innovation is at the core of everything FNB does. ‘I’m the fortunate one who gets to present new innovations,’ Michael says, ‘but I make the point that these are not my doing. I wish you could be a fly on the wall at one of our Exco meetings. FNB is a meritocracy – the best ideas win. You’d see new ideas brought to the table, discussed and debated, and how solutions that are finally adopted can be completely different to the original proposal. The solution is often not the proposal I originally supported.’

Bringing PayPal to South Africa was one of FNB’s offerings that came out of an idea from a member of staff who was prepared to run with it. ‘People change bureaucracies. I want the culture of innovation to reverberate throughout the company,’ Michael says.

‘I’d far rather have 1 000 small ideas that benefit customers rather than one big idea,’ he says. ‘That’s why the bank offers an annual prize of R1 million to the staff member that comes forward and runs with an idea that’s judged the best. I spend a week each year evaluating these suggestions. Because we had so many good ideas last year, the bank paid out almost R7 million to our staff for good ideas – that are moving forward.’

Nothing demonstrated Michael’s passion for technology better than when I said that I really don’t get FNB’s recently-launched GeoPay. His eyes lit up and he grabbed his iPhone. ‘How much can I send you without it being construed as a bribe?’ he asked, and settled on R20. Seconds later, the R20 was in my account. The ease of transferring funds based solely on proximity, without knowing bank account details or even having an FNB account, opens up a whole new ball park. It will start with personal use, but how long before this is how you pay for goods and services?

What makes this possible is the FNB App for smartphones, and FNB is still the only South African bank offering an App.

FNB has been smart in its use of social media. Whereas call centres are usually run by the operations people, the new-fangled social media stuff is often set up and run by the marketing department. FNB deliberately set up its social media channels to feed into its existing customer care system.

For new and more connected users, the FNB Twitter account @rbjacobs is a far more convenient alternative to using a call centre. And using it works with efficiency that’s extremely rare.

When I left my appointment with Michael, I wanted to take a photograph of Bank City. I was stopped from taking photos by a security guard – a frequent occurrence in South Africa – because it’s against security policies. A tweet to @rbjacobs was answered minutes later, followed by an email interchange. Less than a week later I had a call from Facilities Manager Kagiso Nonyana, who said the issue had been taken up with FNB’s security management and ‘the outdated policy has been revoked and we hope you’ll come back to take photographs.’ How many big companies are that fleet-footed?

… the real challenge I fear is the day an Apple or Google starts offering financial services.

Continued »

ES3158 Max The Banker Ad R and P2.indd 2 2012/06/25 11:19 AMES3158 Max The Banker Ad R and P2.indd 2 2012/06/25 11:19 AM


PROFILE

SUCCESS IN AN UNUSUAL SOCIETY‘FNB’s successes are in service, innovation, reputation and the emotional affinity of its customers. Much more needs to be done when it comes to processes – making banking less cumbersome and demystifying banking,’ Michael says.

FNB operates in a very unusual society – a combination of first and third worlds, and many cultures. It embraces people who enjoy standing in queues because it’s part of socialising, and those who will avoid queues at any cost. Through its offerings online, at traditional branches (some differentiated by extended banking hours) and new FNB EasyPlan branches, FNB is catering for everyone. EasyPlan (with banking fees from R3.95 a month) offers basic services and saw one of the fastest branch rollouts ever – about 100 branches in one year.

FNB is expanding its African footprint and recently opened in India. ‘There is a cultural fit and we can leverage our technological innovations, especially for cellphone banking,’ Michael says.

How does he view the competition? While he says he respects all the other banks in South Africa, ‘I’m paranoid about non-traditional entrants into the banking sector – the real challenge I fear is the day an Apple or Google starts offering financial services.’ He went on to say that ‘only the paranoid survive,’ which is reminiscent of Raymond Ackerman’s reason for his success: ‘the fear of failure’. ■

This interview is available in full at www.capeinfo.com

Follow Michael on Twitter: @MichaelJordaanFNB on Twitter: @rbjacobs

MICHAEL JORDAAN: BRIEF CV2004 – present | CEO | First National Bank 2000 – present | Executive Committee member | FirstRand Banking Group2002 – 2004 | CEO | Customer Solutions Division-FirstRand Retail Cluster2000 – 2002 | CEO | eBucks.com SA (Pty) Ltd1999 – 2000 | CEO | FirstRand Property Cluster1999 – 2000 | Chair | FNB HomeLoans1998 – 1999 | Chief Executive Officer | Origin1994 – 1995 | Class of Programme | Rand Merchant Bank1992 – 1993 | Corporate banker | Deutsche Bank AG Frankfurt1991 – 1992 | Management trainee | Deutsche Bank AG Hamburg1990 – 1990 | Commissioned Officer | South African Navy

20

SADC INTEGRATION


Towards a single SADC payments system

The Banking Association of South Africa is spearheading efforts to enable more efficient cross-border payments in SADC. S

ince 1998, the Banking Association of South Africa has sought to align the a ctivities in the banking industry in South Africa and in other SADC countries, with the agenda of the Committee of Central Bank Governors (CCBG) in SADC. The Association spear-

headed the creation of the SADC Banking Association Today, the Association’s membership is comprised of 13 banking associations from SADC member countries and The Banking Association of SA is the secretariat for the Association. In his role of secretariat to the SADCBA, Cas Coovadia, together with the Chairman of the

ISTOCKPHOTO


SADCBA, regularly participates in SADC governors’ meetings and has been invited to inform the development of projects relevant to improving banking in the region. One such project is the Payments Integration Project.

In support of regional financial integration, the CCBG’s payment subcommittee through the SADCBA is providing commercial banks in SADC. They provide with the opportunity to inform the development of financial market infrastructure to support inter-

and intra-regional trade. Being in the cooperative (non-competitive) space, the focus of the SADCBA’s interventions are defining payments instruments, business rules, and messaging standards in the interbank space. Participating banks are keen that efforts to harmonise translate to improved customer service, cost reductions, and efficiencies in the cross-border payment environment. In South Africa, the participating banks are ABSA Bank, First Rand, Standard Bank and Nedbank.

Today, the association’s membership is comprised of 13 banking associations from SADC member countries and The Banking Association of SA is the secretariat for the association.

Continued »

22

SADC INTEGRATION


STRATEGIC DECISIONSThe CCBG have agreed that the project will be implemented in line with the following key decisions: • existing market infrastructures will be

used wherever possible – while allowing banks choice in providers.

• use of international standards to ensure interoperability;

• invest for straight through processing;• each country will keep its own currency

and financial infrastructure; • regional settlement currency to be the

ZAR (South African Rand); • start with Common Monetary Area and

build out; • cross-border cheques to be phased out.

KEY INFRASTRUCTURES 1 An interbank settlement system to be

run by the CCBG will be known as SADC Regional Electronic Settlement System (SIRESS)

2 Regional Clearing Capability for EFT Debits and Credits

3 Regional Clearing Capability for Card and ATMs

APPROACH TO IMPLEMENTATIONThe SADCBA identified 10 payment streams that needed to be worked on in the project.

SADCBA’S MANDATEThe CCBG has given the SADCBA a specific mandate in the creation of a single SADC payments systems area in the region. The mandate is to:• set and implement regional standards;• establish which payments instruments are appropriate;• development of the regional instruments;• promote the development of interoperable systems.

To effectively discharge the mandate provided by the CCBG, the association continues to work with its members to create the necessary governance frameworks, roles, and structures for the project.

To effectively discharge the mandate provided by the CCBG, the association continues to work with its members to create the necessary governance frameworks, roles, and structures for the project.


• EFT Credits & Debits: Low value payments normally processed in bulk electronic funds transfer credits;

• Direct debit (collections): In support of utility bill payments etc;

• ATM: Cross-border cash withdrawals;• Cards: Issued to SADC card holders and

used within SADC;• Cheques: It is anticipated that these

will be phased out in the cross border environment;

• Cash: Bulk ordering and repatriation of bank notes;

• P2P: Low value urgent transfers in support of person-to-person type transactions as well as other commercial type payments. Efforts on the project are progressing well and it is envisaged that testing will begin in the first quarter of 2013. ■

Juliet Kairuki is general manager: SADC, Banking Association South AfricaFor further information call 011 645 6700 or e-mail [email protected]

Work groups have been constituted in support of the activities of each work stream. These work streams are required to define the business models that banks will adopt to send

payments to each other cross border. They will also define and agree on the rules, processes (including exception handling) once the system goes live.

