Banker S.A. Edition 08 by Andrew Green

BANKER SA

SA Edition 8 2013

Magazine of The Banking Association South Africa

SA banking news EDITION 8

Basel III creates opportunity for innovative funding

McKinsey ‘Banks can no longer afford to provide all products to all clients’

FirstRand’s CEO Sizwe Nxasana

Leading the banking sector to a solid standing

Ombudsman Clive Pillay The road to Twin Peaks

PICASSO HEADLINE

CONSUMER EDUCATION Encouraging a savings-oriented approach Financial literacy essential for consumers The Banker_Cover1_edition8 FINAL.indd 1

PROFESSIONAL DEVELOPMENT Growing SA’s bankers Enhancing competency and personal growth

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CONTENTS

06 05 MD’s Message

The Banking Association South Africa MD Cas Coovadia on celebrating Madiba’s life and preparing for the fifth democratic elections

12 29 Banking Crime

Criminals turn to credit cards

Latest bank crime statistics: some gains, some setbacks

06 Tribute to Mandela A farewell to former President, Nelson Mandela

08 Profile

FirstRand CEO Sizwe Nxesana

Educating consumers on financial literacy will enable them to transact comfortably with the new digital technology in banking

12 Special Focus

Consumer education

Building a financially inclusive society and improving the financial well-being of the population

18 Feature

Professional development

Skills development initiatives to grow South Africa’s bankers

24 Expert Opinion

The road to Twin Peaks

Ombudsman for Banking Services Clive Pillay on South African financial regulation

32 Report Back

The SADC payments system

Facilitating trade and infrastructure development

35 Customer Story Loan danger

Raising a deposit by taking out a second loan may not be the best idea

38 Information Technology NFC payments

How retailers and banks can seize the opportunity

42 Legal Notes Identity theft

A threat to corporate and national reputations

45 Banking Association Member

Introducing China Construction Bank To increase its strategic function as a regional organisation to provide its clients with excellent financial service Edition 8

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CONTENTS & CREDITS

24 Publishers: Picasso Headline (Pty) Ltd Times Media Building Central Park, Black River Park Fir Street, Observatory, 7925 Cape Town 8001, South Africa Tel: +27 21 469 2400 Fax: +27 86 6822 926

Head of Editorial & Production Editor Banking Association Editorial Board

Contributors

Picture Credits Copy Editor Production Editor Content Coordinator Head of Design Studio Senior Designer Designer

47 Banking Association Member Introducing Standard Bank

Committed to contributing to the socio-economic development in a way which is consistent with the nature and size of its operations

Raina Julies Charles Boffard boffardc@timesmedia.co.za Lawrence Khoza Luyanda Tetyana Ndivhuho Mafela Thenji Nhlapo Ebrahim Moolla Phakamisa Ndzamela Clive Pillay Gallo/Getty Images Fikiswa Majikela Shamiela Brenner Michele Jarman michelej@picasso.co.za Jayne Macé-Ferguson Shaun Reddiar Mfundo Ndzo

Business Manager

Robin Carpenter-Frank robinc@picasso.co.za

Project Manager

André Potgieter andrep@picasso.co.za

Sales Consultants Subscriptions and Distribution Financial Accountant

Andrew Green Shihaam Adams subscriptions@picasso.co.za Lodewyk van der Walt

49 Technology

Curvy screens and smart watches

50 Banking News – South Africa What – and who – is making news in South African banking?

52 Banking News – International

Senior General Manager: Newspapers and Magazines Mike Tissong Associate Publisher Jocelyne Bayer

ADVERTISING: ANDRE POTGIETER E-mail: andrep@picasso.co.za

Tel: +27 21 469 2408

Outlooks for banking in Latin America, the UAE and India

55 Lifestyle

Meet the bankers

Standard Bank’s Sim Tshabalala

CTPprinters

CAPE TOWN

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.

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MD’S MESSAGE

Goodbye, Madiba

e enter the year 2014 preparing for the fifth democratic elections to elect the parliamentary and provincial leadership of our maturing democracy. We leave a tumultuous 2013, which ended with the passing on of our beloved and iconic leader, Tata Madiba. The year also saw different sectors of our society straying from the path Madiba put us on, after a great deal of sacrifice. We saw violent labour and community protests, corruption in government, corruption in business, contestation in the labour movement and divisions in the ANC-led Alliance. Our primary goal in 2014 must be to celebrate the life of Madiba by all sectors of society committing to reclaiming the ideals and values Madiba lived his life by. We need to adopt integrity, honesty, sacrifice, equity and moral character in everything we do on behalf of our various constituencies. We have seen the emergence of a number of new political parties contesting the 2014 elections. All democrats must welcome this because it is a sign of a maturing democracy. We should all be encouraging people, particularly our young people voting for the first time, to exercise their democratic and hard-fought for right, irrespective of which party they vote for. We must all appeal for a peaceful election that is free and fair, without any undue influence on voters. The leadership of business, labour and government must also see 2014 as the year in which we develop a different way of engagement that is informed by the national interest. A new way of working will mean compromise and sacrifice from all parties in the interests of long-term sustainability. Our beloved country must achieve the necessary growth to create the jobs needed for an equitable society. We will not be able to achieve sustainable growth at the necessary level if the majority of our people continue to be outside the formal economy, and do not have access to adequate health-care and education. We need a pact that will put inclusive growth on the top of our agenda. The year 2014 must also be marked with all sectors of society making the National Development Plan (NDP) a vision that is made real through implementable programmes. The business sector has embraced the NDP as the most pragmatic vision for SA. We must now put implementable programmes on the table, identify the role of business in such programmes and engage with government and

Cas Coovadia Managing Director, The Banking Association South Africa other stakeholders on their roles. We are already working on the infrastructure programme under the auspices of Business Leadership SA and The Banking Association SA will be putting programmes on the table in the human settlements and SME areas in the second quarter of 2014. We must demonstrate to the global community that South Africa deserves the place it holds in global forums. This means addressing, head on, those difficult issues stopping sustained economic growth, effective utilisation of public resources, improving the lives of all our people and the corruption plaguing our society. I would like to conclude my message with a tribute to Madiba. Our leader, in his first State of the Nation Address on 24 May 1994 said: ‘My government’s commitment to create a people-centred society of liberty binds us to the pursuit of the goals of freedom from want, freedom from hunger, freedom from deprivation, freedom from ignorance, freedom from suppression and freedom from fear. These freedoms are fundamental to the guarantee of human dignity.’ These words encapsulate all that we need to achieve to make our country even greater than it is. Let us celebrate Madiba’s life and his sacrifice for our people by working together to create economic growth to enable us to banish want, hunger, ignorance, deprivation and fear. We must create a society where people have the education to work and be enterprising, so that they are not hungry and deprived. We must also enable a citizenry that is not fearful of public debate and expressing opinions, thoughts and views. A society that will call all of us, who deem to represent different constituencies, to account. Edition 8

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TRIBUTE TO MANDELA

Passing of former South African President, Mr Nelson Mandela on 05 December 2013 The Banking Association South Africa

t is with heavy hearts and a profound sense of loss that The Banking Association South Africa learned of the death of former President Nelson Mandela, the giant of the liberation struggle and the founding father of our democracy. Nelson Mandela was a man of great moral and strategic vision who committed his life to leading the struggle to end apartheid. He was a man of principle and humility, whose pursuit of a multi-racial, non-sexist and all-inclusive South Africa never wavered through the 27 years of his imprisonment. Nelson Mandela lived to become a free man and to see his vision become a reality. South Africa has lost a father and the rest of the world has lost an icon who worked tirelessly to make this a better world. Madiba instilled the values of non-racism, honesty

and selflessness into the democracy he led as the first universally elected President of South Africa. The opportunity is rarely given to a people that they should produce a single person who epitomises their hopes and expresses their common resolve as Nelson Mandela did. In simple language, he could convey the aspirations of all South Africans in their magnificent variety, explain their fears and prejudices and sense the feelings of even the most humble. Nelson Mandela may have departed, but he has left us a legacy that will live on in the millions who continue to defend and advance the freedoms, the values and ideals for which he stood. It is a legacy of courage, conviction and a belief in the equality of all people. Edition 8

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PROFILE

Creating a strong footing for future leaders Education is vital for our country and our industry, says FirstRand CEO, Sizwe Nxasana.

ppointed CEO of the banking group in January 2010, Sizwe Nxasana sees himself committed to the executive leadership of FirstRand for, at least, the next five years. However, according to Nxasana, what he will not do is occupy the seat for more

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than 10 years. ‘The next five years will be challenging, but exciting as we focus 8

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on growing the domestic business in an innovative way – expanding into the rest of Africa and building traction in India,’ says Nxasana. ‘I’ve always believed that it’s not a good idea for a CEO to remain the head of a company for longer than 10 years. I was the CEO of Telkom for almost eight years when an opportunity became available at FirstRand Bank to become the CEO of banking operations. I had already been a non-executive director of FirstRand Bank and I was

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attracted by the group’s owner-manager culture.’ Questioned about what legacy he is trying to build at FirstRand, Nxasana responds: ‘I’m not really looking to build a legacy, except to ensure that when I’m gone this business is on a very strong footing to grow in the future. ‘I inherited an exceptional franchise and a fantastic management team from the founders, Laurie (Dippenaar), Paul (Harris) and GT (Ferreira), and I’ve focused on appropriately building on that legacy. Especially the owner-manager culture, the innovation and the unique business model,’ he explains. In a society where South Africa’s historically disadvantaged youth find it hard to identify solid black professionals, Nxasana has demonstrated that he has the talent and skills to run a bank considered to be one of the best performers in South Africa. A qualified chartered accountant, Nxasana says his path to the accounting profession was inspired by Professor Wiseman Nkuhlu. Nkuhle, who qualified as the first African chartered accountant in South Africa, was a lecturer at the University of Fort Hare where Nxasana enrolled for a BCom Marketing degree. Nkuhlu was behind the establishment of the Midlands Economic Equity Group (MEEG), which owned the MEEG Bank in the Eastern Cape. ‘The accounting profession prepared me for corporate leadership generally, not just in banking, but also in telecommunications as the CEO of Telkom.’ Because of his choice to remain employed in the corporate sector, one would question whether Nxasana has lacked the entrepreneurial flair to start up his own business. But that idea is far from the truth. Nxasana has transcended both the entrepreneurial and senior executive worlds. ‘South Africa presents many opportunities for all in different spheres of our economy. I believed I could make a contribution in corporate South Africa,’ he explains. Nxasana, who began his career at Unilever, started his own auditing firm in KwaZulu-Natal in 1989. Seeing that there were no audit firms owned and run by Africans in the region, Nxasana saw an opportunity to establish Sizwe & Co., a firm which became the first black-owned audit practice in KwaZulu-Natal. The firm evolved into Nkonki Sizwe Ntsaluba, and was the first black-owned national accounting practice in South Africa, of which Nxasana became its founding partner. Nkonki Sizwe Ntsaluba later transformed into SizweNtsalubaGobodo (SNG), which is today considered South Africa’s fifth-largest accounting firm. His role as CEO of Telkom in 1998 brought about major career transitions. Nxasana transformed Telkom into a corporate entity, and under him the firm was listed on the Johannesburg Stock Exchange in 2003. Nxasana is passionate about improving the quality of education in South Africa and says that scarce specialist and technical skills continue to be an issue for the banking industry. ‘The number of high-quality CAs(SA) and actuaries coming into the system is still not sufficient to fill all the vacancies that exist across financial services,’ he points out. Nxasana is a keen advocate of FirstRand’s proactive education initiatives. ‘At FirstRand we have many initiatives aimed at up-skilling

