Bongi Kunene, MD of the Banking Association of South Africa (Basa), says it's hard to overstate the potential damage caused by the accusations of sabotage and treason made against the banks by minister in the Presidency Khumbudzo Ntshavheni.
“The biggest asset the banking industry has is trust. When you've got this kind of mudslinging that is so very harsh and noisy, even if it doesn't damage individual banks it damages trust in the system, which takes years to build.”
The harm is done at many levels, starting with the fact that South Africa is part of an international financial architecture that facilitates global trade and the movement of currencies, including the rand, she says.
“South Africa is very well known in financial markets, so it's very hard to hear, particularly from a minister, accusations of the whole industry being involved in treason.”
Ntshavheni made her accusation in November in the context of the Competition Commission's case against banks for conspiring to rig the rand, which was recently thrown out by the Competition Appeal Court.
It triggered a series of urgent discussions with analysts and investors and different markets with an interest in working with South Africa for the long term, says Kunene.
“We're not averse as an industry to explaining what is going on. But there's always going to be a writer or analyst who sees a headline and makes a decision based on that headline. So there must be a lesson here for all of us, including government ministers.”
It strikes a particular note of discord, she says, when such a damning accusation is made by someone so close to President Cyril Ramaphosa just weeks after CEOs of the major banks pledged to support his economic reforms for the growth of the country.
“This would have led you to think that we are on an even keel with the government, or at least at a level where we can call each other and discuss issues. So that was a particularly sour note in the relationship.”
It has led to some soul-searching about the strength of the partnerships business has been building with the government.
“When we agree with the president that we are going to support work streams to achieve certain goals for the country, we leave those meetings with a firm conclusion that we are walking the same path with government. And then we are blindsided by this.”
She says it has raised questions about how many ministers, including those who participate in these meetings, understand the amount of work that goes into delivering what is promised by the banks.
“Where we are now, we look at our engagement model and know that we have to go beyond it. Talking to individual ministers is not enough, we've got to talk more to cabinet as a whole.”
What this does do is say to an external observer: hang on, is South Africa worse than what we thought it was?
— Basa MD Bongi Kunene
Basa, which has all six of the major banks on its board, met with the president after Ntshavheni's accusations against them were made.
“We were satisfied that he understands that the accusations cannot be allowed to stand. We walked away from the meeting feeling it's been dealt with.”
Surely, until the president publicly refutes the minister's accusations against the banks they do still stand?
“It would be something that the banks would love to hear, but that's in the arena of politics. I doubt we are going to get either a retraction or an apology. The accusations do still stand, they're still out there, but the view the banks were able to articulate for themselves is also out there. It's in the public record how we responded. How government walks away from the minister's accusations, the ball is in their court.”
Won't the global investment community be left wondering how risky the bank-government relationship might be for it if a minister who is so close to the president can make such accusations seemingly with his blessing?
“If you look at the report of the South African Reserve Bank on financial stability in May 2023, it would talk to the relationship in terms of investments, what the banks have put in in the form of bonds and what they've invested in productive activities,” she says.
Doesn't this raise a concern that it's been so easy for banks to put money in government bonds that 11% of their assets now consist of government bonds rather than investments in the real economy?
“It raises a concern that there is too much reliance by government on funding by the banks, but it doesn't say the banks are not financing productive activities in the economy. Whatever nature of growth we've had has been the result of banking activity.”
Looking at international trends, South African banks are not over-exposed, she says.
She concedes that the government's creditworthiness has been deteriorating significantly. “The biggest concern is the pace of the deterioration, but in terms of exposure the limits are still manageable by our banking sector. It is a risk, but it’s a managed risk, currently.”
As for the minister's accusation that the banks have been trying to collapse the government, in terms of their balance sheet exposure to the government this would be “a really dangerous situation”.
“But irrespective of the words of the minister, or the political posture that came with those words, we are not there.”
It was very hard to hear those words. In terms of who the banks do business with internationally, lines were buzzing, lots of explanations were offered and those who analyse South Africa came to their own conclusion. Fortunately for us, our banking sector is a known entity
Is Ntshavheni playing with fire for electioneering purposes?
“I don't understand the theatre of politics very well, but it was very hard to hear those words. In terms of who the banks do business with internationally, lines were buzzing, lots of explanations were offered and those who analyse South Africa came to their own conclusion. Fortunately for us, our banking sector is a known entity.
“What this does do is say to an external observer: 'Hang on, is South Africa worse than what we thought it was? Is there something we are missing?'”
Given the serious damage the minister's accusation might have caused to the banking sector and the economy, should Basa have called on the president to fire her?
“Ministers serve at the president's pleasure.”
The fact that the banks are keeping the government afloat is something that could be leveraged, she says. “But we are not at a stage where we would want to have that kind of conversation.”
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