PAYMENT STREAMS• Credit Transfers for Immediate Settlement: Which are normally effected through a Real

Time Gross Settlement System (RTGS)• DVP: The cash leg of stock market trades, example the P of the DVP in the delivery vs

payment process.• Forex Financial Markets: The cash settlements of other financial market transactions such

as Money Market instruments, Bond Market trades, inter-bank foreign exchange deals etc.

The SADCBA identified 10 payment streams that needed to be worked on in the project.

24

FEATURE

SA BANKER Edition 2

A new era: the retail banking sales professional

THE DEMAND There is always a range of economic factors driving a range of sales targets. PwC’s annual analysis of the major banks’ financials highlights the importance of deposits in 2012 to 2013. The report predicts that retail deposits will be cheaper than wholesale deposits as a source of funding for banks. Operationally, this will translate into aggressive sales targets.

Net interest margins on unsecured lending have been good over the past year. There is a market swing towards these products in the retail banking space. This will, no doubt, mean aggressive sales targets.

Then there is the annual quest for the bottom line growth that meets shareholders’ expectations. Those requirements cannot be met through cost reductions alone. A better top line is imperative, conceivably generated by fewer, but more productive staff, which will mean higher sales targets. All in all, the pressure is on for sales more than it has ever been before. The world in which these sales have to be made is changing rapidly.

Continued »

As the world of banking changes and pressure on sales forces increases, it is becoming increasingly necessary for banks to professionalise their sales forces to sustain growth and customer value. Dr Derek Shirley unpacks the package for us.

MORE WITH LESSA number of trends are continuing to make the banking sales environment more challenging than it has ever been. Bank brand differentiation and loyalty still does not provide access to customers when they purchase financial products. As reported in Time Magazine, brand and product differentiation in banks generally remains elusive.

A survey conducted by marketing research firm, Brand Keys, found that consumers make no differentiation at all between bank brands. ‘They’re still among a group of brands where there is zero differentiation,’ says Brand Keys’ founder, Robert Passikoff. In most banking sales situations consumers essentially believe they are buying commodities on a transactional basis, rather than expecting a value-adding sales process. No bank brand yet provides any degree of certainty that it will have access to its existing customers when next they buy a financial product or solution.

Competition is more focused and more vigorous when purchasers do decide to buy. Competition for wallet share is intensive.


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26

FEATURE

SA BANKER Edition 2

To illustrate, Capitec Bank claimed approximately 900 000 new customers last year, primarily in the less affluent customer segments. There are major initiatives to capture market share in these segments by the other major banks. When will the segment reach saturation? Cross selling is more important than ever in this segment because there are fewer unbanked customers. The example serves to illustrate the reality that competition is increasing for all segments and all product categories. The proportion of customers who have an exclusive relationship with any single bank is declining.

Buying behaviour itself is changing. Technology is exerting a dramatic influence on consumer behaviour, and this trend will continue. The internet is already enabling consumers in some segments to become more and more informed about competitive bank offerings and pricing, and very importantly, service standards. Customers are more self-empowered, and far more able to buy comparatively, and as a result competitors are introduced earlier in the consumer’s buying process. This means that a proactive, informed and professional approach is required to win business, and that the speed and agility of the sales force and the selling system becomes ever more important.

Compliance requirements make the sales process more administratively demanding. With particular reference to the less affluent segments, a dramatic upswing in unsecured lending has already attracted the regulator’s attention, amid concerns that indebtedness remains too high and savings too low. This illustrates the increasingly hawkish regulation of financial product sales, which is already ruled by acronyms: FAIS, FICA, NCA, CPA.

While these acts have increased customer protection and helped manage other risks, they have also created considerable compliance requirements and diverted resources away from discovering customer value and into administration, and more can perhaps be expected. The proportion of staff training effort that is dedicated to compliance has become disproportionate, and is exerting a negative influence on banks’ ability to develop effective sales teams.

Sales consultants in retail banking are needing to achieve more, with more sophisticated customers to whom they may have less effective access, in a more competitive environment, in a regulatory context becoming ever more stringent. This reality becomes even more pronounced in business banking, where the solutions are more complex and the stakes are higher.

The proportion of customers who have an exclusive relationship with any single bank is declining.

SALES THEORY: THE SNAP FORMULA(The skill of the sales force) x (the number of applications) x (the allocation of effort) x (the selling process)Getting this right will be likely to require new behaviour at various points in the sales value-chain. Over and above the compliance requirements and systems and product knowledge, the following behaviour in sales teams will have to be optimised:• decisions regarding where to allocate sales effort for

greatest reward;• understanding the customer life cycle and the changes

that drive buying behaviour;• gaining access to customers at the right time;• analysis of customer buying behaviour, and what constitutes full value from the customer’s point of view;• the conversational skills to facilitate the buying process

so that the customer can realise full value from a range of products. This is not the same as ‘selling products’ – it is a more sophisticated conversation that focuses on products only to the extent that these are the vehicles that deliver customer value.

The skill set underpinning this behaviour – and this is not by any means the complete set – is far broader than the skill set underpinning the traditional order-taking role fulfilled by many sales people in banking. This behaviour does not emerge by tucking a couple of days of sales training into a curriculum that focuses on product, compliance and system knowledge. It requires a new approach with a focus on professionalising the sales force. What is required is a new paradigm for learning and development for the role sales people play.

Perhaps the historical quest for differentiation through operational efficiency is being superseded by the opportunity for differentiation in the sales process – and hence in the service process.

Detailed analysis shows that it can be done. It will, however, require rethinking some of the traditional assumptions regarding effective sales behaviour.

The bank that gets this right will certainly enjoy rich rewards.

Dr Derek Shirley is an academic director of Cornerstone Performance Solutions. Cornerstone provides training and consulting services in banking learning and development, focusing on producing the people and behaviour that drive banking results.

For more information visit www.performancesolutions.co.za

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THE DETAILED DIFFERENCEMany banks are investing heavily in their selling processes and technologies to match this emerging reality. Alterna-tive channels, detailed micro-market analyses, elaborate management information systems (MISs); exact performance targets, marketing integration, incentive schemes, and sales portals are all being developed and deployed. The list goes on.

What does this mean for a sales force that must use new technology and new processes to sell in changing markets under new conditions?

Clearly the historical platform of passive lead sourcing for sales teams, and an order-taking mind-set cannot prevail. And in the emerging world, more of the top line in retail banking hinges on the quality of one conversation – the sales conversation.

A poor sales talk leads to an order taken. On the other hand, a great talk leads to multiple-value opportunities discovered, value positioned, solutions or outcomes sold; a relationship built and cross-sell ratios improved and a more satisfied and better serviced customer.

DEVELOPING THE DIFFERENCEThis is a very different question to asking what new training is needed. Behaviour is what people do to make a difference. Effective sales behaviour is empowered by systems and guided by performance support tools, but nothing can substitute for an agile, purposeful and skilled sales force. Training is one component in shaping behaviour – but it is an important one.

Research and analysis over the past few years in South Africa, along with international benchmarking, all point to the fact that there is a need for a new sales workforce in banking: a professionalised one. Developing this sort of workforce will be a new and unfamiliar challenge for Learning and Development and for bankers in general. ■

A survey found that consumers make no differentiation between bank brands.

Embedment of strategy into operations & budgets

This is why

75% of managers don’t have incentives linked to strategy

40% of the organisation’s strategies’ value are not realised because of breakdowns in planning

85%of executive teams spend less than one hour per month discussing strategy Living and

breathing

Funding

Understanding

60%of organisa-tions don’t link budget to strategy

73%of a typical organisation’s employees don’t have access to its strategic plan

95%of the work-force don’t understand their organisation’s strategy

of all organisations fail to execute their strategies90%

Emergence of the Results Management Office (RMO)The RMO approach takes the traditional Programme Management functions of scope, schedule, cost, issue & risk management to a more mature level through a deeper understanding of an organisation’s business objectives & the alignment of programme goals with those of the organisation.