‘Financial literacy can improve the lives of many South Africans, and banks must empower customers with the right information to enable them to effectively manage their financial affairs and choose the right products for their needs.’ young talent. From grassroots education, through our CSI spend, to running our own graduate, CA(SA) and quants (analysing quantitative data) training programmes. We are doing everything we can to ensure a deep and sustainable pool of skills,’ he says. He also points out that the core banking skills that South Africa’s banking sector needs today will still be needed in 10 years’ time. Nxasana believes that additional skills in technology will be needed by the banking industry, as banking develops more electronic channels. To contribute to skills development, FirstRand invests in scholarships and bursaries. The FirstRand Foundation gives opportunities to exceptional young South Africans to study postgraduate degrees abroad through the FirstRand Laurie Dippenaar and Momentum Dippenaar Scholarship programmes. In the year ended June 2013, the investment value in bursary and scholarship investments amounted to R12.9 million. First National Bank (FNB), a division of FirstRand, also has an early childhood development (ECD) programme. Between June 2012 and June 2013, the FNB Fund ECD programme exposed more than 3 000 children to early childhood services for the first time and supported more than 150 practitioners to obtaining an ECD certificate. FirstRand’s ECD investments amounted to R7.9 million. In 2012, FirstRand said its RMB Fund supported a total of 243 grade 12 learners who wrote final mathematics exams, and 183 grade 12 learners who wrote final physical science exams. Of these candidates, 95% passed maths and 88% passed physical science. The maths leadership development programme investment value amounted to R9.3 million. Edition 8

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PROFILE Today customers are being offered very innovative products and channels, compared to a decade ago. You can do almost everything on ATM’s, computers, and cellphones. While there are always “early adopters” to these methods of transacting, there is still a huge need for banks to assist the more traditional customers becoming comfortable with alternative ways of transacting. This is ultimately very beneficial to customers from a cost and convenience perspective.’ By Phakamisa Ndzamela

Nxasana Round-up Sizwe Errol Nxasana CA(SA), BCom, BCompt (Hons) is one of the first 10 black people to qualify as a chartered accountant in South Africa in 1987, and was awarded an honorary doctorate from the University of Fort Hare in 2004. In January 2006, Nxasana took over as CEO of FirstRand Bank, the wholly-owned subsidiary of FirstRand Limited. In January 2010, he was appointed CEO of FirstRand Limited. Nxasana’s passion is all about the development of youth and the transformation of the accounting profession. This is evidenced by the role he played within the Association for the Advancement of Black Accountants (ABASA), and the fact that he was the longest serving president of the organisation. In 2001, Nxasana was approached by SAICA (as the CEO of Telkom at the time) to assist with their Thuthuka initiatives. He is currently the Chairman of the Thukuka Bursary Fund. CURRENT POSITION • Executive Director | FirstRand Limited | 2009 - Present • Chief Executive Officer | FirstRand Limited | 2009 - Present

In 2013, the FirstRand foundation established three new programmes. These included a R5.3 million FNB Fund aimed at primary schools, the FirstRand Foundation leadership programme which is committing R7.5 million to develop South Africa’s current and future leaders, and the R2 million KhulaSangam programme aimed at addressing critical skills shortages. Nxasana says banks also have a responsibility to educate consumers, especially on financial literacy, as well as educating traditional customers to transact comfortably with the new digital technology in banking. He adds that there is room for banks to teach customers to understand budgeting, saving, insurance, borrowing and how interest works. ‘Financial literacy can improve the lives of many South Africans, and banks must empower customers with the right information to enable them to effectively manage their financial affairs and choose the right products for their needs. This is key to a sustainable relationship between banks and customers,’ adds Nxasana. ‘Consumer education is a win-win as both customers and banks benefit.

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SPECIAL FOCUS

Consumer education â&#x20AC;&#x201C; the key to financial inclusion As the banking industry strives to increase access to basic financial products, it is fundamental that South Africans are educated to use those products.

t is an open secret that South Africa has a poor savings culture. Many South Africans suffer from over-indebtedness, with unscrupulous financial services providers who offer inappropriate financial products not suited to their needs. This is partly due to a lack of consumer financial education. As a result stakeholders in South Africaâ&#x20AC;&#x2122;s financial sector have placed consumer financial education on the national agenda. Financial services firms are expected to spend a portion of their profits on consumer financial education initiatives. The idea behind consumer education is to empower people with adequate financial information aimed at helping them to understand financial products better, make informed choices about products, and be aware of the risks that these products carry. Consumer education is key to building a financially inclusive

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society and improving the financial well-being of the population. With proper consumer education, it is expected that South Africans will be better equipped to improve their lives, through investing and creating wealth, and avoiding poverty traps which are partly due to over-indebtedness. To drive this agenda the Financial Sector Code, published in November 2012, provides for all financial services companies in 2013 to commit 0.30% of their net profit after tax from retail operations, to consumer financial education. The contribution is expected to increase to 0.40% of net profit after tax in 2014. The National Treasury has gone as far as compiling a National Consumer Financial Education Strategy. In July 2013, National Treasury approved a National Consumer Education Committee, a multi-stakeholder committee, tasked with overseeing and

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implementing the National Consumer Financial Education Strategy. ‘As the banking industry strives to increase access to basic financial products and services, it is important that people are empowered through financial education and literacy. This will ensure that the right financial behaviour and attitude is cultivated, and that people acquire the requisite skills to engage financial institutions and better understand products and services,’ says Fikile Kuhlase, senior general manager for Socio-Economic Growth and Development at The Banking Association South Africa (The Banking Association). In underlining the need for consumer education in the country, Kuhlase points to negative data, which shows – among other challenges – that an estimated 67% of adult South Africans do not save. About 9.6 million (about 47%) of the 20.2 million credit-active

customers have impaired credit records, according to the National Credit Regulator’s (NCR) data. ‘Debt is crippling consumers and it leads to a downward spiral into poverty, resulting in a debt trap, thus encouraging a savingsoriented approach to life is essential. Savings help individuals and families create a buffer during hard times and to achieve long-term goals. As the industry strives to bank the unbanked, it is therefore essential to have the newly banked educated,’ says Kuhlase. The FinScope Survey shows that in 2013 an additional 3.5 million people were “banked”, an increase from 67% in 2012 to 75% in 2013. FinScope says the increase in the banked population was driven by the roll-out of the South African Social Security Agency system and organic banking growth.

‘Debt is crippling consumers and it leads to a downward spiral into poverty, resulting in a debt trap, thus encouraging a savings-oriented approach to life is essential.’

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Professional Secure CashHandling for South Africa By Britta Buchholz Over the last decade, the retail cash-handling market has grown and developed at a rapid pace. This trend looks set to continue in years to come. Faced with intensive global competition, retailers are more likely to need cash-handling solutions that offer enhanced security, lower costs and improved productivity.

Cash is here to stay Cash has been around for centuries and has proved to be one of mankind’s most successful inventions. It remains the most used and widely accepted form of payment in the world. On average, cash in circulation in South Africa has grown by 25% over the last decade, and 60% of consumers pay in cash in the retail space. According to the ATM Association, 84% of payments in South Africa are still made in cash. Future trends Gunnebo’s innovative focus is to continuously simplify processes within the chain of cash management and optimise cash cycle monitoring. Its focus on increasing costefficiency and further development on the import and export of real-time data ensures that cash management will become more accurate and easier to control. Thus, Gunnebo embraces automation in order to improve customer control over the cash process. Retail cash-handling leaders The Gunnebo Group is leading in the retail cash-handling sector – with over 10 000 machines globally installed and over 100 billion Euros passing through Gunnebo’s cash-handling solutions every year.

Gunnebo was the first to offer fully closed cash systems, the first to integrate ink protection into the retail world, and the first to design solutions to achieve full connectivity with banks and cash-in-transit (CIT) companies. The Group‘s mission is to help create a safer world. Gunnebo does this by offering efficient, innovative security solutions that create value for our shareholders, customers, partners, employees and society on a global scale. Being the leading global supplier entails having a global market presence and, through key accounts, delivering services, products and system solutions to the Group’s customers on the markets where they want them. Offering a safer future means taking a long-term approach, investing in product development and innovation, and building long-term relationships which generate lasting mutual value. Retail World Africa Gunnebo will be launching its latest intelligent cash-handling product, SafePay, to the South African Market at the Retail World Africa show on the 18 and 19 March 2014. The event hosts local and global leading solution providers and decision makers from a variety of key banking and retail industries across Africa.

The Gunnebo Security Group is present in Europe, Asia, Africa and North America. With years of experience delivering security solutions, Gunnebo has unrivalled expertise in secure storage, physical security, entrance control, cash handling and 24/7 service. Our solutions protect people, buildings and property, providing the best security for you, your employees and your customers. Chubbsafes and Alltech Turnstiles and Vehicle Barriers are brands of the Gunnebo Security Group.

Patrick van Aart, Director of Global Cash Handling for Gunnebo, will be presenting Gunnebo’s innovative ways of improving efficiencies in managing and securing cash with our customers, with a focus on key trends in the global and African markets. Gunnebo invites you to visit the Gunnebo stand at the Retail World Africa to witness the professional cash-handling solutions in a live environment and get a chance to ask questions about the product.

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SPECIAL FOCUS

The remaining unbanked, and the new entrants to the banked population, underlined the need for proper and objective consumer financial education. Kuhlase points out that the banking sector understands that as an industry it needs to play an important role in financial education as many credit consumers mainly look to banks. But she notes that a distinction needs to be drawn between objective consumer education and marketing. As part of this consumer financial education drive, Kuhlase says that financial literacy has to be an essential part of the school curriculum in South Africa. As part of its role in driving financial literacy among youth, Kuhlase says that the banking industry, among other things, participates in a “generic financial literacy programme” known as Teach Children to Save South Africa (TCTS SA), an initiative aimed at drilling the culture of saving among children. Kuhlase adds that The Banking Association is also an affiliate of Child and Youth Finance International, a global movement endorsed by the UN secretary-general, Ban Ki-moon, which is aimed at improving the financial capabilities of children and youth. At an individual banking level, Jacqui Carnelley, head of marketing at Standard Bank’s Personal and Business Banking South Africa says her bank engages the youth in schools through the Teach Children to Save initiative. The department visits the townships to educate the middle aged and the elderly. It also uses the platform of radio and television programmes to offer story lines on consumer financial education. Carnelley says such initiatives show people how to behave responsibly and adopt good financial habits. ‘If you create an environment where it’s normal to save then more people adopt these habits and that can help the economy to grow,’ says Carnelley. Mandla Zwane, the head of consumer education and strategic relationships at Nedbank, says his bank reached over 25 000 learners countrywide through their participation in the Teach Children to Save South Africa initiative. And through a youth development programme launched early in 2013 with the office of the premier in KwaZulu-Natal, the bank has reached over 2 400 youth.

As part of its role in driving financial literacy among youth, Kuhlase says that the banking industry, among other things, participates in a “generic financial literacy programme” known as Teach Children to Save South Africa (TCTS SA), an initiative aimed at drilling the culture of saving among children. 2013/07/16 12:26 PM

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SPECIAL FOCUS

Nedbank was also behind a local movie Nothing for Mahala, which sought to educate on financial fitness and the risks around debt. ‘As a bank for all and a responsible financial services provider, Nedbank understands that consumer education and community development are vital in its efforts to continue making banking more accessible to all in South Africa, in particular the entry-level market. It is for this reason that the bank introduced the financial fitness programme, supported by easy-to-use personal financial management tools like MyFinancialLife, which is designed to empower consumers to manage their finances, make informed financial decisions, and plan for the future,’ says Zwane. Absa says that they have a two-pronged approach to consumer education. This includes face-to-face engagement, partly initiated through the Teach Children to Save initiative, and working with suppliers that use accredited training materials and educational aids such as industrial theatre and money boxes. The bank also runs a number of awareness campaigns on its own digital channels, as well as on various other television and radio channels. Absa says that because its consumer education team is not FAIS (Financial Advisory and Intermediary Services) accredited, it cannot sell or offer advice on consumer financial education. The bank says it recognises the risk of getting the balance between workplace marketing and consumer education wrong, and its consumer 16

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education team does not have incentive and performance targets related to commercial leverage. ‘While there is a brand association through our consumer education activities, in many cases the groups we meet are not necessarily even potential clients for our various offerings. Our Work Plan Marketing focuses on groups that are in the market, so to speak,’ Absa says. Liné Wiid, CEO of FNB Transactional Banking and Mass Market, says that through its “Be Financially Smart Programme”, aimed at educating consumers on financial matters on radio, online, face-toface and digital platforms, FNB has educated more than 200 000 people since the programme started in 2006. Wiid says that FNB ran a home owners educational programme targeted at first-time home buyers, of which the bank spent over R12 million, and had trained close to 39 000 new home owners since 2006. ‘We take our programme to worksites, community centres and schools, as well as participate in other financial services initiatives, for example, the Teach Children To Save initiative in conjunction with The Banking Association,’ adds Wiid. Capitec says it had crafted a new consumer education initiative and saw the need to educate consumers on managing their money, prioritising essential costs, budgeting, and driving awareness about banking and financial products. By Phakamisa Ndzamela

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FEATURE

Critical skills: growing South Africa’s bankers With the banking profession becoming more competitive and sophisticated by the day, training professionals in the sector has become essential for employees to keep up with an ever-shifting global economy.

