KwaZulu-Natal Business 2017-18 edition

OVERVIEW Banking and

OVERVIEW Banking and financial services Three new banks are set to join the sector. SECTOR INSIGHT Gap insurance is an innovative new product. • KZN banks are financing mega-projects. No fewer than three new banks are set to make their debuts on the South African market in the near future, with one of them based in KwaZulu-Natal. All are state-related enterprises: Ithala, Postbank and a Human Settlements Development Bank. The Ithala Development Finance Corporation has functioned for many years in the province as the provider of funds for small enterprises, especially in areas where infrastructure is poor and access to traditional banking services is not good. The provincial government, which runs Ithala, aims to have a banking licence for the entity by the end of 2017. In 2016, Postbank (part of the South African Post Office, SAPO) received a first-level licence. Once a board of directors has been appointed and a company formed, the Reserve Bank is likely to grant the full licence. The current Postbank focusses on taking deposits and savings accounts. Postbank has secured a R3.7-billion loan to enable it to open its own loan book. Three state entities are merging to create the new Human Settlements Development Bank: the National Housing Finance Corporation, the Housing Loan Fund and the National Urban Reconstruction and Housing Agency. The focus will be on financing housing for poorer households and for large state-funded housing projects. Part of the drive is to integrate cities better and to combat the legacy of the spatial divide that apartheid left behind. Privatesector investment will be sought. For many decades South Africa had a retail banking Big Four – Standard Bank, Nedbank, Absa/Barclays and First National Bank. All of them have a strong presence in the province, but the big news in the retail sector since 2001 has been the emergence of Capitec Bank. Based on Capitec’s results for 2015/16, BusinessTech published a chart giving Capitec the fourth-most customers. Merchant banking and investment banking are the most com- KWAZULU-NATAL BUSINESS 2017/18 86

OVERVIEW petitive sectors within banking. In KwaZulu-Natal, banks have been vital in getting big infrastructure projects under way, a trend that is set to continue for some time to come, with provincial and national government committed to a continuing infrastructure upgrades. The European Investment Bank extended a €50m long-term loan through Rand Merchant Bank to fund the massive water systems upgrade being undertaken by the eThekwini Municipality. The investment programme encompasses two new aqueducts and the replacement of 1 600km of old asbestos water mains. RMB was also involved in several Tongaat Hulett and Richards Bay Coal Terminal projects, two major players in the provincial economy. Nedbank Capital supported Seacom’s R240-million undersea-cable project, and has signed a three-year funding agreement with healthcare group Netcare to the value of R1-billion. Finscope’s 2014 survey of South African banking and financial surveys shows that between 2004 and 2014 a remarkable eight-million people were connected to the financial system. Overall, the “financially included” reached 31.4-million (up from 17.7-million in 2004). In a category called “formally served” which includes services other than formal banks with branch networks, the percentage of South Africans grew from 50% to 80%; in the “banked’”category (more traditional but including new devices), the percentage grew from 46% to 75%. This is partly because South Africa’s formal banking sector has such excellent infrastructure. Nedbank has Approve-it, which allows customers to accept or reject an Internet transaction by cellphone. Nedbank also has partnerships with shops such as Boxer Stores and Pick n Pay where customers can have access to financial services in previously unserviced areas and also on all days of the week such as public holidays and Sundays. Some of Nedbank’s other innovations include Home Loans Online Digital Channel and Market Edge, together with the Nedbank App Suite. The Nedbank@Work product offers targeted service to employees of companies that bank with Nedbank, including free advice. The Keyona Plus account includes funeral cover, a loan facility and a method of transferring money. The Nedbank4me account is tailored to the youth market. Financial services group Old Mutual (a 54% stakeholder in Nedbank) is set to create four stand-alone businesses out of the Old Mutual Group. This will allow the UK-based wealth management business and the New York-based asset manager to be free of linkages to the rand, while the South African businesses, Nedbank and Old Mutual Emerging Markets, can focus on their specialities. With business size and nature being so complex, flexibility is vital for financial service providers. Old Mutual has an employee retirement scheme called the Old Mutual Super Fund which is able to cater for different levels of retirement funding and risk cover. Linked employee benefits make it possible for employers to integrate the scheme with the company’s payroll. The insurance market has become more varied over time, with a greater variety of products now available to more market segments, including middle-income earners. A typical example of a specific product that is responding to new realities is Old Mutual’s iWYZE medical gap cover, designed to pay the difference between what medical aid scheme is willing to pay and what the hospital or doctor is charging. CONTACT INFO Auditor-General South Africa: www.agsa.co.za Association for Savings and Investment South Africa: www.asisa.org.za Financial Services Board: www.fsb.co.za Insurance Institute of South Africa: www.iisa.co.za Insurance South Africa: www.insurance.za.org JSE Limited: www.jse.co.za Post Bank: www.postbank.co.za South African Institute for Chartered Accountants: www.saica.co.za South African Reserve Bank: www.resbank.co.za 87 KWAZULU-NATAL BUSINESS 2017/18