Output drivenAdministrative

ReactiveEfficiency orientated

Metrics focused

Current strategy execution is: The RMO way:

Results focusedEffectiveness orientated

Strategic and agilePredictive and proactive

Outcome driven

Is your organisation’s strategy yielding results?

Manages the critical path & outcomes

Ensures organisational readiness

Measures shareholder returns R esults

Strong focus on people & stakeholder alignment

Provision of technical skills to enable decision makingA lean execution framework

that focuses on delivery rather than reportingIs the organisation

ready to adapt to the change ?

Are we doing the right things, correctly ?

Links & measures strategic initiatives to customers & risk profile

Are we doing the right things ?

Do we have the skills to handle the right things ?

It focuses on:

Sources: Deloitte. The Execution Premium”, Robert S. Kaplan and David P. Norton. Harvard Business Press.

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LEGAL VIEWPOINT

SA BANKER Edition 2

ISTOCKPHOTO

SADC’s standardised loan documentation:

Some progress, some challenges


SADC Banking Association and the African Loan Market Association are working toward faster, more efficient loan processes.

There is widespread recognition among banks and law firms in South Africa, that standardised loan documentation could help reduce the high cost of loan transactions and speed up the transaction process. Standardised documentation will also develop the

secondary market for loans and facilitate syndication of loans. While efforts to develop and implement standardised documents are still in the early stages, there are signs of progress.

‘Strong support exists in the South African banking and finance sector for the work of the African Loan Market Association (ALMA), which is spearheading the drive to introduce standardised loan documentation,’ says Elliott Wood, a director in the banking and finance practice at Werksmans Attorneys. ‘The thinking is that more cost-effective, efficient transactions would stimulate the market, particularly the secondary and syndicated loan market, to the benefit of lenders and borrowers alike.’

ALMA is a non-profit trading association formed in September 2011, to support and grow the African syndicated loan market by giving members access to training, market information and standardised loan documentation. Its members include major local and international banks, law firms, development finance institutions and credit rating agencies.

‘Standardised loan documentation is a priority and ALMA’s documents committee has already developed the first of such documents and made them available to members,’ says Wood. However, some challenges are being encountered in the take-up of these documents by the banks.

According to Wood, the first standardised documents are specifically for unsecured loans. ‘By definition, this type of loan is geared for a niche market, representing a very small percentage of borrowers. However, some banks have attempted to use the unsecured loan documents for secured loans,’ he says.

‘This is obviously not ideal, since the documents were designed for unsecured loans and, not surprisingly, had to be adapted for the context of secured loans, which requires significant amendments,’ Wood explains. ‘The standardised forms will only achieve their purpose if used for appropriate transactions.’

For each and every transaction, the parties have to familiarise themselves with different versions of loan documentation.

A related challenge is that users of the new documentation still have to get used to the notion of standardisation, which could take time.

‘In Europe, where standardised documentation has achieved relative success, it took the Loan Market Association (LMA) many years to achieve this,’ says Wood. ‘The European market is also significantly different from the scenario locally, and we can’t expect standardisation to happen overnight in South Africa.’

The Local Market Association (LMA) also has far more documents available to members, which makes things convenient. This does not detract from the high level of support for standardisation in South Africa – as well as in Kenya and Nigeria, who have also become members of ALMA.

‘There is no denying that the current set-up, where each bank and law firm uses its own loan documentation, can add to the cost of transactions and result in delays,’ Wood says. ‘For each and every transaction, the parties have to familiarise themselves with different versions of loan documentation. This can be extremely time-consuming – hence expensive – especially when multiple lenders are involved in a transaction.’

He points out that the average length of a main loan agreement is between 50 to 100 pages, with ancillary and security documents accounting for significantly more pages. ‘Loan agreements are voluminous, to say the least, and if there is no standardisation, an enormous amount of time is expended on documentation reviews and gaining familiarity.’ This goes some way towards explaining why loan transactions can take so long, often months, to conclude, depending on their complexity.

‘ALMA is definitely taking steps in the right direction,’ Wood says. ‘Going forward, it will be critical to expand the standardised documentation available so as to cater for other types of loan transactions. Standardised documentation has the potential to make a meaningful impact on the time and cost of transactions, especially if applicable to a broader range of transactions.’ ■

For more information visit www.africanloanmarket.com

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INDUSTRY SURVEY


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Continued »


‘The weaker banks need to disappear because, aside from failing to do their job of providing credit, they weaken the rest of the system.’ That’s how Francisco Gonzalez, chairman of Argentina’s Banco Bilbao Vizcaya, sees it.

Gonzalez is one of over 1 200 CEOs interviewed in 60 countries – including 32 in South Africa – for PwC’s 15th Annual Global CEO Survey, ‘Delivering results: Growth and value in a volatile world’. The survey explores CEO confidence in their company’s growth prospects, and how they’re building local capabilities and creating new stakeholder networks in new markets.

A significant percentage of CEOs see the lack of skills as a major challenge to the growth of their businesses, with only a minority ‘very confident’ that they will have access to the talent that they need over the next three years.

In this year’s survey, South African CEOs showed greater concern over a number of external factors, most particularly the availability of key skills. No less than 78% of local CEOs are concerned about this single issue, compared to a global average of 54%.

Gerald Seegers, director for human resources services at PwC Southern Africa, says: ‘CEOs are facing a “talent crunch”, and it’s an issue keeping them awake at night. An inability to find and keep the right people is biting, with CEOs saying the lack of talent is stifling expansion and innovation within their organisations.’

This is particularly felt by South African CEOs, more than half of whom reported that it was becoming more difficult to recruit workers in their industries, citing the supply of skilled candidates, changing skills needs and compensation expectations as the leading reasons for this. ‘CEOs are also candid about the effect talent constraints have had on their companies’ growth and profitability in the past year, with South African organisations being significantly more affected than their global counterparts in a number of areas.’

PwC’s Global CEO Survey

Threats and opportunities

PwC Southern Africa CEO Suresh Kana says, ‘It comes as no surprise to learn that the biggest strategic changes anticipated in the next year are likely to be seen in CEOs’ strategies for managing talent, organisational structure and technology investments.’

‘To face up to this crisis,’ Seegers says, ‘CEOs are turning outside their sectors for talent, and they are also going deeper into their own organisations to pinpoint their future leaders and invest in their development now.’

BANKING AND CAPITAL MARKETSBanking and capital markets (BCM) leaders in PwC’s CEO Survey are weighed down by economic and regulatory uncertainty. But they recognise the vital importance of investment in talent, innovation and strategic alliances as they strive to sustain profitability and long-term growth.

‘Our latest CEO survey underlines the extent to which regulatory upheaval and economic uncertainty are weighing down on banks and capital market businesses. Capital and liquidity demands are putting further pressure on balance sheets, while uncertainty over the final rules, is making it difficult to plan ahead. Regulation is becoming increasingly intrusive and intense, with supervisors demanding more information, more quickly than ever before,’ explains Robert Sullivan, global leader, banking and capital markets, PwC (United States).

‘But as difficult as these challenges are, sector leaders still need to look over the horizon at how the rapid shifts in the global economy, technology and customer demand are going to reshape their marketplace and their ability to compete,’ he continues. ‘The immediate priority is how to develop the scenario analysis and range of options needed to deal with the current uncertainty. Looking ahead, the key priorities are determining whether your business and operating models will still be viable in this evolving

34

INDUSTRY SURVEY


landscape and identifying the strengths within the business that would allow it to establish a leading position. The findings from this year’s CEO survey provide some useful markers that will help industry leaders in these vital deliberations.’

PwC reported on the emergence of four major themes for the BCM sector:

Sustaining growth is challenging. More than 80% of BCM CEOs see over-regulation and economic uncertainty as threats to growth. Only 15% are planning to carry out a cross-border acquisition in the coming year, despite the strong need to sustain revenues and bolster return on equity.

Capitalising on global opportunities. South America, Asia and Africa dominate the list of regions targeted for growth by the BCM CEOs. Sixty percent of BCM CEOs see emerging markets as more important for their company’s future than developed markets.