Graduates on the South African Reserve Bank’s 12-month Cadet Graduate Programme.

n South Africa, a developmental state that has suffered historical injustices, the professional skilling of the previously disadvantaged is key to transforming the financial services sector. As part of a process to continue developing bank professional skills in South Africa, the local banking industry – institutions like BANKSETA, the Institute of Bankers (IOB), the South African Reserve Bank and other stakeholders – have been investing millions of rands in efforts to support and nurture future skills needed to sustain the country’s banking sector.

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BANKSETA is regarded as one of the best sector education and training authorities in the country. Over the years it has carried a mandate to encourage banks to develop an active learning environment in the workplace and promote transformation by ensuring that more women, black employees and the disabled, continue to be professionally skilled. As part of this mandate, BANKSETA offers post-matric learnership programmes, a certificate in management development, masters and executive short courses at a number of universities, an international executive development programme aimed at preparing senior managers in banks for executive roles.

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‘From a staffing perspective, our skills development initiative has helped create a learning culture, improved the skills of staff, while providing staff with improved career opportunities and options.’ – Absa

This year the IOB in South Africa, previously accredited as a training provider by BANKSETA, was granted permission by the South African Qualifications Authority to be the professional body in the banking sector. The IOB has a renewed mandate to promote education and training in the banking and finance profession, encourage continuous professional development, and be a partner in driving South Africa’s commitment to transforming the sector. In addition, the South African Reserve Bank College offers a cadet graduate programme, specialised learning programmes based on the core functions of a central bank, workshops, seminars, and an elective course in central banking for MBA students studying at the Gordon Institute of Business Science (GIBS). South Africa’s major banks have also invested in large developmental centres aimed at training staff. Investec Group spokesperson, Margaret Cerff, says that Investec’s total spend on training South African employees amounted to about R100 million in the period ending in March 2013. Cerff says the bank has a Learning and Development Centre, which plays a critical role in the development of its employees. It offers an induction programme for new employees, bespoke learning programmes in information technology, banking and finance, compliance, risk management, leadership and diversity. ‘Investec’s vision, to ensure that we have a strong, diverse and capable workforce that is dedicated to a common goal of servicing our clients, is critical to the sustainability of our business. We thus position development as possibly the most crucial aspect of our people processes, and work exceptionally hard to continually build an environment in which people can perform extraordinarily,’ says Cerff. Nedbank says it invests nearly R350 million towards skills development annually. The green-branded bank has a flagship graduate development programme, academy programmes, and an internal bursary scheme and other learning and developmental programmes aimed at equipping staff with the skills required to achieve full performance in their existing and future roles. On the impact of its initiatives, Nedbank notes: ‘Through our learning interventions, the bank has seen vital skills transfer with competency enhancement, personal growth and long-term career planning taking place among employees. Also, the bank’s commitment to learning and skills development Edition 8

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BANKER SA

2013/12/19 4:23 PM

Established in 1994 Virtual Card Services is one of the early leaders in the eCommerce environment in South Africa. Virtual Card Services is a South African Reserve Bank Registered System Operator and a Member of Association of System Operators. Affiliated banks include the major banks in SA namely ABSA, FNB, SBSA and Nedbank plus ATM Solutions, FNB Botswana, FNB Namibia. VCS Kenya is coming soon. VCS provides a dedicated service that is fast and secure to all their clients while remaining competitively cost efficient. The company’s client list today boasts a cross-section of businesses who have realised the benefits of accepting online payments. Accepting all credit cards and debit cards plus payment options such as PayD, Cell Pay Point and SID (EFT). Our clients enjoy the benefits of our secure business model, Secure Socket Layer (SSL) encryption, Thawte certification, two firewalls, 3DSecure and Payment Card Industry Data Security Standards (PCI-DSS) compliance. Additional Security Alert configurations to reduce fraud include Velocity checks, transaction blocks, Personal Authentication Message and Hashing.

Expand your business; let us help you reach your target market both locally and globally. Increase your sales by taking advantage of our free shopping cart payment modules or just use our ‘Make a payment’ button on your website. Then monitor your sales via your Virtual Terminal back office facility. Receive easy to reconcile reports to control your online transaction history. Enjoy the benefits of Recurring billing and Tokenization (On Demand) transactions for subscriptions and donations. Virtual Card Services is a supporter of Social Responsibility organizations (NGO’s and NPO’S etc). Contact us now to see how we can help you.

VCS South Africa

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2013/12/18 9:56 AM

FEATURE

‘Through our learning interventions, the bank has seen vital skills transfer with competency enhancement, personal growth and longterm career planning taking place among employees.’– Nedbank

is making a tangible contribution to accelerating the transformation of the Nedbank Group and, indeed, the South African financial services industry as a whole. On an industry level, Nedbank won BANKSETA’s skills@work award and the Knowledge Resources Chief Learning and Development Officers Award for 2013. Nedbank says through its initiative it sees itself leading the industry in employment equity and skills development. Absa will not specify how much it has invested in skills development, stating only that it has far exceeded industry minimums. The Barclays-owned bank says it has developed and is currently delivering on an integrated model that includes employed and unemployed youth. This is aimed at ensuring that the bank’s skills development agenda is aligned to BANKSETA’s “scarce and critical skills” requirement across the financial industry. ‘Absa is one of the few banks in South Africa that co-funds

unemployed learners and takes responsibility for the majority of learners from rural areas. Ultimately, this contributes to making unemployed youth more employable, and assisting youth with the opportunity to attain higher qualifications,’ the bank said in a statement. ‘From a staffing perspective, our skills development initiative has helped create a learning culture, improved the skills of staff while providing staff with improved career opportunities and options. We also provide the children of our staff members with better schooling opportunities through bursaries. As a result of our comprehensive programme, Absa was recently honoured by BANKSETA skills@ work awards for best practice in skills development.’ Absa points out that professional skills development is important for executing succession and transformation initiatives. The bank says that its succession plans depend on “growing its own timber”.

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BANKER SA

2013/12/20 10:05 AM

100 years of looking to the future Bankmed has entered the realm of legendary. This year, 2014, we celebrate 100 years of being the medical scheme that looks to the future. 100 years of forward-thinking innovation. 100 years of unwavering commitment to you â&#x20AC;&#x201C; each and every one of our members.

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After 100 years in business other schemes can only follow in our footsteps, can only dream of the day when they can join the ranks of the legends. Where do we stand after a century in the industry? We stand as leaders, as innovators in strengthening relationships, improving benefits and structures, as the scheme that believes that every member deserves the best we can offer. We stand as a scheme that does not accept just anyone, we accept only those individuals that have qualified to join our exclusive ranks, that are as committed to their future as we are.

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2013/11/05 1:59 PM 2013/11/05 3:01 PM

FEATURE

‘A key priority for 2012 was reviewing the content of our leadership programmes to ensure that they are flexible enough to accommodate varying business needs.’ – Standard Bank The bank also mentions that it is committed to partnering with higher learning institutions, learning rotation programmes, to provide international work-based experience. The Barclays connection allows Absa to send some of its staff into international markets where Barclays operates, to gain invaluable global experience. Standard Bank, Africa’s largest bank by assets, spent R609 million on training in 2012, a 25.8% rise from 2011. The bank said in 2012 that it had focused on two talent pools: the executive talent pool of individuals earmarked for key management roles, and the emerging talent pool of staff at an early stage of their careers, but who have the potential to rise to management. ‘A key priority for 2012 was reviewing the content of our

leadership programmes to ensure that they are flexible enough to accommodate varying business needs. We also implemented four leadership programmes in our operations in the rest of Africa,’ the bank said in its annual report. During 2012, 2 498 (1 101 in 2011) leaders participated in formal training programmes. The bank points out that 72% of its employees who participated in these programmes were black. Standard Bank said it continued to recruit from communities it operates in and, had invested R17,1 million in graduate programmes last year (2012). Standard Bank states that of the 187 people who participated in its graduate programmes in 2012, about 33% were women, and of the South African attendees, 70% were black. By Phakamisa Ndzamela Edition 8

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BANKER SA

2013/12/20 10:06 AM

EXPERT OPINION

The road to Twin Peaks Ombudsman of Banking Services, Advocate Clive Pillay, shares his thoughts on the topic with regards to the voluntary Ombud schemes.

Advocate Clive Pillay: â&#x20AC;&#x153;The independence of the Ombud schemes is not up for debate.â&#x20AC;?

he South African financial regulatory and supervisory system has historically evolved through almost all the stages of the existing regulatory structures. Having started as an institutional approach, it transformed into a functional approach in the late 1980s.

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In the 1990s, the regulatory structure transformed itself into a partially integrated system whose main principle entailed the central bank regulating the banking sector, and a multi-sector regulatory approach for other non-banking financial services. The evolution of the South African regulatory structure has been largely driven by international trends and market imperatives.

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COMMISSIONS OF INQUIRY In 1987, the De Kock Commission observed that institutional regulation had resulted in over-regulation in the banking sector, making the sector inefficient and not competitive, and recommended functional regulation (regulating specific activities) and risk-weighted equity rules. In 1993, the Melamet Commission recommended that South Africa adopt a unified regulatory approach to be in line with developments in European countries whose financial systems are similar. SOUTH AFRICAN NATIONAL POLICY DOCUMENTS South Africa, which incidentally was contemplating adopting a single regulator model from the recommendation from the 1993 Melamet Commission, decided to move in line with international trends. In 2011, it issued a policy document announcing reforms to improve the institutional structures to support financial regulation. This document proposed a shift, which the South African Cabinet adopted in July 2011, to a twin peaks model of financial sector regulation. Given its current regulatory structure, the adoption of the twin-peaks model was considered to cause the least amount of disruption to both market participants and the current regulators. This was followed by the publication of “Implementing a twin-peaks model of financial regulation in South Africa” on 1 February 2013. The policy document contains detailed proposals on the implementation of the twin peaks model. The shift to the twin peaks system of financial regulation will result in the Financial Services Board being responsible for market conduct, whilst the South African Reserve Bank will be responsible for prudential regulation. An interagency financial stability oversight committee will also be formed, as well as a council of financial regulators. It seems that, given South Africa’s historical neglect of market conduct regulation, the twin peaks model is probably the optimal means of giving sufficient priority to transparency, market integrity, and consumer protection. The policy document expresses concern that the fragmented nature of the current ombud system poses certain risks. These risks include, inter alia, consumer confusion, gaps and overlaps in jurisdiction, administrative inefficiencies, inconsistencies in approach, and doubts regarding the independence of the industry – sponsored voluntary schemes. A review of the current ombud system is underway in South Africa to develop recommendations to improve its efficiency and effectiveness, while building on the work and expertise of existing bodies. As part of this review process, options that are being considered for the financial ombud system structure include:

Given its current regulatory structure, the adoption of the twin-peaks model was considered to cause the least amount of disruption to both market participants and the current regulators. • Continuing the current system of independent offices, but with stronger oversight by the Financial Services Ombud Schemes Council. • Establishing a merged entity with a single representative governing body under the leadership of an executive officer, while retaining separate ombuds for each sector. In this model, the sectoral ombuds would be tasked with dispute resolution and issuing determinations, while governance and operational matters would be centrally co-ordinated. Regional ombud offices could be built into such a model. The policy document (February 2013) appears to concede that the voluntary ombuds system is best suited to provide customers with access to simple, effective and independent resolution mechanisms that can secure them a fair outcome when broader consumer protection frameworks fail. The existence, too, of the voluntary ombud scheme does not appear to be under threat, and will continue to exist whether in the current form of independent offices, but with stronger oversight, or in a merged entity with possible regional offices. Edition 8

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BANKER SA

2013/12/20 9:08 AM

years of banking in a democratic South Africa â&#x20AC;&#x201C; committed to

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EXPERT OPINION in the ombuds schemes. Also, in this way, the ombud scheme will align with best practice standards such as independence, impartiality, confidentiality, transparency, clarity of purpose, and effectiveness, and to dispel the concerns that the National Treasury appears to have. This is extracted from a fully referenced paper by Advocate Clive Pillay, entitled The Twin Peaks model of financial regulation: the status of the voluntary Ombudsman in various jurisdictions. The full paper is available from executivepa@obssa.co.za.

