Banking Summit 2019 – Tito Mboweni

Publication Date: 13/09/2019

Banking Association South Africa Conference

TT Mboweni, MP

Minister of Finance

13 September 2019

Ladies and Gentlemen, thank you for the opportunity to speak here today.

Government and banks have a complicated relationship, and so I am bit worried about speaking about banking on Friday the thirteenth.

The economic situation

Banks are at the heart of the economy.

They fulfil a vital function of intermediating between savers and borrowers.

These savers might be here in South Africa; or they may be offshore.

Indeed, banks and the economy are inextricably linked. When banks lend, the economy grows; when the economy grows, banks lend. This can be a vicious cycle, in that growth in credit and economic growth can artificially feed off each other until there is a financial crisis.

But it can also be a virtuous cycle. Once confidence strengthens, the bankers will begin lending. Once they begin lending, growth follows, and the show is back on the road.

We are seeing some very early signs that the economic situation is improving and that bank lending is strengthening. One swallow does not make a spring, but there are some hints that things are gradually getting better.

After contracting by 3.1 per cent in the first quarter[1] of 2019, growth rebounded by 3.2 per cent in the second quarter. Unfortunately, these two quarters have cancelled each other out. Growth on a year-on-year basis was subdued at 0.9 per cent after registering no growth in the first quarter.

Real gross fixed investment growth posted a positive growth of 6.1 per cent, the strongest growth in nearly two years This was after a contracting by a revised 4.1 per cent q/q (saar) in the first quarter. According to StatsSA, by type of asset, investment spending increased markedly in the machinery and equipment, transport equipment and residential buildings sub-categories. By type of organisation, the outcome reflects a significant jump of 15.2 per cent in private sector investment.

On the lending side, growth in Private Sector Credit Extension increased to 7.2 per cent year-on-year in July from 6.9 per cent year-on-year in June, coming in slightly lower than the 7.3 per cent y/y projected by the Bloomberg consensus. The stronger growth in credit was due to an uptick in credit growth extended to corporate sector, with credit to households decreasing marginally.

In short, there are some signs that investment spending is slowly improving and that lending to corporates is slightly stronger.

This, of course, takes place against the backdrop of a very weak global situation. In the short term, there are trade wars and, of course, the rising risks of Brexit. In the long term, productivity growth has slowed.


Getting the economy moving

We need to get the economy moving. We need new ideas to solve old problems.

There is a trade-off between easing regulation in financial services and financial stability. One way to address this would be through the implementation of a tiered banking system where different categories of banks are limited to differing levels of risk….

The key barriers to entry can be organised into the following areas: (i) regulation; (ii) legislation; (iii) scale economies; (iv) learning effects and requirement for patient capital funding; (v) vertical integration; (vi) routes to market; (vii) costs associated with packaging, promotions, and display; and (viii) switching costs.

We are constantly asking what we can do better. We need to make it easier for challenger banks to enter the market. We need to make sure that the regulations do not unnecessarily regulate. At the same time. Banks need to be safe and prudentially sound at all times.

We need to make sure the tsunami of regulation has the right effect. For the first time, the Financial Sector Regulation Act, which we all know better as the Twin Peaks Law, imposes a requirement on the regulators to do a comprehensive economic impact study on the effects of their regulations. When considering whether to implement regulations, we expect the regulator to clearly define the benefits versus the costs.


The fiscal position

In the Budget Speech, I highlighted that we are borrowing approximately R1.2 billion a day, if we exclude weekends. This figure has risen even higher over the past few months, as revenue growth has slowed, and unexpected expenses from Eskom have arisen. We are borrowing more and more from banks. Over the last four years, banks have increased their holdings of South African government securities by over 40 per cent, with debt holdings rising from around R237 billion to around R410 billion.

What is the effect of the increase in borrowing? Economics will tell you that the world works through price adjustments. Markets clear at the right price. And the laws of economics are much like the laws of gravity. We are to some extent benefit from the global hunt for yield, and our borrowing costs are lower. But imagine if our fiscal position was better. Both the Treasury and the banks could be borrowing at even better rates, supporting the real economy.

Also, we worry about how the increase in government borrowing has reallocated resources. It makes sense for government to borrow if government can deliver a greater return to society. But I don’t have to tell the people in this room that much of that borrowing is going to state-owned enterprises. I will leave it to the Minister to tweet about them. 