Market opening up to innovation. Innovation is clearly a key aspect of the growth agenda for BCM CEOs, with 64% looking to build up their capacity in this area. Digital transformation provides an opportunity to engage more closely with customers. But it’s also opening up the market to disruptive new entrants, though few CEOs are concerned about the threat.

Concerns of talent shortages. More than 40% of BCM CEOs believe skills shortages are a threat to growth and that it’s getting harder to recruit and retain good people in their industry. The high-potential middle managers that will be crucial in taking the business forward are in especially short supply.

The report was required to identify the external factor that had the most impact on their company financially in the past year, [the report states], ‘Nearly three-quarters of BCM CEOs cited the ongoing sovereign debt crisis in Europe and two-thirds said that the crisis had triggered changes to their strategy, risk management or operational planning… More than half believe that the global economy will get worse over the next 12 months, compared to less than 20% who believe it will improve.’

Electronic banking was seen as a key growth area. ‘Digital interaction offers smart banks the opportunity to engage more closely with customers and increase wallet share,’ according to the report. ‘Our research also indicates that digital banking is perceived as providing high value and is an area for which customers across all markets and segments would be prepared to pay. New technology and production development is clearly a key aspect of the growth agenda for BCM CEOs.’

At the same time, digital transformation could be highly disruptive, allowing new entrants to break into the banking market, pick off the most valuable revenue opportunities and seize control of customer relationships. Several technology companies are looking to make inroads into the banking market. Francisco González of BBVA is mindful of the challenge. ‘Our future competitors will not be traditional banks but large technology companies,’ he said. ■

For the full PwC 15th Annual Global CEO Survey, see www.pwc.co.za.

CEOs are facing a “talent crunch”, and it’s an issue keeping them awake at night.

60% of Banking and Capital

Markets CEOs see emerging

markets as more important

for their company’s future

than developed

markets.

BB

VA

Francisco Gonzalez, chair-man of financial services group BBVA: ‘Our future competitors will not be traditional banks but large technology companies.’

36

FEATURE


SABRIC CEO Kalyani Pillay: ‘We are confident that lessons learnt in South Africa can be beneficial to our clients in their new markets’.

SA

BR

IC


SABRIC: a unique collaborationWhen faced with a challenge, South Africans make a plan.

For ten years now, the South African Banking Risk Information Centre (SABRIC) has been in the vanguard of combating crime at South Africa’s top banks. During that time, the crime threats facing South Africa’s banks and their clients have developed

in ways barely imagined a few years before.South Africa’s banks responded to this challenge in a unique way.

Since 2002, when SABRIC was created at the initiative of the big local banks, a co-operative approach between all the stakeholders has reaped rich rewards.

CEO Kalyani Pillay says SABRIC follows a unique model. ‘We are privileged to have such an enviable model that is characterised by the collaboration of natural competitors. It really demonstrates the seriousness that our clients place on combating crime.’

Initially, a unit of The Banking Association of South Africa, SABRIC was incorporated as a non-profit company in September 2003. Banking Association MD Cas Coovadia, who also chairs SABRIC’s board, explains: ‘SABRIC was established after, as The Banking Association, we realised that the scale of bank crime in the country was increasing and there were also clear signs that we needed to collaborate more and more with law enforcement

agencies and other government departments on this issue. As a result, the banks benefit from economies of scale, and collaborate on a common goal. The local banking industry is able to engage in collective crime-combating initiatives without compromising their competitive imperatives.’

When SABRIC was formed, bank robberies were the predominant form of crime to be addressed. Today instead, Pillay says, cybercrime – whereby information communication technologies are used to defraud customers – has become the major challenge to the local industry, as is the case globally.

SABRIC serves a vital communication function between the banking industry and government departments on crime-related issues. ‘We are ideally positioned to bridge the gap between our clients and government entities involved in combating crime. Instead of each of our clients having to singularly cultivate and maintain relations with the various state entities involved in the combating of crime, SABRIC assumes this responsibility on behalf of the industries that we represent, and also follows up on related strategic and operational matters emanating from these relationships with state entities. It makes sense from a rands and cents point of view, and the state entities involved also benefit from

One would, however, like to see more control exercised over the access to commercial explosives.

Continued »

38

FEATURE


Changing banks?

dealing with a single point of contact,’ Pillay explains. For example, last year SABRIC agreed a milestone IT cooperative initiative with the department of home affairs, allowing banks access to the home affairs national identification system (HANIS). Banks can now verify clients’ details online with the home affairs department in order to curb ID-theft-related fraud. The system allows banks to determine whether an identity document presented by a client matches the records of fingerprints at home affairs.

Pillay has been SABRIC’s CEO since 2007, taking over from Gilbert Swats, who became regulatory risk head at FirstRand. Her background is in the NPA and she also practises as an attorney.

‘It is important for an organisation such as SABRIC to have a holistic view of crime patterns in our operational space, hence the inclusion of cash management companies and independent ATM service providers in our fold,’ says Pillay.

A very simple divisional structure characterises SABRIC, with operations divided between an office for combating commercial crime and another for fighting violent crime. In charge of combating commercial crimes is Susan Potgieter, a lawyer who worked in the legal and forensic divisions of a major bank before she joined SABRIC in 2003. Kevin Twiname is in charge of operations focusing on violent crimes such as bank robberies, ATM bombings and cash-in-transit industry crime.

The advanced nature of South Africa’s banking systems has led to perpetrators of bank crime changing their focus. The perpetrators devise bank schemes intended to dupe customers as they find it increasingly challenging to penetrate the sophisticated systems of the banks.

It is for this reason that the banks and SABRIC invest significant resources in education. With this, one may assume that the war on bank crime is won. ‘We have noticed how crime trends follow market developments. Criminals are notorious in exploiting all opportunities to their own advantage. A good example of this is the storylines used in online scams,’ Potgieter says.

‘Identity theft is a recurring theme in commercial crimes. It is very rare that criminals perpetrate commercial crimes using their own identity. They either impersonate citizens with good credit profiles so they can apply for products and services using their identities, or take over their existing benefits, or use stolen identities to perpetrate crimes, hoping that they will not be identified. All our member banks invest extensively in crime prevention activities. As processes and systems are upgraded and consumers educated, unfortunately criminal modi operandi also adapt. This requires a consistent focus on preventative strategies and inter-bank co-operation through SABRIC, which contributes significantly to the industry’s ability to mitigate associated risks.’

We aim at turning each negative report into a positive one through early warnings to our members.


or changing banks?

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LEARNING SOLUTIONS FOR PROFESSIONAL PERFORMANCE IMPACT

SABRIC’s clients include Absa, First National Bank (FNB), Nedbank, Standard Bank, Investec, Postbank, Capitec, African Bank, Mercantile Bank, Bank of Athens, Ubank and Bidvest Bank. In addition, the three major cash-in-transit companies – SBV, G4S and Protea Coin – as well as two independent ATM service providers – ATM Solutions and Bytes Technologies – are part of its clientele.

SABRIC’s board is chaired by Mr Cas Coovadia, the MD of the Banking Association, and constituted of the following directors: Ms J McLeod of FNB, Mr M Springett of Absa, Adv Nick Jacobs of Nedbank, and Ms JK Griffin of Standard Bank. Mr WJH Scholtz of Nedbank is an independent director.

Potgieter notes that SABRIC has to remain alert at all times and keep up with technology-driven changing crime patterns. ‘While it is important to respond appropriately to organised crime activities, it is more important to use the lessons learnt to be proactive and prevent crime. We aim at turning each negative report into a positive one through early warnings to our members.’

The case of notorious bank robber and escapee Bongani Moyo is an example of how SABRIC’s capabilities benefit its clients. Moyo is allegedly responsible for a string of bank robberies in various banks and with SABRIC’s involvement, the banks and the police quickly became alert to a common challenge.

Twiname explains: ‘We are able to identify patterns of crime across provincial and international boundaries and share this information with law enforcement, banks and other organisations, to assist them in making informed decisions to reduce their risk exposures.’

Though certain bank-related violent crime has lessened, these are still critical, particularly attacks on ATMs with commercial explosives and ‘follow-home’ robberies, when bank clients who make large cash withdrawals are followed and robbed. Even though ATM bombings have increased in the Western Cape this year, there’s been an overall decrease. ‘One would, however, like to see more control exercised over the access to commercial explosives,’ Twiname adds.