The policy document appears to concede that the voluntary ombuds system is best suited to provide customers with access to simple, effective and independent resolution mechanisms... CONCLUSION It appears that the independence of the ombud schemes is not up for debate. Rather, in my opinion, it seems that the debate ought to be broadly on: (1) whether there exists gaps, overlaps and inconsistencies in what the ombuds schemes provide; (2) whether the cost-effectiveness of the schemes could be enhanced through a greater co-ordination and rationalisation; and (3) whether the debate should engage the ombuds schemes on issues such as: • Access of consumers; • Funding; • Accountability; • Efficiency and effectiveness; • The nature of disputes considered; • “Membership” of the schemes – voluntary or compulsory; • Publication/enforcement of determinations; • Binding nature of decisions; • Investigative powers; • Basis for decision (for example, law and equity); • Appeal mechanism; and • Legal representation (permitted or not). In this way, in my view, consumers will be provided with a speedy and affordable redress to address complaints and resolve disputes. In South Africa, such redress is embodied

The Ombudsman’s Jurisdiction WHICH BANKS ARE PARTICIPANTS? Only banks that are members of The Banking Association South Africa (The Banking Association) are bound by our rules. WHO CAN COMPLAIN TO US? Any bank customer may lodge a complaint against his or her bank with the Ombudsman for business services (OBS), provided the OBS has jurisdiction. Entities such as companies, corporations, partnerships and trusts may lodge a complaint if the person making the complaint is authorised to do so, and the annual turnover of the business or group of businesses is R10-million or less per year. COMPLAINTS WE CAN HANDLE The OBS can assist you only if your complaint: • relates to products or services provided by the bank; • involves a claim of R2-million or less; • arose within the past three years; and • the bank concerned is a member of The Banking Association. COMPLAINTS WE CANNOT HANDLE We cannot assist if your complaint involves: • a bank’s commercial decision about lending or credit, interest rates • or bank charges, unless there has been maladministration; • a matter that would more appropriately be dealt with by a court of law or another dispute resolving process; and • a matter which is or has been the subject of litigation, subject to certain exceptions.

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BANKER SA

2013/12/19 4:17 PM

Clickatell and Virtual Terminal Network (VTN) launch auto-recharge airtime platform for MTN, Airtel, Etisalat and Glo in Nigeria VTN VCASH subscribers in Nigeria can now set their phones for auto-recharge. Clickatell, a leading mobile enablement provider in Nigeria with a fast growing PIN-less airtime distribution business, and VTNetwork Limited, which runs VCASH and is one of Nigeria’s leading mobile payment operators, launched an automated airtime-buying platform in Nigeria – giving ordinary Nigerians, for the first time, autorecharge capabilities on their mobile phones. This state-of-the-art service provides instantaneous capability to automatically load value onto phones in real time when their balances approach zero. This service it works on the MTN, Airtel, Etisalat and Glo networks. ‘One hundred percent of our one million users use airtime everyday and need this service,’ said Peter Ojo, VTNetwork CEO. He added that ‘even simple phones can utilise auto-recharge’. VCASH subscribers can use auto-recharge 24/7 to replenish set amounts of value according to their wishes. The power is in the system’s ability to detect in real time that a phone‘s airtime is nearly used up based on a subscriber’s set usage pattern, and to then invoke airtime and apply the minutes to the phone. The process is invisible, but the control is in each VCASH user’s hands, with setting selections made via a mobile phone or online. Monies in e-wallet attract reward points, which extend the buying power of subscribers. With a population of more than 160 million, Nigeria has mobile phone penetration of 105 million and a massive market for airtime sales. Samson Isa, Clickatell director for West Africa said, ‘Clickatell is pleased to launch this auto-recharge service in collaboration with VCASH in Nigeria. Being able to top up one’s phone automatically, on presets determined by each user, is groundbreaking work by VCASH for Nigeria and we are pleased with this association. These locally grown innovations are what make this an exciting industry. Each of our markets is different.’ Peter Ojo, chief executive officer at VTN, said, ‘You’ll never again be cut off when making an important call; as simple as that’. He added, ‘We have automated the airtime vending whereby Nigerians can conveniently schedule and do virtual

top ups any time, any day, on MTN, Glo, Airtel and Etisalat Networks. Nigerians in the Diasporas can now recharge the phones of aged parents, children and loved ones back home through our VCASH Western Union® electronic payment partnership.

The VCASH Account Funding Options

The funding options include online bank transfers and deposits at a bank branch, cash-in deposits through one of VCASH’s 4 000 agents, via VCASH Reload card or via a Western Union® money transfer. In addition to buying airtime, monies in a user’s VCASH account can also be sent to other VCASH users (person to person transfer – P2P) or used to pay bills and to purchase goods or services. VCASH partnership with NIBSS’ e-Bills Pay enables transfer of funds from customer bank accounts into their VCASH e-wallets.

About Clickatell, Inc.

Clickatell is a global leader in mobile messaging and transaction services, which enable its customers to connect, interact and transact with their business partners and communities on the mobile phone. Clickatell’s global footprint means that it can deliver short message services (SMS) through its next-generation Clickatell Message eXchange (CMneXt) to over 860 mobile networks in over 220 countries and territories. This service has the potential to reach 6 billion mobile phone users – more than 80% of the world’s population. In addition, with Clickatell Transaction eXchange (CTX), it provides the essential link between mobile consumers and their financial institution with services like airtime top-up. More than 15 000 enterprise, government, medium and small business customers and application developers have embraced Clickatell’s technology solutions. Founded in 2000, Clickatell is headquartered in Redwood City, California. It has received equity from a number of the world’s premier venture capital institutions, notably Sequoia Capital, Ethos Private Equity, DAG Ventures and Dantink Investments.

For further information, visit www.clickatell.com Media Contacts: Clickatell Africa Maraleze Knoetze maraleze.knoetze@clickatell.com

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Clickatell Nigeria Samson Isa Tel: +234 802 536 9888 E-mail: samson.isa@clickatell.com

2013/12/20 8:35 AM

BANKING CRIME

Criminals turn to credit cards

The latest bank crime statistics reveal an increasing rate of credit card fraud.

redit card fraud in South Africa is on the rise, according to the latest banking crime statistics report revealed by the South African Banking Risk Information Centre (Sabric). The report, which covered the period from 1 January to 30 September 2013, based on information from 16 banks and credit providers, revealed that the banking industry’s gross fraud losses due to South African-issued credit card fraud grew by 22% – from R300,6 million in 2012 to R366,8 million in 2013. This report will be a further dent to online consumer confidence after the global cyber-security firm, Norton’s 2012 Cybercrime Report, placed South Africa third, behind China and Russia, in ranking the world’s leading cyber-crime hotspots. Counterfeit credit-card fraud losses are also on the rise, increasing by 27% in 2013. About 61% of all counterfeit credit card losses occurred

outside South Africa in 2013, up from 45% in 2012. These did not only happen in neighbouring countries such as Namibia, Botswana and Mozambique, but in non-EMV (a standard for credit and debit payment cards based on chip card technology) compliant nations like the United States and Brazil. Susan Potgieter, General Manager of Sabric’s commercial crime whip, says that most of these crimes were perpetrated through ATM cash withdrawals, and that the money was used predominantly for groceries, airtime, online shopping and betting, hotel accommodation and flights. This trend towards foreign usage represented additional challenges for local law enforcement agencies, she adds. DEBIT CARD LOSSES DOWN In stark contrast to the credit card figures, the value of debit card fraud losses decreased by 42% between January and September 2013; this is Edition 8

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BANKING CRIME compared to the same period last year, falling from R204 million to R117,7 million. Sabric attributed this decrease to new banking systems, and increased collaboration between the industry and law enforcement. Gauteng, the Western Cape and KwaZulu-Natal experienced 86.1% of the credit card fraud losses, with 42.8% of the transactions occurring in Gauteng. New security measures meant that criminals were returning to lowtech frauds, revealing a statistic of a 102% increase to 31 million in 2013 in lost or stolen card fraud. ‘Changes in business processes linked to chip and PIN cards necessitated criminals to revert back to older modus operandi such as shoulder surfing (watching a client type in the PIN), and card jamming or swapping. This has led to the visible increase in lost and/or stolen card fraud to levels last seen in 2010,’ says Potgieter. Card not present (CNP) fraud losses increased by 16%, from R154,7 million in 2012 to R178,7 million in 2013. This fraudulent activity takes place where neither the card nor cardholder is present during these transactions. Card skimming, which involves the copying of encoded information for illicit purposes, and transactions with a card reader, continued to be the scourge of the banking industry. According to Potgieter, skimming devices can be set up at an ATM in as little as 30 seconds, and the majority of these are locally assembled. In 2013, 162 devices were recovered – 80 from Gauteng and 23 from Mpumalanga. ‘It’s simple enough to buy a card reader – you can get one on the Internet,’ states Potgieter. ‘It’s the same technology used everywhere from hotels to petrol stations, but in this case, it is used for the wrong purposes. Consumers should phone their bank immediately if they find one at the ATM.’ Hawks spokesperson, Captain Paul Ramaloko, says that arrests relating to banking crime were relatively easy to make – with camera evidence at ATMs, and the zero-tolerance approach adopted by the banking industry on rogue employees who colluded with organised crime syndicates. But Ramaloko urged both banks and consumers to take more initiative in raising awareness. ‘The figures are concerning, but we are doing our best. We’re making arrests on a daily basis, and there are regular police patrols to potential hotspots.’ He adds that while they are slowly ‘winning the war, banks and consumers need to do their bit to stop these criminals’. Ramaloko urged consumers to be especially wary when using isolated ATMs, where criminals were more likely to strike. Potgieter agreed with Ramaloko and insisted that it was not all “doom and gloom” ahead of the festive season. ‘There is a lot consumers can do to protect themselves. Cards can be skimmed at ATMs or at points of sale. Bank clients are urged not to accept assistance from anybody at ATMs, and not to let their cards out of sight when transacting,’ states Potgieter. She also suggested that consumers save their bank’s contact details on their cellphones in case of an emergency, and shield the keypad when typing in their PINs at ATMs. In view of the increase in CNP crimes, Potgieter advises that consumers register for security programmes such as 3D Secure for online shopping, and to avoid sending emails with their credit card numbers and expiry dates. By Ebrahim Moolla

‘Card not present (CNP) fraud losses increased by 16%, from R154,7 million in 2012 to R178,7 million in 2013. This fraudulent activity takes place where neither the card nor cardholder is present during these transactions.’

