A 'glimmer of hope' towards transforming the financial services landscape

Kim Heller

It cannot be business as usual. Especially not in South Africa, the most unequal country in the world.

If steered on the helm of transformation, fairness and transparency, South Africa's financial services sector could be a vital vessel of democracy helping to navigate the nation away from the deep-set patterns of economic marginalisation and financial inequality.

On the horizon is the Conduct of Financial Institutions (COFI) Bill. With its sharp developmental thrust and strong accountability propellers, COFI  provides a glimmer of hope for a fairer and more equitable financial services landscape.

The Bill sets out a streamlined path to transformation as well as greater regulatory cohesion and accountability. It brings better alignment between the BBEE Act and the Financial Sector Code while enhancing the powers of the Financial Sector Conduct Authority (FSCA) to overturn discriminatory decisions and seek court orders.

With a spanking new developmental deck that makes entry and participation easier, COFI could be an effective springboard for greater inclusion and participation. However, the history of failed financial legislation in South Africa serves as a stark reminder of how even the most solid policies can sink without rigorous implementation and oversight.

For now, racial gulfs in financial participation and financial prosperity continue to shipwreck financial parity and sully forecasts for a more inclusive and equitable society.

An oar of discrimination keeps marginalised South Africans economically stranded. Personal and business lending and investment remain unequal, with Black South Africans being less likely to be granted home loans or business financing than White South Africans. The lack of historical disadvantage and an empty pot of intergenerational wealth prejudices black South Africans in the banking and investment stakes.

Disparities in access to capital, credit, and favourable bank rates perpetuate discrimination in democratic South Africa. Often labelled as more risky investments, black South Africans are prejudiced by the sector's policies and practices.

The demon of de-banking continues to haunt politically exposed individuals. This is under the cloak of reputational management, and in the grim pall of poor transparency and impaired judicial oversight. The harmful practice of de-banking is a calculated financial attack on targeted individuals, in the ugly gambit of power and prejudice.

The closure of accounts is seldom based on fiscal responsibility; instead, it often serves as a political weapon to suppress dissent and challenge power and patronage. De-banking has severely affected several prominent political figures and opinion makers who have opposed South Africa's elite transition.

Black-owned businesses such as the Sekunjalo Group have become easy targets, while white-owned groups implicated in scandals, such as Steinhoff, have been treated with kid gloves.The veil of "reputational risk" must be lifted to show the ugly silk of conspiracy that lies beneath.

In the words of Dali Mpofu SC, "If banks can close your account without evidence, based on perception, then they are not just financial intermediaries—they are political actors."

COFI will need to create transparency and full disclosure on why certain bank accounts are closed, while others are left to thrive. These freedoms are present in many countries worldwide. In the United Kingdom, banks are now mandated to give 3 months' notice and provide reasons for debanking. This followed massive civil society outrage after UK politician Nigel Farage's bank accounts were abruptly closed.

In South Africa, the slate of prejudicial bank practices and the general lack of transparency and accountability has seen trust and credibility of the sector at an all-time low. Despite its potential, COFI must move beyond bureaucratic or technical compliance to become a genuinely transformative tool that fosters financial access, participation, and empowerment for marginalised individuals, organisations, and communities.

COFI needs to be more than a seductive, refashioned compliance mechanism. If it fails to deal with the thorny issues of systemic exclusion, discrimination and debanking, it will lose its legitimacy and effectiveness and find itself relegated to the large body of legislation that has failed to see the light of day.

Financial transformation has been undermined by discriminatory practices, insufficient regulatory oversight, and a lack of transparency and accountability. Successful implementation of COFI is dependent on vigilant monitoring and strong regulatory oversight. This is understood and addressed in the Bill.

Previous legislation has struggled due to poor execution and insufficient regulatory authority. Until the industry regulators have the necessary authority to revoke discriminatory and politically motivated decisions and actions, they will remain toothless.

A bow of regulation without the arrow of robust civil society support will fail to hit the transformation target. Without a supportive shield for those discriminated against, COFI will lack real potency. There is a real role to be played by civil society and financial activists.

Civil society must act as a watchdog for financial consumers. The true measure of success for COFI will be its ability to make a meaningful difference in the lives of ordinary South Africans, particularly those who were financially marginalised during apartheid.

This includes addressing the harmful effects of discriminatory financial practices that have led to the loss of assets and economic opportunities for these individuals. The Bill has yet to be enacted into law but is being prepared for Parliamentary review. It will herald in a new regulatory regime.

It is time for the financial services sector to show a genuine commitment to transformation and transparency. Without a watermark of ethical acuity and social responsibility, the financial services sector will remain a palace of elite interests. And South Africa will continue to be a rich man's world.

* Kim Heller is a political analyst and author of No White Lies: Black Politics and White Power in South Africa.

** The views expressed do not necessarily reflect the views of IOL, Independent Media or The African.