Pillay says, ‘Crimes directed at customers are a major concern for the banks at the moment, generally from a reputation point of view. For example, the banks are not affected by robberies of customers after withdrawals but certainly take this matter seriously, because in the process it is their systems that are used. Phishing attacks are another example where the banks feel that, in addition to providing awareness to customers to be careful with their personal information, there should be other measures to ensure that these perpetrators are arrested and prosecuted.’

Many of the ‘follow-home’ incidents are violent and include robbery of significant sums of cash belonging to members of stokvels or savings clubs. Police, in collaboration with SABRIC

and the banks, have been able to make numerous key arrests of perpetrators.

Twiname says, ‘Perpetrators of these crimes are ruthless in many cases, and victims usually tend to lose more than just the money they withdrew from a bank; in some instances, we have heard of cases where people’s household belongings have been lost as a result of ‘follow-home’ robberies. It is for these reasons that SABRIC and the banks are on a drive to advise customers to consider alternative forms of banking instead of carrying large sums of cash – such as performing electronic transfers.’

Pillay says that the focus of the banking industry, over and above ensuring that latest technologies are used to deter criminals, is to ensure that customers access information and knowledge that will assist them to ensure that they do not fall victim to crime. ‘We cannot ignore that bank crime patterns have shifted over the years and the perpetrators are now increasingly targeting customers.’

SABRIC is also investigating ways to assist its clients in developing pre-emptive crime-prevention measures for their expansion into new markets, particularly African markets. ‘We are confident that lessons learnt in South Africa can be beneficial to our clients in their new markets.’ ■

40

REGULATION


Are ‘discriminatory’ lending practices here to stay?Some companies could contravene the spirit of Treating Customers Fairly regulations.

Differentiated rates and ‘discriminatory’ lending within the financial services sector are responsible practices that protect customers and should continue into the future despite the proposed introduction of new ‘Treating Customers Fairly’

regulations, says Deloitte.‘The Treating Customers Fairly (TCF) regulations will be

similar to the programme being implemented in the UK, which was introduced to compensate for the failure of existing consumer protection legislation,’ says Pravin Burra, director, capital markets at Deloitte. ‘Regulators in the UK decided to focus on outcomes – the culture they wanted to instill in the financial services industry as a whole – rather than attempt to amend existing regulations.’

In South Africa, Burra points out, Financial Services Board (FSB) regulations on Treating Customers Fairly would be an addition to the plethora of existing consumer legislation and regulations such as the Consumer Protection Act (CPA), National Credit Act (NCA) and the Protection of Personal Information Act (PPI).

With the TCF regulations, the onus could also be placed on company leadership to prove that they are adopting, promoting and instilling measureable consumer-friendly practices throughout their businesses. ‘But because of the unique circumstances surrounding South African society,’ says Burra, ‘it could be argued that some business practices, based on the management and reduction of risk, could contravene the spirit of TCF regulations.’

‘The proposed South African TCF will be built on the premise that all South Africans are entitled to be treated in a non-discriminatory manner, with no regard being applied

to gender or race. ‘Our industry, however, is using criteria to differentiate target markets from a pricing and sanctioning perspective that inadvertently result in demographic segmentation taking place.’

For example, some loans may only be advanced to customers who qualify on the basis of having tertiary qualifications. Due to the historical issues in South Africa, the vast majority of qualifiers within this segment are still white. ‘The question being asked is: “Is this a fair lending practice, or are banks and insurance companies being discriminatory by shutting out people who could otherwise be considered for finance or loans?”’ says Jonathan Sykes, head of credit, capital markets at Deloitte.

‘The financial services industry could argue that the TCF regulations are forcing them to take more risks and price products accordingly. This could then result in advances being undertaken on a portfolio basis with all customers being required to equally carry risk and thus “cross-subsidise” others within a group who are less creditworthy,’ Sykes says.

Reality dictates, Sykes believes, that differentiated and ‘financially discriminatory’ services will be entrenched features within the financial services sector.

‘The emphasis will be where it always has been – separating low-risk and high-risk individuals, rewarding good risks with lower rates and discriminating against those with bad records with higher rates.

‘Discrimination through application of price differentiation should protect the customer. Given the pressures on banks, particularly when it comes to cost of capital, pricing and competition for market share, margins are under pressure,’ adds Sykes.


‘Market forces, rather than social factors and regulation, will continue to drive the market. Ultimately this will be benefi cial for South Africans.’

Sykes maintains that the market will become more aspirational and could even have a positive social impact. Certain sectors of employment could become more att ractive than in the past, because of the possibility of people occupying certain categories of employment being regarded as bett er risks than others and benefi tt ing from diff erentially-priced products.

Th is pricing practice would broadly accord with the desired outcomes of TCF regulations:• customers must trust their fi nancial service providers;• products and services supplied are appropriate to consumers, and• that transparency and discipline in the industry is enhanced.

Transparency and discipline – and the customer confi dence that comes with them – require oversight. Burra believes that: ‘Th e onus is on government and pressure groups to keep banks accountable. Where it is considered that price diff erentiation oversteps the mark, the banks must be told so that they can adjust their practices accordingly.’

Possible sanctions could include banks being required to lower penalty fees on dishonoured debit orders, improving the management of the current debit order system, greater transparency regarding ATM fees and ch arges, the implementation of a standardised switch ing code to promote ease of switch ing bank accounts between banks, and improving customer education,’ says Burra.

As the Banking Association’s Stuart Grobler points out, the ch allenge is that TCF regulations are outcomes-based as opposed to rules-based, making them diffi cult to implement in law. ■

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CONTACT DETAILSwww.citigroup.com Tel: +27 11 944 0000

Twitter: @Citi YouTube: www.youtube.com/citi Blog: http://new.citi.com Facebook: www.facebook.com/citi LinkedIn: www.linkedin.com/company/citi

Q & AName of bank: Citibank, N.A. South Africa branch (trading as Citi South Africa).Owner: Citi South Africa is a branch of Citibank, N.A. and is part of Citigroup Inc. (‘Citi’), the global financial services company. Core business: As a leading global bank, Citi has about 200 million customer accounts and operates its business in more than 160 countries and jurisdictions around the world.

Globally, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services. These include consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management.

In South Africa, Citi is a corporate and investment bank with a global footprint. We provide our clients with tailor-made solutions. We offer a full range of financial products and services including mergers and acquisitions, foreign exchange trading, an equities platform as well as debt capital markets, debt advisory and liability management.

Our respected research team, comprising both strategists and economists, covers a variety of stocks primarily based in South Africa. In addition our corporate finance team provides financial engineering and structured financing solutions. We also offer trade and cash management as well as having recently launched our custodial services (November 2011).Target market: Citi targets top-tier local companies who are looking to expand into Africa or across the globe into other markets. Our clients include public sector, financial institutions and non-banking financial institutions. We bank with many of the global subsidiaries of international companies operating in South Africa. Core values: Citi is committed to the economic and social development of South Africa. As such, and where possible, we assist South African companies to gain access to international capital in order for them to grow and develop. Citi is committed to economic transformation in South Africa. We are a level-4 contributor to BBBEE and have a well-advanced strategy in this regard. Our core values run through Citi globally, and are spearheaded by Global CEO, Vikram Pandit: • Common Purpose: One team, with one goal: serving our clients and

stakeholders.

Introducing Banking Association Member Citibank

THE CCO: DONNA OOSTHUYSEDonna Oosthuyse is the Chief Country Officer (CCO) of Citi South Africa. She is also chairperson of the International Bankers Association of South Africa.

• Responsible Finance: Conduct that is transparent, prudent, and dependable.

• Ingenuity: Enhancing our clients’ lives through innovation that harnesses the breadth and depth of our information, global network and world-class products.

• Leadership: Talented people with the best training who thrive in a diverse meritocracy that demands excellence, initiative and courage.