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REPORT BACK

SADC’s new payment plan: a simple step to success Reporting on the ongoing rollout of the Southern African Development Community’s (SADC) revolutionary new payment system that is set to boost economies and trade in the region.

he initial phase of SADC’s move to streamline crossborder transactions between its members has seen settlements involving Lesotho, Swaziland, Namibia and South Africa top R10 billion a week since its inception in July 2013. Cross-border payments are currently overloaded by the administrative processes of currency conversions, foreign exchange regulations and the transferring of funds between countries and

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banks. Facilitating transactions through a single currency and central settlement hub is seen as a key strategic initiative towards realising the full economic potential of the $780 billion SADC region. Under existing arrangements, a transaction can take days to be settled. With the new SADC Integrated Regional Electronic Settlement System (Siress), transactions will be settled in seconds. Siress, part of the regional integration project’s Payments Integration Project, also aims to boost socio-economic development through

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The 13-member SADC Banking Association is managed by The Banking Association South Africa, which undertakes the role of executive secretary.

harmonisation in areas of common interest such as trade tariffs and border controls, integration in telecommunications and financial infrastructure and the tourism sector. It is also hoped that the system will impact positively on infrastructure payments. South Africa is the primary driver in SADC, accounting for almost half of the collective Gross Domestic Product (GDP) with $380 billion. The 13-member SADC Banking Association is managed by The Banking Association South Africa, which undertakes the role of executive secretary. There are plans underway to extend the system beyond the four members of the Common Monetary Area – which all have currencies on par with the rand – to include at least three more countries, and eventually for all 15 nations under the SADC banner, to benefit more than 277 million people. Cash currently makes up about half of the transactions taking place in the regional alliance. The next phase of the project involving credit payments is scheduled to go live in July 2014. Payments facilitator BankservAfrica has been commissioned to expand into other SADC countries ahead of the launch. BankservAfrica provides interbank electronic transaction‚ switching and settlement services to the South African banking sector and to banks in Africa. It also provides similar services to Swift‚ which connects more than 10 000 banking organisations‚ securities institutions and corporate customers in 212 countries and territories. Currently, the only way to transact across borders is via Swift, an expensive and burdensome procedure. Cross-border transactions have, until now, had to be conducted through correspondent banks – a situation that, according to a Swift report, sees up to 48% of this business going to foreign rather than African financial institutions. The new system will allow participant banks in the region to benefit from these flows. These developments are also expected to help the ailing rand over the long-term, boosting currency flows and resulting in increased liquidity. The Bank for International Settlements (BIS) recently revealed that the rand has dropped to the 18th most-traded global currency, from tenth in 1998, and these developments could be the shot in the arm that the currency needs. The benefits will be enhanced if the project is expanded to include other regional integrated communities on the continent. According to the Consultative Group to Assist the Poor, sub-Saharan Africa’s payment systems are the least developed globally, with cash dominating the payment system in most countries. Inter-bank domestic transactions within a capital city can take up to 45 days in some extreme cases. In this light, the SADC, which has been ridiculed in the past for inefficiency, has been supported by economists for its move towards modernisation. In 2015 debit orders will be included, allowing, for example, insurance companies to tap into other markets and arrange for monthly payments without having to unravel mounds of red tape. By Ebrahim Moola

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BANKER SA

2013/12/19 4:15 PM

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CUSTOMER STORY

Loan danger

Raising a deposit by taking out a second loan may not be the best idea.

he National Credit Regulator (NCR) receives an average of 3 000 complaints per month. Another indication of the immense debt pressure on South African consumers is the 390 000 people who have applied for debt counselling to date. An astounding 46,8% of the countryâ&#x20AC;&#x2122;s 19,98 million credit-active consumers have impaired records. Concerned by the deterioration

in consumer credit health, the NCR has been compelled to issue a set of affordability guidelines to assist consumers. In this unforgiving economic climate, more and more consumers, particularly those in the 18 to 35 demographic, are turning to unsecured loans as a source of a deposit for vehicle and home loans. This is verified by the rise in unsecured credit, which grew from 7,8% to 24% from December 2007 to December 2012. By law, the Edition 8

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CUSTOMER STORY

An astounding 46,8% of the country’s 19,98 million credit-active consumers have impaired records. maximum interest rate payable on unsecured loans is 31% – almost double the mortgage average of 16%. And yet, consumers like Carla Adams, a 35-year-old accountant, say that they have been actively encouraged by bank consultants to access these unsecured loans for deposits. Adams had recently left her job for new pastures, and with it, she also parted with her company car. After deciding on a car, she

applied for a vehicle loan but was told that she needed to give in a deposit since she had just started a new job. Adams told the consultant that she didn’t have the amount required, and was surprised at his advice to apply for an unsecured loan. ‘Instead of giving me a 100% loan for vehicle finance, why do they offer me a 90% loan and encourage me to make up the remaining 10% with a more expensive unsecured personal loan? I work in finance, and it just didn’t make any sense to me at all. If I had agreed to that, I would be going down the road to financial ruin,’ says Adams. She adds that the inconvenience of additional paperwork and administrative costs was a mechanism in what she called the bank’s “money-making scheme”. However, Rudolph Mahoney from Wesbank poured cold water on Adams’ claims, saying that this practice was more than frowned upon in the banking industry – the application simply wouldn’t meet the requirements of the National Credit Act. ‘We would never tell a customer to take out an additional unsecured loan. Unlike home loans, we do not approve loans based on deposits as a percentage of the applied amount. ‘Based on the client’s credit score we may ask for a bigger deposit, but we will never recommend that the client take out an additional loan, because we know that at that point the client cannot qualify for more credit. However, we will recommend that the client buy a cheaper car,’ says Mahoney. Standard Bank’s Sihle Bolani agreed with his counterpart, saying: ‘It is not our practice to encourage customers to apply for unsecured loans to cater for deposit requirements on their vehicle finance. In fact, we do discourage such practice. It defeats the purpose for which a deposit is required – that being to limit the amount of debt taken up by the customer in relation to acceptable affordability of instalments or repayments, and reduction of risk associated with the funding of a depreciating asset. Where we become aware of such intent by the customer, we do advise against the approval of the application of such vehicle finance,’ stated Bolani. According to Bolani, there are only two acceptable sources of a deposit for vehicle finance: (1) the cash available in the customer’s accounts; and (2) the net amount that may become available from a transaction involving a trade-in of the customer’s current vehicle (normally purchased by a dealer). It is a worrying indication when consumers are prepared to take out an unsecured personal loan – a source of credit usually associated with emergencies or education – to finance for an even bigger debt. Apart from the exorbitant interest rates, which could derail your financial plans entirely, there is also the damage it will do to your credit record. This will count against you in the long term; it can reduce the amount of the vehicle or mortgage loan you have access to, defeating the whole purpose of the enterprise. Higher repayments leave you with little room to manoeuvre in the event of an interest rate hike or job loss. According to the NCR, the best course of action is to think long term: keep a tight budget and save for a deposit, rather than opting for instant gratification. By Ebrahim Moolla Edition 8

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INFORMATION TECHNOLOGY

NFC payments How retailers and banks can seize the opportunity

ccording to Strategy Analytics’ forecast and Eurosmart reports, 115 million Near Field Communication (NFC) handset owners worldwide will spend just over $48 billion using their NFC phones in 2017. About 930 million contactless smart cards were shipped in 2013, an increase of 41% in 2012. With smartphone manufacturers now committed to NFC, consumer enablement will pressure retailers to accept NFC. BE PREPARED TO EXPLOIT NFC PLATFORMS By being NFC-enabled at the outset, retailers can gain considerable competitive edge with customers, and also benefit from close working partnerships with key industry players before the market becomes too saturated. REMEMBER POS IS NOT JUST ABOUT PAYMENTS NFC delivers two-way, real-time communication between the merchant and the consumer at the Point of Sale (POS). With NFC, merchants and retailers of all kinds can turn their point of sale into a much more valuable point of interaction that provides customers with intelligent and ultra-secure checkout capabilities. GET CREATIVE AT THE POS Mobile will open up new opportunities for loyalty, promotion and brand building. This requires a new level of creative input, and the involvement of marketing and communications functions. Ensure all relevant departments across the organisation are engaged and up to speed with mobile commerce, and what it means to them and their activities. Retailers and banks may also need to consider additional investment or re-allocating marketing budgets into new promotional activities that can leverage mobile commerce as a communication and fulfillment platform. For example: • Programmes that allow consumers to use virtual e-gift cards, participate in loyalty schemes and earn rewards at the POS; • Materials and apps designed to exploit two-way communication between the handset and POS device or NFC stickers in store to transmit e-vouchers, loyalty rewards, payment and promotional messages; • Provision of links for social media and group discount offers; • Gathering customer data efficiently through various payment devices for improved consumer analytics; and • Enabling alternative payment methods to create mobile POS. BE SOCIALLY ACTIVE Social media can help brick-and-mortar retailers reach out to customers and increase brand awareness, but also gauge interest. Group buying websites bring awareness to a company’s brand while taking advantage of promotional activity. 38

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Social media also empowers retailers. By listening to customer feedback, both good and bad, retailers can find the right target group for products/services and learn which innovations will appeal most. CHOOSE A PARTNER WITH PROVEN ABILITY For mobile commerce to reach its potential, many payment devices currently in the field will need to be upgraded. It isn‘t simply an issue of adding an NFC reader, it requires deep software richness at the POS to interact with customers and manage a services-based model encompassing new applications and deployments. Retailers should be wary of new supplier and integrator entrants who may be attracted to the size and volume of the market, but who may lack the necessary knowledge, financial stability or longevity to see their projects through successfully. By opening up discussions with established vendors, retailers will be better placed to understand the impact on existing operations once NFC goes live. LEVERAGE EXISTING SPEND Many retailers are currently replacing their POS estates in order to comply with the latest payment card industry (PCI) standards. Stores with regular, low-value, high-volume cash transactions may

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‘It is crucial that retailers begin aligning retail NFC within their IT strategy now in order to take advantage of the full potential of mobile commerce, and to make the mobile wallet a viable reality for customers.’

also be looking to upgrade devices to take contactless payments. Any investment in POS infrastructure today should include a roadmap for NFC enablement. Without doing so, retailers risk being left behind. They may also eventually be forced, by stakeholders

and customers, to commit to future upgrades which would incur a higher cost than a planned, phased roll-out that takes into account existing POS evolution roadmaps. Technological innovation will play an increasingly powerful role in retail strategy. For the consumer, these new platforms will bring the attraction of greater convenience and better service. For retailers, where image, promotions, seasonal pull and loyalty are important, new mobile and POS devices and applications will drive footfall with smart apps and engaging new services. Retailers and banks can prepare for these opportunities by ensuring that all their latest payment solutions are NFC/contactless enabled, with full colour and multimedia screens, and ample processing power to support these new sales initiatives and apps. It is crucial that retailers begin aligning retail NFC within their IT strategy now in order to take advantage of the full potential of mobile commerce, and to make the mobile wallet a viable reality for customers. Payments will become a more integral part of the sales process, helping retailers compete effectively for the hearts and minds of consumers. With a holistic approach to mobile, NFC and integrated payments, POS will evolve to deliver ideas and added value that make retail stores more compelling and interactive for everyone.

Tap and go

NFC allows customers to make payments using the “tap-and-go” method, rather than having to insert cards into a reader. This technology can provide banks, network providers and retailers with new opportunities for collaboration, and South African banks have been preparing for its rollout. Absa has been trialling cellphone NFC payments since December 2011, and has deployed 4 000 NFC-enabled POS terminals to retail stores throughout the country. Standard Bank has begun issuing NFC-enabled gold and titanium credit and cheque cards using Mastercard’s technology.