Financial Technology (fintech) is transforming the financial services sector across the globe.

Fintech offers the promise of reducing costs and frictions, increasing efficiency and competition, narrowing information asymmetry, and broadening access to financial services—especially in lower income countries and for underserved populations. Fintech advances support broader economic development and inclusive growth, facilitate international payments and remittances, and simplify and strengthen regulatory compliance and supervisory processes.

To manage risk and not stifle innovation, this year the National Treasury with support from the World Bank undertook a mapping exercise of the current landscape of fintechs in South Africa. The mapping helps policymakers and regulators better understanding the sector and develop the necessary regulations for innovation that promotes inclusive economic growth.  We found there to be over 220 finetch operating in SA from 2008. In line with international trends. Payments is the dominant sector with 67 players.

The Intergovernmental Fintech Working Group (IFWG) was established in 2016 to allow regulators to understand, regulate and foster fintech with the objective to ensure the continued efficient functioning of financial markets, financial stability and the interest of customers are safeguarded.

The IFWG was started between SARB, Financial Intelligence Centre, Financial Sector Conduct Authority and National Treasury. National Credit Regulator joined recently and SARS part of Crypto Asset Regulatory Working Group.

Reacting to fintech and culminating from the IFWG, regulators have thoughtfully been finalising an Innovation Hub. The Innovation Hub will centralise innovation capabilities by fostering innovation in the regulatory environment and across the financial services sector in a manner that is proactive, coordinated and collaborative across industry regulators.

Its collaborative nature enables transparency and cross-regulatory oversight, creating an environment that promulgates shared insight and knowledge across regulators, whilst reducing duplication of effort. It is designed to enable innovative solutions to reach the market more quickly, whilst maintaining rigorous consumer protection and stability in the financial system.


Ease of Doing Business

The World Bank’s annual Doing Business Report currently ranks South Africa 82 out of 190 countries tracked. In an effort to remove constraints to greater investment, the Presidency has established a team consisting of the National Treasury, InvestSA, and the Department of Planning, Monitoring and Evaluation to address the policy, legal, regulatory and administrative barriers that frustrate investors. The team is reporting to Cabinet on a monthly basis. The Presidency has set the goal for South Africa of being among the top 50 global performers within the next three years.

The team has developed a roadmap with short, medium- and long-term goals and are actively engaging with organised business on reform action plans according to a number of key indicators like starting a business, property registration and taxation. The Presidency is expanding the One-Stop Shop approach to ensure potential investors are not shunted between different departments and agencies in search of support and services.


Restoring fiscal strength and strengthening institutions

Government envisages a government that can provide institutions and infrastructure that enable the economy and society to operate, but that has the means to drive transformation by:

Strengthening state-owned enterprises and reconfiguring government departments through maintaining efficiency, cost-containment, cooperative governance, strategic alignment in institutions as well addressing problems of poor governance, inefficiency and financial sustainability within the state-owned institution through:

  • Enhancing state-owned enterprises’ corporate governance and risk management structures
  • Developing measures to strengthen key state institutions such as the NPA, SIU, SARS and State Security and to develop a plan to significantly increase the capacity and effectiveness of the NPA, including to ensure effective asset forfeiture.
  • Improve business models in state-owned enterprises, the principles would be to revise business models of SOEs with the aim of making them modernizised and adoptable through unbundling Eskom and merging SA Express with other state owned airlines.

The National Treasury has set aside R100 billion over 10 years for a national Infrastructure Fund and will be working with private investors and international financial institutions to leverage further finance for infrastructure. Decisive measures to address the situation at Eskom, working with the leadership of the entity to fix operational challenges and improve its financial position. A Chief Restructuring Officer has been appointed to manage the unbundling of the company into separate generation, transmission and distribution entities. National Treasury has committed funds over the next three years to assist Eskom to meet its obligations on condition that it takes the necessary steps to return to financial sustainability.



As I have done before, I will end my remarks by recalling the analogy of the three-legged table. Our success can only be achieved if we have the right combination of effective political leadership, good policy design, and strong and capable institutions. In this regard, we believe we can achieve the right outcomes, if we work together. As Madiba once said: “It always seems impossible until it is done”.

Thank you

[1] Revised from the original figure of 3.2 per cent contraction.