Is there a key product or initiative you wish to highlight?Citi offers a broad spectrum of corporate and investment products including among others:• Forex, including spots, forwards and options;• Money market placements, NCDs, time deposits, call deposits,

promissory notes;• Fixed income – government bonds and repos, corporate bonds;• Derivatives in the form of FRAs, swaps and cross-currency swaps;• An equities platform which includes equity derivatives (optionality

and Delta 1 solutions);• Equity capital markets as well as equity trading and research;• Debt capital markets products such as debt advisory and liability

management;• Full transactional services to corporates, which include commercial

cards and recently pre-paid cards. Our unique cash-management solution and platform enable clients to link their international subsidiaries into one banking system. Citi provides clients with end-to-end servicing and financing of their trade needs, and;

• Custodial services, launched in November 2011, offering the South African market a settlement bank solution combining custody, clearing, cash, treasury and other key services.

• International links: Information on our international footprint can be found at www.citigroup.com.

• CSI: Through the Citi Foundation, Citi South Africa provides grants to NGOs engaged in community-building initiatives. These grants are primarily focused on encouraging and rewarding micro-entrepreneurship initiative. The Citi Foundation also focuses on developing and assisting organisations who work in micro-finance and financial literacy. ■

[email protected] | Tel: +27 21 872 7065 | Fax: +27 21 872 7168 | 191 Main Road Paarl 7646 | PO Box 3505 Paarl 7620 | Registration Nr: 2006/032693/07Zenith is a licensed Financial Services Provider, underwritten by Hollard, an authorised Financial Services Provider. FSB Number: 36469

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CONTACT DETAILSwww.sasfin.com [email protected] 0861-sasfin ( 727 346)

Q & AName of bank: Sasfin Bank Limited

Owner: Sasfin Holdings Limited

Core business: Integrated banking and financial services organisation for the entrepreneur, whether corporate, commercial or private. Products and services include: trade and debtor finance, equipment finance, debt and equity capital markets, private equity, M & A advisory, sponsor services, asset consulting, asset management, financial planning, portfolio management and stockbroking, money markets, foreign exchange, healthcare consulting, short-term insurance, logistics and trade solutions, verifications services and growth incentives.

Target market: High-growth entrepreneurial businesses and high net worth individuals.

Core values or differentiators: Sasfin is a banking and financial services group offering diverse yet tailor-made products and services that are predicated on a deep understanding of our clients’ needs and delivered through strong relationships and personalised service.

Any newsworthy changes in the bank’s structure or business in the near future? We are in the process of launching an energy efficiency financial solution for the SME market.

Is there a key product or initiative you wish to highlight? We offer a global investment platform, through which our wealth management clients can construct a bespoke portfolio of international securities, including direct investments into top international companies and brands on all the major stock exchanges worldwide.

International links: Sasfin has a subsidiary based in Hong Kong that assists in providing our start-to-finish import solution to South African importers who are sourcing their products from the Asia region. The International Finance Corporation, a member of the World Bank Group, made a strategic equity investment in Sasfin Holding Ltd in September 2009.

CSI: Our CSI programme focuses on education, community initiatives, aids awareness programmes, sponsorships and donations to a variety of developing NGOs and similar organisations ■

Introducing Banking Association Member Sasfin Bank

THE CEO: ROLAND SASSOONRoland is the Chief Executive Officer of Sasfin Holdings Ltd and Sasfin Bank Ltd, and serves as a director for most of their subsidiary and associates companies. He is chairman of the Group’s Executive Management Committee, and of SAL, Sascred Financial Services Ltd and Sasfin Private Equity Fund Managers (Pty) Ltd. He gained ten years’ experience with factoring, leasing, export shipping and confirming companies before joining the Group 32 years ago as CEO.Roland Sassoon completed a CIS Diploma (FCIS) at Damelin College and is a member of the Chartered Secretaries Southern Africa.

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Procedural banking

Learning implementationLearner experienceKnowledgeProcedural application

The new world of banking is a perpetually dynamic environment characterised by increasingly complex consumers, shifting regulations and high speed technological developments amidst annual restructuring. It is therefore safe to assume that executing a set of actions or operations in the same manner in order to always obtain the same result under the same circumstances is no longer sufficient.

Today, procedural banking equates to wasted opportunities. Whilst sales and service might tick their boxes, upselling, cross-selling and retention go amiss.

Surely training solutions should equip bankers to respond with something a little more purposeful and value-oriented? Surely this kind of rote execution of procedure is the yesterday of banking, and not the tomorrow?

The answer is the same in all spheres of banking. Success in the new banking relies on much more than procedural skill. Enter the ‘iBanker’, an intelligent, innovative, intentional, independent, informed and inspired individual with integrity and initiative.

Cornerstone’s thorough approach to education ensures interventions beyond qualifications. Our research clearly shows iBankers achieve better results because they have an appreciation of the business context, using problem solving strategies and metaskills over and above procedure, creating real banking and customer value.

Procedure is yesterday. iBanker is tomorrow.

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Understanding of banking contextStrategic business driven learning solutionsEfficient learning implementation+Transformational learner experienceSuccessful learner outcomes for Agile applicationValue added behaviour change Business driven impact

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Success in the New Banking: The Incredible Banker

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Banking Business Acumen 1

The Business Essentials Of Banking*Principles of Personal and Business Finance**

Credit 2

Sustainable Unsecured Lending**Effective and Compliant Credit Collections*

Successful Bank Credit for Business Clients**

Sales 2

Mastering Banking Product Sales*

Risk & Risk Management 2

Principles of Governance, Risk and Compliance*Essentials of Compliance Practice in Banking**

Specialised Banking and Finance 3

Principles of Foreign Exchange**Principles of Investment**

Professional Effectiveness for Bankers 4

Personal and Professional Effectiveness*

Management and Leadership in Banking 5

Foundations of Effective Management for Banking*Shaping High Performance Teams in Banking**

Sales Management 5

Mastering Sales Management in Banking**

Specialised aspects of Management 5

Effective Procurement in Banking*Practical Project Management in Banking**

Cornerstone Short Courses 2012

1 Business Acumen 5 Management and Leadership

4 Professional Effectiveness

3 Specialised Banking Disciplines

2 Core Banking Disciplines

48

SKILLS DEVELOPMENT


Trade trainingNEW FROM BANKSETABANKSETA launched its fully-funded National Payments Systems Foundation course in conjunction with the Payments Association of South Africa (PASA) in the middle of June this year. BANKSETA board member Shirley Zinn said the implementation of the course was meant to supplement on-the-job training and learning through informal interactions among payment practitioners.

Zinn believes payment practitioners have admitted the complex nature of the payments domain and that it requires shared, formalised training. Through this programme, there will be improvements in industry engagement and will lead to an increase in industry-based innovations.

BANKSETA Chief Executive Officer Max Makhubalo says that the South African banking sector is constrained by a lack of appropriate skills. He explains that BANKSETA has doubled its support for small and micro-enterprises, with one aspect of this being through its mobile training solution – a bus equipped with satellite technology, touch-screen computers and office equipment – launched two years ago.

BANKSETA has also researched the issue of ‘Recognition of Prior Learning’ (RPL), where those with experience in the sector – but without the necessary formal educational qualifications – are given credit toward gaining their qualifications. As part of BANKSETA research, sector representatives and regulators visited the Centre for Learning Sciences and Technologies in the Netherlands to benchmark the European approach to RPL and its application in the banking and microfinance sector.

‘The pilot RPL project has been a huge success,’ according to Makhubalo. He says while BANKSETA has a wide range of initiatives to promote employment in the banking sector and to develop employee skills, one area which has been neglected has been the employment of disabled people.

‘We have researched the hindrances to the recruitment and retention of disabled people in banking, and are now implementing the results, like assisting the visually-impaired to use computers,’ says Makhubalo.

EVOLVING TRAINING NEEDSDr Derek Shirley, Chief Executive of Cornerstone Performance Solutions, says that there have definitely been changes in training methods employed by banks over the past 10 years. He also points out that the banks have increased their training spend over the years, but because of the new financial and banking regulations, the buying process from external service providers has been tighter and much more carefully controlled.

‘They have to find a balance between external service providers as well as providing the training internally. They will most likely source external service providers for training areas that demand advanced expertise, like compliance,’ says Shirley.