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Generation Why? Attracting the bankers of the future The results of the 2013 Deloitte Talent in Banking Survey show that student career priorities and attitudes towards banking are changing, and banks will have to respond decisively if they want to continue attracting the best talent. Deloitte examined data from the 15 markets that are most relevant to banking, namely Brazil, Canada, the United States, China, India, Japan, France, Germany, Italy, the Netherlands, Russia, South Africa, Spain, Switzerland and the United Kingdom. Almost 108 000 business students from 1 350 universities participated in the survey and provided a clear reflection of their intentions, aspirations and associations in relation to banking careers. A total of 6 240 direct responses were received from students in South Africa. Key findings of the survey Banking is a less popular career choice today than it was in 2008 Since the financial crisis, banking has internationally become a less popular career choice for business students, while industries like software and computing services have become more popular. Banking’s popularity has fallen by only half as much as that of manufacturing and engineering. For those considering a banking career, preparing for the future is more important than money Students are more concerned with training and development than level of earnings. Nonetheless, both are important, ranking first and second out of 40 job attributes. Earning a “competitive base salary” comes seventh on students’ list of 40 priorities, while “performancerelated bonuses” rank 19th. Banking-oriented students want a supportive and dynamic workplace The students surveyed associate only six of their top ten job attributes with banking. Two of the four that they don’t associate with banking (“leaders that support my development” and “a creative and dynamic workplace”) suggest that they desire a degree of fun and support in their first job. However, they don’t expect banks to provide this.

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Banking-oriented students don’t expect to reach their career goals while working in banking Work–life balance is the top career goal for banking-oriented students, followed by job security as the second-most important. These are, however, not attributes that the students associate with banking. The paradox may be a response to the industry’s slew of job losses. Conversely, it may denote a multi-stage career plan, with a short stint in banking for training and development, followed by an alternative career. More than half of business students expect to move on from their first employer within three years Of those interested in banking, 85% expect to move on from their first job to another within three years. Only 10% expect to remain in their job for a decade or more. Banks are not considered diverse places to work in Most banking-oriented students don’t think that banks support gender equality (65%) or that banks are accepting towards minorities (74%), and this may be turning off applicants. Women make up 53% of business students but a mere 48% of banking-oriented students. Moreover, substantial minorities of business students strike banks off their list of “ideal” employers, because they don’t think they will develop in the banking environment (16%) or because they don’t identify with current banking employees (14%).

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Investment banks are seen as extreme versions of other banks, offering more money and prestige and less equality and friendliness Banking-oriented students believe that a job in investment banking has more of the characteristics associated with banks (e.g. money and prestige) and fewer of those attributes banks are seen to lack, such as job security, equality and a friendly workplace.

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2013/12/11 3:45 PM

y? ure

Ethics and corporate responsibility are low priorities for wouldbe bankers Despite the call for banking to demonstrate its social utility and to reform its culture, ethics and corporate social responsibility are low on the priority list for banking-oriented students, ranking 32nd and 33rd respectively out of 40 desirable job attributes. Environmental sustainability comes in at 39th. These three also appear in the bottom ten attributes that banking students associate with banks. Given the new regulatory model, banks may need to emphasise ethics, culture and social role more in their recruitment.

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Focus on South Africa Out of all the countries surveyed, banking is most popular with students in South Africa Even though banking is not seen as the most popular of all employers in any of the surveyed countries, business students in South Africa ranked banking 23rd out of 100 employers, which is the highest ranking given in this survey to banking as a preferred employer. At the lower end of the rating scale, Japan ranked the popularity of banking as an employer 50th, while Germany ranked it 64th. Banking has lost out to a recent surge in the popularity of accounting careers Looking at the attractiveness of employment across industries over the last year or two, the results of the survey show that business students’ interest in auditing and accounting careers has been rising steeply, while their interest in banking careers has been declining.

on from Like their international counterparts, South African bankingoriented students care most about their training and development Out of the 10 job attributes that banking-oriented students associate with banks and the top ten attributes they find most attractive, respondents from South Africa and the other surveyed countries concur that professional training and development is at the top of their list.

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upport ds minorities

Addressing the talent challenges that lie ahead The survey is a wake-up call for banks, whose popularity has fallen sharply, following the global financial crisis. There is also a growing gap between their image as employers and their needs in the new highly regulated environment.

48% of ies of ployers, g urrent

Nonetheless, there are a number of ways in which banks could respond to attract the best talent:

r banks, d friendliness nt banking g. money and lack, such as

Casting the net wider From a South African perspective, the banking industry’s position on transformation needs to be effectively communicated to prospective employees to ensure attraction of diverse talent. Banking is an international and cosmopolitan profession, and banks should emphasise this in their recruitment. They should also work towards becoming truly meritocratic employers.

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Defining your purpose and recruiting on fit Banks need to articulate a new vision and purpose and the business model that underpins it. Given higher capital requirements and restrictions on activities, the new business model will tend more towards a utility than in the past. With higher levels of regulatory scrutiny, there will be a greater focus on culture. It is therefore a concern for banks that banking-oriented students neither associate banks with ethics, corporate social responsibility or environmental sustainability, nor care much for them. As banks articulate their new vision, they need to define what this means for their employees, and recruit accordingly. Identifying key requirements in the bank of the future Banking-oriented students still associate banks with prestige and financial success – the attributes on which banks traded pre-crisis. However, banks are more likely to need innovation, creativity and dynamism as they cope with the implications of new technology. They need to adapt their employer branding and explicitly project, seek and reward these attributes. Emphasising training and development over pay The Culture in Banking Survey by Deloitte revealed that senior bankers view pay as the key lever for cultural change. But compensation practices are under pressure, thanks to falling returns. Moreover, banking-oriented students rank training and development ahead of pay as a key aspiration. Banks do offer great training, and they should highlight this rather than the more ephemeral attraction of money. Developing long-term career strategies In view of more than half of banking-oriented students expecting to stay in their first job for a maximum of three years, banks need to offer students a clear career path and a more amenable lifestyle. With the students’ top career goal being work–life balance, banks may be rewarded with greater loyalty if they offer greater flexibility. Thinking global, hiring local Business students’ priorities vary widely across countries. South African banks need to tailor their approach to each market when hiring graduates, so that their brand aligns with local aspirations. Planning for the transition Thanks to regulation and technology, the bank of the future will look very different from what we see today. Yet, culture – and staffing – will not change overnight. Banks need to plan carefully to manage the transition from the profit-oriented, highly leveraged models of the past to adapt to a much more heavily regulated environment. For more information contact: Jack Sellschop, Director - Consulting/Human Capital, Human Capital FSI Leader Direct: +27 (0)11 517 4223 Mobile: +27 (0)83 680 0539

Email: jsellschop@deloitte.co.za

2013/12/11 3:46 PM

LEGAL NOTES

Identity theft â&#x20AC;&#x201C; a threat to national reputation According to Bruce Thornton, associate director in Risk Advisory at Deloitte, the response to the challenge of identity theft has led directly to the highlighting of the need for improved security and the legislative responses of many international governments.

ases of identity theft have not only highlighted the apparent ease with which South African documents are falsified, causing reputational damage to the country, but also generally raised awareness internationally about the vulnerability of data containing sensitive information, says professional services firm, Deloitte. Recent events that have focused adverse international attention on identity theft in South Africa have included the use of a false

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SA passport by Samantha Lewthwaite, a British citizen and widow of one of the so called 7/7 suicide bombers, who was reportedly involved in the Nairobi Westgate attack. Another example was the imposition of visa requirements on South Africans by the UK, after it was found that about 6 000 illegal Asian immigrants had been smuggled into Britain using South African documents, says Thornton. â&#x20AC;&#x2DC;These events focus attention on the growing incidence of ID theft across the world. A major focus is on the global data revolution,

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‘…stolen personal information has become a commodity. The price of the stolen information increases based on the financial standing of the individual whose information has been stolen.’ and the fact that it is estimated that 90% of the data in the world today has been created within the last 24 months. Much of this data contains personal information, and carries the risk that this personal information can be obtained by unauthorised people who can use [it] to the detriment of the legal owners.’ Incidents that have set international alarm bells ringing included: • In 2010, a large multinational insurer stated that it had lost approximately 46 000 records containing customers’ personal information. It was later divulged that there was a South African connection as the security breach arose when customer information sent to a South African subsidiary company for processing, resulted in the loss of an unencrypted back-up tape during a routine transfer to a data storage centre. This breach resulted in the insurer receiving a hefty fine from the UK’s Financial Services Authority. • In October 2013, it was reported that Adobe had suffered a massive security breach which compromised the IDs, passwords, and credit card information of nearly three million customers. ‘Personal information obtained illegally can be manipulated resulting in a devastating impact on unsuspecting individuals. Once in possession of a stolen ID document, criminals can use the acquired identity to gather or create additional information, explains Thornton. ‘The growth in use of smartphones and the spread of programmes such as “Trojans” into these devices has exacerbated the problem of identity theft. Our online lives have enabled easier illegal collation of our personal information to take place. Criminals armed with this information can create debt, make in-store or online card purchases, and even obtain fraudulent passports without the knowledge of the person concerned. ‘The bottom line is that stolen personal information has become a commodity. The price of the stolen information increases based on the financial standing of the individual whose information has been stolen. ‘With the increased online availability of stolen personal information there is also a commensurate increase in identity theft to enable buyers of such stolen data to fraudulently access the benefits associated with such stolen information,’ says Thornton. ‘Although South Africa has not yet experienced a spike in hacking incidents linked to the theft of persona, some industry experts expect ID theft to surpass traditional theft due to the perceived anonymity associated with ID theft,’ adds Thornton.

The protection of personal information by entities is therefore set to play a critical role in the prevention of future ID theft. In South Africa this concern has been reflected in the Protection of Personal Information Bill (POPI), which will soon be signed into law. This Bill seeks to support the right to privacy of personal information of South African citizens and, also protects personal information collected and processed by organisations. The Bill requires a custodian of third party personal information to have adequate measures to secure the integrity of personal information from, among other things, theft, loss, damage, unauthorised destruction and unlawful access or processing of personal information. The Bill also requires custodians of this information to identify and constantly update safeguards against identified risks to personal information in their possession. The holder of information is also required to ensure that – where there is reasonable suspicion – that personal information has been accessed or acquired by an authorised person; the processing party must notify the regulators and the person whose personal information may have been subject to unauthorised access. ‘The response to the challenge of identity theft has led directly to the highlighting of the need for improved security and the legislative responses of many international governments,’ says Thornton. ‘However, reality dictates that as the world of technology leads to the further proliferation and distribution of personal information, further challenges will arise requiring innovative action to prevent the devastating effect that abuse of data can have on individuals and entities that are impacted by this illegal activity.’ By Deloitte Edition 8

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NOTICE OF SUSPENSION OF ENROLMENT FEES THROUGH PA003 NOTICE OF SUSPENSION OF ENROLMENT FEES THROUGH PA003 National Home Builders Registration Council have suspended The National Home The Builders Registration Council have suspended the practice of the practice of accepting enrolment fees through the PA003. accepting enrolment fees through the PA003. In terms of Rule 5(1)(b) of the National Home Builders Registration

In terms of Rule 5(1)(b) Council of theRules National Council in GNRHome 1408 of Builders 1 DecemberRegistration 1999 (‘Regulation 1408”), Rules in GNR 1408 of 1 December 1999 (‘Regulation 1408”),the NHBRC is required to enter into agreements with financial the NHBRC is required to enter into agreements with financial institutions/mortgage lenders for payment of fees enrolment fees in of monies owed to the institutions/mortgage lenders for the payment ofthe enrolment in respect respect of monies owed to the home builder by the housing consumer home builder by the housing consumer on payment of the first progress payment (‘PA003”) from a payment of the first progress payment (‘PA003”) from a mortgage mortgage loan. In lieu of aonNHBRC agreement with any financial institution/mortgage lender, as required loan. In lieu of a NHBRC agreement with any financial institution/ by Regulation 1408, the NHBRC hereby advises the suspension of the PA003 method. mortgage lender, as required by Regulation 1408, the NHBRC hereby Until such time as the advises requirement of the legislation is adhered to,the NHBRC is willing to accept a the suspension of the PA003 method. guarantee issued by a recognized financial institution in favour of the NHBRC.Home builders and housing consumers are encouraged direct enquiries toofthe customer care office. Untilto such time any as the requirement thenearest legislationprovincial is adhered to, the NHBRC is willing to accept a guarantee issued by a recognized

Toll-free: 0800 200 824 financial | web:institution www.nhbrc.org.za in favour of the NHBRC.Home builders and housing consumers are encouraged to direct any enquiries to the nearest provincial customer care office.

