Western Cape Business 2018 edition

OVERVIEW Banking

OVERVIEW Banking Financial services is a growth sector. SECTOR INSIGHT The City of Cape Town has issued a green bond. • The JSE has opened an Exchange Hub in Cape Town. The new green bond issued by the City of Cape Town is a sign of the “climate change” times. South Africa’s third-ever green bond attracted bids over R4-billion on an initial offering on projects worth R1-billion. The JSE intends opening a green section to deal with the expected growth of such instruments. The lead arranger for the bond was Rand Merchant Bank. The green bond is certified by the Climate Bonds Initiative and ratings agency Moody’s gave the bond a rating of GB1. The finance and insurance sector contributes 10.9% to provincial GDP and is an area of the economy that shows consistent growth. The sector outperforms most other sectors according to the FNB Chart Book, and further growth is anticipated. New financial services companies are starting or relocating to the Cape. These range from asset managers to hedge funds, venture capitalists and insurers. The decision by the Johannesburg Stock Exchange (JSE) to open a JSE Exchange Hub in Cape Town confirms the city’s importance in the financial world. There are eight Cape Town-based companies in the Top 40 Index of the JSE: Capitec Bank, Mediclinic, Naspers, Woolworths, British American Tobacco, Remgro, Shoprite Holdings and Sanlam. The head offices of financial firms are dotted all over Cape Town. These include Old Mutual and Foord (Pinelands), Coronation (Newlands), Prudential (Claremont), Sygnia (Green Point), Sanlam (Bellville) and Allan Gray (Waterfront). PSG has its headquarters in Stellenbosch and is well represented in rural towns. Even the small rural town of Greyton is home to Overberg Asset Management. Insurers such as Santam and Metropolitan Life are based in Bellville. Most of the banking groups also offer a range of services such as asset management or investment advice. Financial services group Old Mutual (a 54% stakeholder in Nedbank) has begun the process of creating four standalone businesses out of the Old Mutual Group. This will allow the UK-based wealth management business and the New York-based asset managers to be free of linkages to the rand, while the South WESTERN CAPE BUSINESS 2018 104

Banks OVERVIEW African businesses, Nedbank and Old Mutual Emerging Markets, can focus on their specialities. Fintech is increasingly important to financial institutions. Barclays’ app development organisation, Rise, has seven outlets around the world, including one in Woodstock in Cape Town. A French-funded fintech operation was launched at Century City in 2016. The African Institute of Financial Markets and Risk Management (AIFMRM) aims to meet the demands for skills by developing local talent. It is supported by the Western Cape Provincial Government, the University of Cape Town, Barclays Africa Group, FirstRand and Liberty. 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 a medical aid scheme is willing to pay and what the hospital or doctor is charging. A number of new licences for banks are in the pipeline, with the first of these being a digital bank. The banking licence issued in 2017 to Take Your Money Everywhere (Tyme, by Commonwealth Bank of Australia) is the first to be issued since Capitec was granted a licence by the South African Reserve Bank in 1999. Capitec, with its roots in Stellenbosch, has since gone on to become a major player on the South African retail banking scene. It now merits inclusion in a new “Big Five”, with Standard Bank, Absa, FNB and Nedbank. In terms of assets, the five biggest banks are Standard Bank, FirstRand (which owns FNB), Absa (which is part of Barclays Group Africa), Nedbank and Investec. According to the Reserve Bank, this group had 89% of market share in 2015. Merchant banking and investment banking are the most competitive sectors with companies such as BoE Private Clients, Rand Merchant Bank and Investec prominent. Other applicants for new banking licences are Discovery and Post Bank, a division of the South African Post Office. Discovery is already a giant on the JSE (market value of R83-billion) with a wide range of products and services that give it access to millions of customers. Life insurer MMI Holdings is entering a partnership with African Bank to enable it to start taking deposits and loaning money. Banks are working hard to offer products to the previously unbanked. Nedbank 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. Standard Bank’s community-banking initiative offers a low-cost cellphone-banking service. Retailers can act as agents for the bank, even in very remote rural areas. Shops such as Shoprite, Pep and Spar are connected, as are certain spazas. ONLINE RESOURCES Auditor-General South Africa: www.agsa.co.za Banking Association South Africa: www.banking.org.za Financial Services Board: www.fsb.co.za Insurance Institute of South Africa: www.iisa.co.za JSE Limited: www.jse.co.za South African Institute for Chartered Accountants: www.saica.co.za South African Reserve Bank: www.resbank.co.za 105 WESTERN CAPE BUSINESS 2018