He added that banks do most of their own operational training and seek external providers only for specialised areas. He says that in terms of executive training, most banks have partnered with institutions of higher learning with whom they offer executive training and mentoring for their senior management.

Thabiso Ncube, financial analyst at Karabo Portfolio Managers added that with the advent of new applications, software and hardware in the global market, it is rather obvious that the approach to training needs in the South African banking sector must evolve to cope with the dynamics of global technology.

BANKSETA INTERNSHIPS‘Banking is the litmus test for the health of the economy,’ says Makhubalo. However, South Africa’s banking sector is constrained by a lack of appropriate skills.

‘The output from schools is deteriorating in the levels of mathematics, accounting and communication skills, which affects customer-relation management skills. This impacts on the amount of money that has to be spent by banks to train new full-time employees to get them to the level of their competitors’ staff in Europe or the US,’ Makhubalo said.

‘The fact that South Africans have a preference for university education, even if it is social sciences, while the country is in desperate need of technical, accounting and IT skills, exacerbates

South African banking is constrained by a lack of appropriate training. BANKSETA and training providers are working to fix this issue.


the problem. Very few tertiary students enter further education and training (FET) colleges or learnerships, which are also very difficult to promote to top-achieving students.’

One of BANKSETA’s roles is to attract the necessary share of the talent pool for the banking and micro-finance sector – not merely to turn matrics from the bottom of the academic barrel into acceptable and useful employees.

If the cost of training employees to the required level of skills became too heavy, both the company spending that money, and South Africa, would become uncompetitive, Makhubalo said.

The good news is that ‘learnerships’ – apprenticeships that allow time off for instruction, while teaching on-the-job training – have been identified as one of the best ways of building skills.

While an internship does not guarantee permanent employment, between 75% and 85% of apprentices in the SETA’s programmes have been ‘absorbed’, Makhubalo said.

BANKSETA has two training projects: Letsema, aimed at matriculants, and Kuyasa, for those with a university degree or a certificate. In the past seven years, the Letsema programme has successfully trained about 6 000 youngsters – an average of almost 860 apprentices annually.

During the training year, the interns are paid a monthly stipend and given the opportunity to work in a bank.

‘We give them soft skills, like what it is to be a bank employee,’ Makhubalo said. The interns also earn a certificate in banking. ■

We have researched the hindrances to the recruitment and retention of disabled people in banking, and are now implementing the results.

BANKSETA Chief Executive Officer Max Makhubalo

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OverviewXantium offers a complete service relating to the manufacturing and personalisation of cards. Our products and services range from consulting to the complete management of any one of the following aspects:

• Card design & manufacturing• Personalisation• Stationery/packaging design and sourcing• Pin mailer printing• Card distribution and reporting

Detailed production information for all cards is provided in real time through Xantium’s web-based Track & Trace system [see Track & Trace]. This system is secured and accessible only by authorised employees. All reports generated on this system are PCI –DSS compliant.

Chip & EMVA chip card is a credit or debit banking card that has a microchip embedded in it.The chip provides enhanced security and greater convenience to banks and cardholders. In order to enhance their service and security offerings, many fi nancial institutions, in line with Visa and MasterCard requirements, are opting to issue chip cards. Xantium with its products, technical support and services, can assist companies to move towards utilising and installing this new technology. Xantium is also able to carry out large-scale EMV conversions and implementations as well as daily ongoing card renewal and replacement services.

TelecommunicationsXantium offers secure data fi le processing, production, full packaging and fulfi lment.

Complete Card Solutions Provider

ContactsFor any card related product enquiries please contactXantium Integrated Solutions.Tel: +27 (0) 11 472 9330 orE-mail: [email protected]

www.xantiumis.co.za

Our clients are assured of accurate, affordable SIM cards that are timeously delivered. Xantium provides GSM, CDMA and UMTS product lines in telecommunications.

Track & TraceXantium has developed a Track and Trace system that is used not only as an internal personalisation production management tool, but also gives customers the level of comfort that the card personalisation will be completed in the required time frame. Xantium has developed a web-based front-end to the Track and Trace system to allow clients to track the progress of their orders through the personalisation bureau, giving them complete transparency. One benefi t of this is for feedback for call centres, allowing for accurate information in real time, making it possible for the call centre agent to identify where in the system a card is, and to manage customers’expectations on the fi rst call. Some of Xantium’s larger customers have Card Operation Departments which are responsible for the on time delivery of over half a million personalised cards per month. The Track and Trace system has proven to be an effective tool in the management of the supply chain, from cards being ordered through to dispatch. Stock management is also available through the system and allows clients to monitor and re-order stock timeously.

Black Economic EmpowermentXantium Integrated Solutions has a Level 5 - Broad Based Black Economic Empowerment (B.B.B.E.E.) scorecard. Our Black owned Equity Company comprises several industry stalwarts who bring a wealth of experience and relationships to our collaboration.

TECH PAGE


GadgetsSpeed and power: the latest mobile business tools. By Charles Boffard.

SAMSUNG GALAXY S IIIFROM R6 900samsung.com/zaThis is the Android phone that does everything. Behind the huge, pin-sharp touchscreen is a bag of new Samsung tricks, several of them useful for business users.

The user interfaces are interesting: there’s voice control for functions like making appointments and setting alarms, and to call back someone who’s just sent you a text message: simply hold the phone to your ear. Smart stay detects your face and keeps the screen illuminated as long as you’re reading it. Pop Up Play lets you watch a video in part of the screen while multitasking. The 8MP camera has the most advanced functionality we’ve seen on a phone.

For business users, the 1.4MHz quad-core processor means it’s a very fast multitasker. Double-speed Wi-Fi compression enables faster fi le sharing. It’s a beauty.

HTC ONE XR6 000htc.comYou’ve got to move fast in tech. The Galaxy S III’s 1.4GHz processor was the fastest gun in town for, oh, about two weeks. HTC’s new One X has 1.5GHz and 512MB RAM under the bonnet, and with Android 4.0 (Ice Cream Sandwich) and HTC’s excellent Sense interface, the user experience is fast and slick enough to rival the iPhone’s. It’s big – the splendid screen measures 4.7in/11.7cm – but under 9mm thick, and even with all that battery-draining screen and processing power, the One X’s battery lasts through a full day’s heavy use.

In short, it’s the best Android phone yet. Any downside? There’s no microSD slot; just 32GB of onboard memory and 25GB of additional Dropbox online storage for two years.

HP ENVY SPECTRE XTFROM R10 000hp.com.zaNetbooks used to be a choice between size and power. Not any more. HP’s latest Spectre series are shiny, aluminium-clad, MacBook-looking speed demons, powered by Intel’s new quad-core i7 Ivy Bridge processors. This means they’re capable of multitasking better than you can. There’s a 13.3in/33.8cm HiDef backlit LED display, exceptional Beats Audio speakers, a solid-state disk of up to 256GB and USB3.0. As always, HP throws in a good bundle

of pre-installed software that’s actually useful, this includes Intel Identity Protection, Absolute Data Protect and PhotoShop. The Spectres are also ready for

Windows 8 – if you are.

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HP ENVY SPECTRE XTFROM R10 000hp.com.zaNetbooks used to be a choice between size and power. Not any more. HP’s latest Spectre series are shiny, aluminium-clad, MacBook-looking speed demons, powered by Intel’s new quad-core i7 Ivy Bridge processors. This means they’re capable of multitasking better than you can. There’s a 13.3in/33.8cm HiDef backlit LED display, exceptional Beats Audio speakers, a solid-state disk of up to 256GB and USB3.0. As always, HP throws in a good bundle

of pre-installed software that’s actually useful, this includes Intel Identity Protection, Absolute Data Protect and PhotoShop. The Spectres are also ready for

Windows 8 – if you are.

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NAVIGATION: GARMIN OR GOOGLE?Smartphones have made cameras, diaries, dictaphones, alarm clocks and maybe even laptops nearly extinct. Are sat-navs next?

The great thing about the Google Maps Navigation app is that, with the right data plan they’re free. The satellite map views are great. And you can highlight ATMs, restaurants, parking and so on by adding extra ‘layers’ to the image. Best of all, searching is easier and quicker. Just enter a couple of search words, Google style, and choose from the results.