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2013/12/20 8:41 AM

MEMBER BANKS Introducing Banking Association Member China Construction Bank Q&A Name of bank: China Construction Bank Corporation (Johannesburg Branch). Who owns the bank? China Construction Bank Corporation is listed on the Hong Kong and Shanghai stock exchanges. The top 10 shareholders are: • Central Huijin Investment Ltd. (“Huijin”) – 57.03 (H-share), 0.23 (A-share) • HKSCC Nominees Limited – 29.04 (H-share) • Temasek Holdings (Private) Limited (“Temasek”) – 7.15 (H-share) • State Grid Corporation of China (“State Grid”) – 1.14 (H-share) • Baosteel Group Corporation – 0.80 (H-share), 0.13 (A-share) • China Ping An Life Insurance Company Limited – 0.86 (A-share) • China Yangtze Power Company Ltd. (“Yangtze Power”) – 0.41 (H-share) • Reca Investment Limited – 0.34 (H-share) • Ping An Life Insurance Company of China Ltd. –traditional – high interest rate insurance products – 0.24 (A-share) • China Securities Finance Corporation Limited – 0.09 (A-share) Core business: Bilateral and syndicated lending, trade finance, structured trade and commodity finance, project finance and treasury, and transactional accounts and services. Target market: Its Johannesburg branch targets clients in the Energy, Telecommunications, Mining, Financial Services, Trading, Logistics, Manufacturing, Health Care and Media industries in subSaharan Africa. Core values or differentiators: Its core value is "To Build a Better Life". In order to achieve this, the bank provides innovative, practical and top-quality products and services to its clients. The bank believes that its first responsibility is to its clients who use its products and services. The bank strives to: • produce attractive returns for its shareholders. • treat employees with dignity and respect, creating opportunities for them to grow in their respective fields. • follow the philosophy that "our clients are the reason for our existence", and accordingly provides clients. • be considered as a prime business institution in the communities within which it operates. Any newsworthy changes in the bank’s structure or business in the near future? The bank intends to become more visible on the continent through active participation in funding projects. In the future, it will increase its strategic function as a regional organisation to provide its clients with excellent and efficient financial service. It will actively participate and service the cooperation of Chinese-African trade, as well as continue with the goal of becoming a key bank in Southern African region. Is there a key product or initiative you wish to highlight? One of our key focus areas at present is the promotion of our Renminbi (RMB) product offerings, which include:

• Renminbi /Forex Clearing Service for Foreign Banks, • Cross-border RMB Settlement • Renminbi Trade Finance • Renminbi Term Funding In the course of July 2009, the bank signed a Memorandum of Understanding (MoU) with FirstRand Bank to promote bilateral trade between China and Africa. To date the relationship has blossomed successfully, and its parties have jointly completed a number of transactions. International links: China Construction Bank Corporation is growing global bank with 10 tier-one overseas branches in Hong Kong, Singapore, Frankfurt, Johannesburg, Tokyo, Seoul, New York, Ho Chi Minh City, Sydney and Taipei, and five wholly-owned operating subsidiaries including CCB Asia, CCB London, CCB Russia, CCB Dubai and CCB International. Its overseas entities covered 14 countries and regions. Name/s of the CEO and or Chair: Jianguo Zhang, vice chairman and president of the Johannesburg branch.

VICE CHAIRMAN AND PRESIDENT: JIANGUO ZHANG

Jianguo Zhang has served as vice chairman and executive director of China Construction Bank since October 2006, and its president from July 2006. He also served as vice chairman of the board of directors and the president of Bank of Communications from May 2004 to July 2006. Zhang occupied several positions in the Industrial and Commercial Bank of China, including general manager of the International Business Department and deputy president of the Tianjin Branch. In 1982, he graduated from Tianjin College of Finance and Economics with a bachelor’s degree in Finance and a master’s degree in economics in 1995. CONTACT DETAILS Telephone: +27 11 520 9400 E-mail: info@ccbjhb.co.za Website: http://za.ccb.com/johannesburg/en/index.html Address: China Construction Bank Building 5th Floor, 95 Grayston Drive, Sandton, 2196

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BANKER SA

2013/12/19 4:38 PM

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2013/12/20 8:39 AM

MEMBER BANKS

Introducing Banking Association Member Standard Bank Q&A Who owns the bank? Standard Bank is a publicly listed company, trading on the Johannesburg Stock Exchange and the Namibian Stock Exchange. Core business: The Bank is a leading African financial services group, with its head quarters in Johannesburg. It also operates in 20 other African countries. The Bank’s three main pillars of business are Personal and Business Banking, Corporate and Investment Banking, and Wealth Management through Liberty Holdings Limited. Target market: Standard Bank provides a full spectrum of banking, insurance and management services and serves corporate and individual customers. Core values or differentiators: The Bank’s key differentiator is employing people who are passionate in developing the company as a leading African financial services institution. It also employs people who are excited about Africa and its prospects. Standard Bank has a unified, experienced leadership team, that is committed to executing its strategy. It is committed to contributing to the socioeconomic development of the countries in which it operates, in a way that is consistent with the nature and size of its operations. The Bank provides financial services and products responsibly, bearing in mind the needs of society, its customers, its staff, its shareholders, the environment and future generations. Is there a key product or initiative you wish to highlight? The Bank is backing projects worth R10-billion as part of South Africa’s third round of the Renewable Energy Independent Power Producer Procurement Programme. It underwrote R9.4-billion for wind and solar projects in the first round, and a further R6.4-billion during the second round. These commitments support individual projects and companies that are creating renewable energy assets in South Africa. International links: The world’s largest bank, the Industrial and Commercial Bank of China (ICBC), is a 20% shareholder in the Standard Bank Group. This strategic partnership with ICBC provides the Bank with exceptional opportunities to capitalise on the growing business, finance and trade flows between Africa and China. Name/s of the CEO and/or Chair: Standard Bank Group is run by joint chief executives, Sim Tshabalala and Ben Kruger. CSI at Standard Bank: The Bank believes that education is a critical area in which the bank can make a positive contribution to economic growth and job creation in South Africa. Our CSI programmes include bursaries for disadvantaged students at high school and tertiary level.

JOINT CEO PROFILES BEN KRUGER

Ben Kruger is the incoming joint group chief executive of Standard Bank Group (SBG), and an executive director of SBG and Standard Bank SA (SBSA). He is chairman of Standard Bank Plc, and a director of Stanbic IBTC Bank and Stanbic Africa Holdings. Kruger joined the group in 1985.

SIM TSHABALALA

Sim Tshabalala is the incoming joint group chief executive of SBG, current chief executive of SBSA, an executive director of SBG and SBSA, a director of Tutuwa Community Holdings and the chairman of The Banking Association South Africa. Tshabalala joined the group in 2000.

FOR FURTHER INFORMATION, CONTACT STANDARD BANK ON Tel: +27 11 636 9111 or visit www.standardbank.co.za, Standard Bank Head Office: 5 Simmonds Street, Johannesburg, 2001

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2013/12/20 8:37 AM

TECHNOLOGY

A world of Gadgets Take a fun drive this holiday to your nearest tech store and go experience the latest tech toys that will bring you up to speed in the New Year. By Charles Boffard LG G2 R7 300 lg.com/za If you’re upgrading your Android phone, here’s a good reason to look beyond the current Samsung, HTC, and Sony favourites. The front runners have just been joined by LG’s new 5.2-inch flagship phone, the G2. It has so much potential that it may push the Galaxy S4 and HTC out of the front rank. Its 800MHz Snapdragon processor is the most powerful in an Android phone – its display and 13MP camera match the best, and its battery outlasts the competition. Also, with HP’s remote app, it can control most manufacturers’ TV sets. Well worth considering. SAMSUNG GEAR R5 000 samsung.co.za How’s this for an accessory? The Galaxy Gear connects to the Note, the Galaxy S3 and S4, via Bluetooth. Instead of pulling out your phone constantly, by glancing at your wrist, it shows alerts and caller IDs for incoming calls, and allows you to read text messages and emails on its screen. And yes, you can answer and make calls on it. According to Samsung, it sold 800 000 in its first two months. Its battery life is between 16-24 hours. SONY SMARTWATCH 2 R2 700 sony.co.za Sony’s second smartwatch has a slight edge over the Gear: it’s compatible with most Android smartphones, not just Sony’s own. On the other hand it has no speaker or mic, so you can’t actually make or answer calls on it – it acts as a remote for the phone. Of course, it’s sleek looking (Sony makes no ugly products), with a choice of digital or analogue homescreens/readouts, and around 300 apps so far, including Gmail, Facebook and Twitter. Its battery life will last you between 3-7 days, now that’s something to talk about.

Around the bend Remember those old banana-curved Nokia phones from the 90s? Well, like bell-bottom jeans and platforms, they may also be coming back into style. Maybe. In 2014, Samsung will bring us the Samsung Round, “the first smartphone with a curved screen”, based on the Galaxy S4. But LG has beat them to market with the LG G Flex, due in South Africa soon. And whether they were cooked up by overheated marketing departments or nerd-competitive engineers, what else could these be for than beating the opposition at something? The Samsung’s sides curl inward from the centre, matching the curve of the hand; the LG curves from top to bottom, matching the curve of the face. Whether you like your phones bendy or straight, these are not just curiosities – they are both premium, high-spec devices with topnotch pedigrees.

Edition 8

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BANKER SA

2013/12/20 9:16 AM

SA BANKING NEWS

South African News

Basel III creates opportunity for innovative project funding The efforts of South African banks to comply with the Basel III framework paves the way for innovative solutions for funding long-term infrastructure projects, according to professional services firm, Deloitte.

‘S

outh African infrastructure projects have traditionally relied heavily on banks for most of their financing but, due to the impact of Basel III, many are going to have to look at a broader range of funding options as banks find it increasingly difficult to finance long-term projects,’ says Andre Pottas, Infrastructure and Capital Projects Leader at Deloitte. ‘Instead of banks funding the entire 20-year project, we are likely to evolve to a model where they finance the initial stages of a project,’ he says. ‘The remaining funding will stem from project bonds or loans sold to institutional investors, such as pension funds and life companies that have an appetite for long-dated assets to match their long-dated liabilities.’ The tighter capital requirements of Basel III, along with the new liquidity standards – the Liquidity Coverage Ratio (LCR) and the net stable funding ratio (NSF ratios) – means that banks will be required to match the tenure of their funding with that of their lending. Banks have until 2015 to comply with the LCR, and until 2018 to meet the NSF ratio. In other words, if a South African bank wants to fund a 20-year 50

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BANKER SA

infrastructure project, it will need to structure its balance sheet funding to align with the project tenure to meet the Basel III funding and liquidity requirements. However, Wayne Savage, Financial Services Partner at Deloitte, says that South African fund managers, which are a large source of funding for domestic banks, are typically reluctant to provide such long-term funding to banks due to the perceived real rate of return on such investments. The result is that South African banks are heavily exposed to shorterterm funding of between three and six months as local fund managers are reluctant to provide capital to banks over a timeframe that may involve being repaid over 15 to 20 years. This restricts their ability to invest in other asset classes that may provide better returns over time. Given that Basel III now requires banks to obtain more longer-dated funding, preferably with tenure of one year or more, South African banks are finding it difficult to finance longer-term projects at competitive market rates. The premium they charge to invest in such projects means that an alternative funding mix will need to be developed in order to arrive at a lower-cost long-term funding structure.

