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Banking

• Two banks have gone past one million cellphone customers

Limpopo’s urban areas are well served by a wide range of well-equipped banks and companies in the financial-services sector. Competition is stiff in developing new strategies to incorporate the emerging second economy and rural, unbanked communities, of which there are many in Limpopo. These new banking methods are developing the sector, and giving it a new flexibility, diversity and range. Rural people are often members of burial societies or saving groups (stokvels) but products such as the Mzansi account for low-income earners are attracting them to formal banking.

The number of clients using cellphone banking is growing rapidly. In July 2009, both Absa and FNB surpassed the one million mark for customers in this market. In respect of rural banking, FNB was an active promoter of the newly developed Mzansi account, running a nationwide consumer education tour that included Limpopo.

In most parts of South Africa, retail banking is very much the preserve of the ‘Big Four’ – Standard Bank, Nedbank, Absa/Barclays and
First National Bank.

However, Limpopo has its own bank, VBS Mutual Bank, and Capitec Bank has a strong presence in Limpopo. Established in 2001, Capitec now has 360 branches nationwide (26 in Limpopo) and in July 2009, signed up its twomillionth customer. The VBS Mutual Bank grew out of the Venda Building Society and operates mainly in the northern parts of the province. The head office is in Makhado and the credit department operates out of Thohoyandou.

Innovation is the name of the game in reaching new markets and helping small businesses grow. FNB’s commercial division has a New Business Banking Unit, which provides tailored solutions for start-up businesses.

Standard Bank’s Community Investment Fund (CIF) initiative extends loans to informal businesses that do not qualify for credit under standard lending criteria. The CIF has distributed more than R7-million to more than 630 businesses through its six funds in three provinces. The Mutale Community Investment Fund in Limpopo was established
in October 2007.

Insurance
In its 2008 Financial Stability Review, the South African Reserve Bank (SARB) found that South Africa’s long-term insurers remained sound, despite the bad effects of the global economic downturn. Nearly 70% of institutions providing long-term cover had assets-to-capital ratios well above minimum requirements. Life assurance is a small market (3.8 million people have life cover) with a massive potential for growth
– there are 32 million adults in South Africa. According to Finscope, the number of people belonging to burial societies decreased in 2008 to 25%, from 29% the previous year.

Finscope’s 2008 survey of the financial industry stated that there is ‘an overall lack of insurance products’ and that South Africans are ‘generally underinsured’. In the short-term market, the percentage of South Africans with some form of short-term insurance is static
at 10%. Vehicle insurance is the most popular product, at 7%. This translates to 2.2 million car owners having insurance – out of seven million cars on the road. Clearly there is a large market waiting to be tapped if the industry can come up with affordable products.

In the context of reporting in mid-2009 that insurance company Santam had just reported a drop in earnings per share of between 25% and 35%, Moneyweb suggested that this might be an incentive for insurers to be more innovative in creating products for the South African market,
as has been done by banks.

Metropolitan Life, a company that explicitly targets the lower and middle-income markets, is active in Limpopo. Offering a range of financial packages from medical aid and funeral policies to savings and pension plans, this diversified financial services group also offers unit trusts and investment advice.

National financial institutions
The SARB is the central bank and falls under the national Department of Finance. It sets monetary policy and decides on domestic interest rates. The Payment Association of South Africa has brought the country into line with other countries in terms of payment clearing house, settlement and netting agreements.

The SARB oversees the banking services sector, while the Financial Services Board governs the non-banking financial services industry. South Africa’s principal financial service markets include the national stock exchange, the JSE Ltd and the Alternative Exchange (AltX), the SA Futures Exchange and the Bond Exchange of South Africa (BESA).

Outreach
Eleven high schools across the country, including Limpopo’s Tidima High School, have received portable ‘lapdesks’ as part of FNB’s corporate social responsibility programme. Ben Vorster and Hans Merensky schools are the two Limpopo schools that participate in FNB’s Classic Clashes, with rugby and netball being the two sports involved.

One of Metropolitan Life’s sponsorships is for the national Under-19 soccer championships, a vital component in building future soccer stars.
In 2009, the Metropolitan Under-19 Championship trophy was won by Limpopo’s young team. Spinoffs from the tournament present opportunities for small businesses in fields such as event management, catering and security.

Another initiative is aimed at improving the performance of South Africa’s taxi industry. The Taxi Pledge, a joint venture between Metropolitan and the South African National Taxi Council, makes promises to commuters with respect to safety and the treatment of customers.

ONLINE RESOURCES
Auditor-General of South Africa: www.agsa.co.za
Banking Association South Africa: www.banking.org.za
Financial Services Board: www.fsb.co.za
Institute of Bankers in South Africa: www.iob.co.za
Insurance Institute of South Africa: www.iisa.co.za
Insurance South Africa: www.insurance.org.za
Ombudsman for Banking Services: www.obssa.co.za
VBS Mutual Bank: www.vbsmutualbank.co.za

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