Once you’ve parked, your phone can guide you on foot, though your battery may die before you get home.

The good thing about Garmins, TomToms and Navigons defi nitely isn’t the simple but slow step-by-step destination input, or the substantial up-front cost. Or even the Blou Bulle and Jeremy Clarkson voices. It’s the screen size (a definite safety factor), the ease of use, and the extra driving information like detailed junction maps with the correct lanes highlighted, which will add years to your life, and live traffic updates, which can subtract hours from your commuting.

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International News

According to the new tool, reported cases of fraud increased from 355 in the first half of 2011 to 520 cases in the second half of the year. In the same period, the value of fraud decreased from

US$7.17 billion to US$3.702 billion.‘We felt that there was a need to create a tool like the Africa Fraud Barometer since the world has begun to

look at Africa as a new investment destination,’ says Petrus Marais, KPMG’s global leader for forensics,

who developed the Barometer. ‘We are still dealing with an often negative perception of Africa. We therefore see ourselves as risk analysts and would like to provide information that allows potential investors to assess and conceptualise risk on the African continent.’ The Fraud Barometer distinguishes between the number of reported fraud cases, type of perpetrators, victims of fraud, type of fraud, countries and targeted industries.

KPMG has released the findings of the inaugural Africa Fraud Barometer, a first effort to measure the risk of fraud for companies on the African continent.

Continued »

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• Financial services sector / insurance / cooperatives / international banks• CEOs, deputy CEOs, CFOs, COOs and middle/junior management

SA Banker is a quarterly publication, published in June, September, December 2012 and March 2013.

• Lobbying • Policy influence • Guiding transformation in the sector • Acting as a catalyst for constructive and sustainable change in the sector • Research and development • Engagement with critical stakeholders

The Banking Association South Africa is the mandated representative of the sector and addresses industry issues through:

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The Banking Association South Africa manages numerous committees that advise the executive on issues pertinent to the sector. Such committee areas include:

Target market:

To advertise in SA Banker or for any further information, please contact Warren Daries at [email protected] • Tel: 021 469 2400 switchboard • Direct: 021 469 2408 • Cell: 082 200 6922

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Data currently available captures the entire year of 2011. Hardest hit by fraud are government and the public sector. ‘Fraud occurs most where money enters and exits a company or institution,’ says Marais.

The African countries with the highest number of reported cases of fraud are South Africa and Nigeria. Zimbabwe has the highest value of fraud perpetrated in the second half of 2011, amounting to over US$1.2 billion.

KPMG compiled data by accessing and analysing all available news articles and designated databases. The data will be disseminated in a press release every six months. ‘Over time, we expect to get a clearer picture about the different types of fraud committed, which will allow us to propose to our clients various types of measures against fraud,’ says Marais.

‘On the positive side, I have learnt that recently, there has been a greater willingness by governments in Africa to address fraud. That is particularly the case in South Africa.’

Ernst & Young’s 2012 Global Fraud Survey, Growing Beyond: a place for integrity, shows that 15% of senior executives polled at leading companies around the world are willing to make cash payments to win or retain business, up from 9% in 2010.

More than 1 700 executives across 43 countries were surveyed for their views of fraud, bribery and corruption. Companies in South Africa, Kenya, Namibia and Nigeria formed part of the respondent base.

Over a third of the global respondents believe corruption is widespread in their country, and the situation is significantly worse in rapid-growth markets like Brazil (84%), Nigeria (72%), Turkey (52%) and South Africa (64%).

On the positive side, the survey clearly shows that African respondents are committed to combating corruption, with the processes in place to monitor anti-bribery compliance broadly on a par with (or even higher than) those in the rest of the world. Africans also show a keen appetite for increased supervision by regulators (72% in South Africa as compared with 69% globally) and strong support for ‘bounties’ for whistle-blowers. Seventy-eight percent of South African respondents (79% in Africa overall) would support such a scheme, compared with 52% globally.

BOARDS UNDER PRESSURE Boards are held responsible by regulators and shareholders for addressing the challenges of corruption and anti-bribery. But globally, a substantial minority of respondents believe that, while management strongly communicated its commitment to anti-corruption policies, breaches were not penalised.

‘This is an area in which South Africa performs significantly better than the global average,’ Van Rooyen notes. ‘In South Africa, 62% of respondents said that breaches of anti-bribery and anti-corruption policies were penalised, as against 45% globally. Africa as a whole was even higher at 68%.’

Many businesses are also exposed to additional risk, having failed to conduct appropriate anti-corruption due diligence before and after acquisitions. For US-based companies, this type of due diligence is the norm: 84% either always or very frequently conduct it pre-acquisition. Elsewhere the frequency is much lower (32% in China, 9% in Nigeria).

Here again, South Africa compares favourably, with 73% of South African companies frequently or always conducting due diligence prior to an acquisition.

‘In the fight against fraud and corruption, South Africa faces a specific challenge: while 60% of respondents believed that authorities were relatively willing to prosecute bribery and corruption cases, only 16% saw these prosecution efforts as effective. These perceptions are mirrored across the African region as a whole, but are significantly at variance with the rest of the world,’ Van Rooyen concludes. ‘Our belief is that businesses with major operations in Africa would be likely to benefit from participation in initiatives for collective action that are beginning to show potential for combating fraud, bribery and corruption.’ ■

To view the surveys in full, see kpmg.co.za and www.ey.com.

On the positive side, I have learnt that recently, there has been a greater willingness by governments in Africa to address fraud.

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BANKING NEWS

SA BANKER Edition 1

ADDRESSING A GORDON INSTITUTE of Business Science (GIBS) Forum in Johannesburg, Marcus said, ‘The flight to quality is a misnomer and should rather be a flight to familiarity.’ South Africa offers real rates of return in a world reeling from financial crisis, but the question is whether we can create an attractive investor destination through our policies.

Marcus said that the role of central banks has fundamentally changed since the financial crisis and they are now at the forefront of repairing economies. ‘Their mandate,’ she said, ‘has been extended to include stimulating economic growth, assisting financial markets to function more effectively and responsibility for financial stability of the economy.’

Before the financial crisis hit, price stability and inflation targeting were the overall goals of central banks, and issues of economic growth and employment were considered to be out of scope; these have now become core to their mandate.

Marcus said that between 2006 and 2008, when inflation exceeded the target band in South Africa and growth was in excess of expectations, the tighter monetary policy stance adopted by the Reserve Bank was appropriate.

Now, however, the emphasis of central banks globally is on stimulating economic growth through interest rates and assisting financial markets to function more effectively. To this end, quantitative easing was aimed at providing liquidity to certain sectors of the market, and central banks became counterparties to the interbank market in order to cushion the effect on the real economy.

South African News

Central banks now repairing economiesReserve Bank Governor Gill Marcus believes that the R30bn capital flow to South Africa’s financial markets in 2012 is proof of great interest in the country and signals an opportunity in the current stressed environment.

Marcus said she believes the responsibility for financial stability is where the mandate of central banks has evolved the most since the crisis began.

‘This is the fifth year of the financial crisis, and the issue is cumulative,’ she said. ‘The scale is huge, and we must not forget that behind all these numbers are individuals whose lives are being affected.’

How central banks should react to asset bubbles was much debated before the crisis and was seen as external to their mandate. The consensus was that asset prices should only be taken into account when they affect inflation, and the role of central banks was limited to cleaning up, should the bubble burst.

However, as the low interest rate and inflation environment was seen as one of the causes of the financial crisis, longer-term systemic financial risks have to be taken into account and ‘financial stability has been squarely placed in the court of the central banks,’ according to Marcus.

She said that while South African banks had emerged largely unscathed from the financial crisis,

there is no room for complacency. To this end, the South African Reserve Bank will continue to closely monitor the recent increase in unsecured lending as a potential threat to financial stability.

Marcus concluded that the context within which central banks operate is increasingly complex: ‘When wanting to extend the mandate of central banks, it is important to understand what the institution can and can’t do, especially in uncertain times where many of the actions being taken are unprecedented.’ ■

For more info on GIBS forums, see www.gibs.co.za

Reserve bank Governor Gill Marcus: ‘It is important to understand what the institution can and can’t do.’

SA

RB

banker edition 02

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