Edition 8

2013/12/20 10:14 AM

‘We are most likely going to evolve into a model utilised in Europe and the US, where the project funding structure usually comprises a short-debt tranche and an equity tranche.’ ‘The implication is that South Africa’s R3.4-trillion infrastructure programme is going to have to look beyond the banking system and government to secure funding for long-term projects,’ says Pottas. ‘We are most likely going to evolve into a model utilised in Europe and the US, where the project funding structure usually comprises a short-debt tranche and an equity tranche. The latter is typically funded by the project promoter and the debt piece by a bank in the construction phase, as institutional investors do not like to take construction risks. Once the project is commissioned and proven, the funding is refinanced, with an infrastructure fund taking the equity piece from the promoter. The project bond, often listed, replaces the bank construction bridging finance and is then sold to institutional investors, such as pension funds and life companies, with an appetite for long-dated paper delivering a stable return,’ says Savage. Savage adds that the life insurance industry is an untapped source of potential funding for long-term infrastructure projects. However,

alternative solutions to long-term infrastructure funding can be found when one partners with innovative advisors. Deloitte has already structured a listed infrastructure project bond, a first for South Africa, that was issued in April this year via a special purpose vehicle created by Soitec Solar GmbH (60%), its empowerment partner Pele Green Energy (35%), and the Touwsrivier Community Trust (5%) to fund a 44MW Concentrated Photo Voltaic Solar renewable energy power plant in the Western Cape. The bond was assigned a Moody’s Baa2.za South African national scale rating for R1.0 billion of notes issued by CPV Power Plant No.1 Bond SPV (RF) Limited. The notes have a maturity of 16 years from the date of issue in an amortising repayment profile and pay a fixed coupon of 11%. ‘There are several considerations that need to be taken into account in selecting an optimal funding structure for such deals, many of which are influenced by a complex regulatory environment,’ says Savage.

Affordable housing: Standard Bank Group signs an agreement with a European Investment Bank

housing. The facility agreed with Standard Bank Group’s subsidiary that Standard Bank of South Africa Ltd has tenor of up to 20 years. Simon Ridley, Standard Bank Group’s Financial Director, says: ‘We are delighted to have raised this funding from the EIB. This is a step forward in Standard Bank’s continued commitment to funding projects in the affordable housing market.’ ‘The new housing lending programme agreed with Standard Bank in South Africa will lead to further development of affordable and social housing in South Africa. This engagement will help achieve the common objective of increasing financing to build new homes and upgrade housing across the country,’ says Pim van Ballekom, European Investment Bank Vice President. ‘The new Affordable and Social Housing Initiative remains the European Investment Bank’s most substantial financial support for low-income housing outside Europe, reflecting the importance of decent housing conditions for further economic and social development in South Africa.’ This is the second affordable housing loan that The Standard Bank of South Africa Ltd has signed with the European Investment Bank; the first was concluded in 2008. Under the initiative, the European Investment Bank will contribute up to half of a housing scheme’s cost. Selected housing schemes are expected to be in place by 2017, with around 6 500 construction jobs being created.

Standard Bank Group is making available up to EUR30 million for the financing of affordable housing developments in South Africa. This is part of the European Investment Bank’s wider EUR150 million engagement to support investment in affordable and social housing in South Africa. Four local partners will manage the new programme in South Africa. This is part of a framework loan that the European Investment Bank (EIB), Europe’s long-term lending institution, is making available to a number of borrowers in South Africa. The funds will be used to finance the development of affordable and social housing, including student

Edition 8

news.indd 3

BANKER SA

2013/12/20 8:12 AM

BANKING NEWS INTERNATIONAL

Outlook on Indian banking system Moody’s Investors Service maintained its negative outlook on India’s banking system, reflecting the negative effects of currency volatility, persistent inflation, and slowing economic growth.

According to Moody’s, asset quality will continue to deteriorate, particularly for public sector banks, and profitability will likely remain weak, limiting internal capital generation. ‘The operating environment for India’s banking system continues to exert negative pressure on ratings of many public sector banks. While structural issues related to the infrastructure sector are not new, the recent downturn in economic growth has exacerbated these problems and increased their negative effects on asset quality,’ says Gene Fang, Moody’s Vice President and Senior Analyst. While asset quality for private sector banks has largely remained stable, the combination of non-performing loans and restructured loans has grown as a percentage of gross loans at public sector banks. Reserves for loan losses remain weak, and further provisions to sustain coverage will reduce profitability. Systemic support remains strong, as evidenced by recently announced government funding to boost capital at public sector banks. Moody’s expects government support for this sector to be sustained, regardless of the 2014 election outcome. Its report also highlights that Indian banks continue to have sound liquidity metrics, underpinned by a sizeable domestic deposit base and minimal reliance on wholesale funding. 52

BANKER SA

international news.indd 2

Worldwide, loyalty is key

According to Bain & Company’s “2013 Customer Loyalty in Banking Report”, most banks are missing prime opportunities to deepen their existing customer relationships and are ceding new product sales to competitors. Key findings include: • Roughly half of banking customers in developed countries and 84% in the developing world purchased a new bank product over the past year; • Customers purchased one-third of those products, on average, from a bank other than the customer’s primary bank. Bain finds that two factors stand out in swaying customers to buy: the customer’s loyalty to their primary bank, and the bank’s ability to actively sell to its customers. According to the report, a bank’s relative customer loyalty measure explains roughly half of the variation in its relative win rate, and it additionally finds that approximately one-third of banking products in the US are sold, not bought. That is, customers did not plan to buy a particular product, but they received an offer and then decided to purchase it. ‘The “easy growth” is over for banks, as increased competition worldwide is forcing banks to fight over too few new customers,’ says Gerard du Toit, a partner in Bain’s Global Financial Services Practice in Boston and lead author of the report. ‘But there is a surprisingly large upside with existing customers to increase win rates on new product sales.’ The report highlights how loyalty plays a key role in increasing product uptake in each of the 27 countries examined. In addition, it reveals five key capabilities that are critical to success: • Decide where you must win and where you’re willing to lose. Regardless of how marketing segmentation is conducted, banks that cater to the average, cater to no one. • Design products that “pop”. Though retail bank product features can be copied quickly, banks must keep pace with the latest benefits that customers value. • Accelerate the digital transformation. • Loyalty gives you the right to win more business, but you do have to ask for the sale. • Build branding that delivers more trust, less buzz. Credibility comes by telling the story of what a bank has to offer, not what it aspires to be. ‘The banking math is simple. Loyal banking customers own more products, and buy more products, but that doesn’t mean they’re going to make your sales for you,’ du Toit concludes.

Edition 8

2013/12/20 8:15 AM

McKinsey tells investment banks to cut products and costs The world’s largest investment banks should enact changes including “ruthless prioritisation” of clients and combining fixed-income and equity trading to avoid a sharp decline in profitability, according to McKinsey & Co. The companies should cut the number of products they offer and push many clients to electronic platforms, New York-based McKinsey said in an annual review of the investment banking and trading industry released on 20 November 2013. As per the report, the firms must also understand which clients are most profitable and restrict use of balance sheet to those customers. The report added that the return on equity (ROE) was 8% last year at the 13 largest investment banks, and may drop to 4% by 2019 without remedies. ‘The extent of the challenges facing the current business model suggest [that] there is a serious question over its viability,’ the consultants wrote. The 13 largest firms trailed performance of the broader investment banking industry, which produced a 10% return on equity last year. The largest firms could see ROE drop by half amid new leverage restrictions, additional rules on trading and derivatives, and revenue growth that will probably be just 1% annually over the next few years, said the report.

The average large investment bank needs to cut costs by an additional 25%, and reduce risk-weighted assets by $60 billion while increasing revenue by $1 billion to reach a 12% ROE. The way banks currently operate, as many as 20% of clients are unprofitable, Kevin Buehler, a Director at the consulting firm, said in an interview. ‘Banks can no longer afford to provide all products to all clients in all geographies with a full-service approach,’ Buehler said. Investment banks have exposed themselves to inefficiencies and duplication by organising by asset class, separating traders who buy and sell stocks from those who deal in commodities or currencies, the report said. Instead, firms should organise into an “execution factory” that handles most flow trading of standardised products, largely through electronic platforms, the report proposed. Banks should also have a separate division that designs and structures unique hedges and other products for clients, and another group that allocates all funding and customer financing, advised the reports. The portion of global investment-banking and trading revenue that comes from Asia, excluding Japan, will surpass that of North America by 2017, McKinsey stated. In that year, Europe, Middle East and Africa will contribute 33%, down from 39% in 2012, while Latin America will climb to 4% from 3% in 2012. Edition 8

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BANKER SA

2013/12/19 4:34 PM

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2013/12/19 3:05 PM

LIFESTYLE

Meet the bankers

‘Bankers can make a really big positive difference. We give people the ability to be active economic agents; we allow businesses to perform; and we are in a position to promote transformation.’

Sim Tshabalala, Joint CEO, Standard Bank Group

arly this year, in March 2013, Simpiwe “Sim” Tshabalala became joint chief executive of the Standard Bank Group and chief executive of Standard Bank South Africa. He was born in Hlabisa, an area in rural KwaZuluNatal, but grew up in Rockville, Soweto, and obtained his matric at the Sacred Heart College in Johannesburg. Tshabalala attended Rhodes University in Grahamstown, where he graduated with a Bachelor of Arts degree in 1988, and a Bachelor of Laws in 1990. He served his articles at Bowman Gilfillan and became a professional assistant at the firm. Tshabalala went on to do a Master of Laws at Notre Dame in the US, where he received the summa cum laude honour in 1993. In 1994, Tshabalala was admitted as an attorney of the High Court. While he was consulting at Real Africa Durolink investment bank, he continued with his studies on a part-time basis, and completed a higher diploma in tax law from Wits in 1996. In 1998, Tshabalala joined the Structured Finance division of Standard Bank Group. He worked his way up through the ranks, becoming the Group’s director in 2000 and the managing director of Stanbic Africa in 2001. It wasn’t long after that he became known in the banking industry as a man to watch: in 2005 he was nominated by The Banker magazine as one of the “Top 18 under-40 bankers in the world”. In 2006, he was appointed chief executive of Personal and Business Banking for South Africa. In the same year, he completed Harvard University’s Advanced Management Programme.

In March 2008, Tshabalala was appointed chief executive of Standard Bank South Africa. Following that, in April 2009, he was appointed to serve as one of three deputy chief executives for Standard Bank Group. In June 2012, Tshabalala took on the additional responsibility for Corporate and Investment Banking’s client franchise in South Africa. There were talks in the industry and the media about Standard Bank Group appointing two CEOs, but Tshabalala maintained that it was not unusual for the Group to take this step because of its culture of collaboration. This new role extended his responsibilities to the banking businesses on the African continent outside South Africa, and to the bank’s wealth business, including Liberty Holdings. Tshabalala sits on the Board of Standard Bank’s subsidiary in Nigeria, Stanbic IBTC Bank. He is also a member of Business Leadership South Africa and chairman of The Banking Association. Tshabalala believes that a good banker has to be a strategic thinker, a people person and a technical expert. ‘Bankers can make a really big positive difference,’ he says. ‘We give people the ability to be active economic agents; we allow businesses to perform; and we are in a position to promote transformation.’

Standard Bank Standard Bank is Africa’s largest bank, with operations in 18 African countries and 20 in other continents. Standard Bank is Africa’s most valuable banking brand, and the only African company to be ranked among the world’s 100 Most Sustainable Corporations list.

Edition 8

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BANKER SA

2013/12/20 8:20 AM

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Edition 8

2013/12/19 4:39 PM

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