Trouble for South Africa’s big banks over fees

South Africa’s major banks are facing scrutiny over high service charges and their perceived exclusion of small businesses from accessing funding.

Parliament’s Portfolio Committee on Trade, Industry, and Competition, led by Chairperson Mzwandile Masina, has announced plans to summon these banks for a formal hearing in the new year.

The move reflects growing concerns over the banking sector’s accountability and its role in fostering financial inclusion.

Masina stated that the committee’s discussions with the National Treasury have highlighted critical issues, particularly regarding excessive service charges and the restrictive credit practices that hinder small businesses from accessing much-needed capital.

These practices, he noted, stifle economic growth and innovation.

To address these concerns, Parliament intends to engage directly with South Africa’s leading financial institutions, including FNB, Standard Bank, Nedbank, Investec, and Capitec.

“We will call the banks to appear before the committee in the next quarter,” Masina said during a recent briefing.

“The banks make unilateral laws that do not make sense, and we have to hold them accountable.

“This includes charges to individuals and to institutions of government. They will appear before us to have a conversation on what areas can be tightened,” he added.

The scope of this oversight is not limited to the so-called “big five” banks.

Smaller banks, such as African Bank, Grindrod Bank, Bidvest Bank, and Mercantile Bank, will also be required to present themselves before the committee.

Masina argued that South Africa’s banking landscape is disproportionately concentrated, limiting competition and enabling practices that disadvantage consumers and businesses.

He criticised the arbitrary manner in which banks handle critical decisions, such as opening and closing accounts or determining access to credit, and called for a more cooperative approach to financial governance.

In parallel with these hearings, the government is advancing plans to establish a state bank through the transformation of Postbank, a development expected to shake up the sector.

Finance Minister Enoch Godongwana recently provided updates on this initiative during a parliamentary question-and-answer session.

According to Godongwana, the government is working to position Postbank as a fully operational state-owned bank to serve communities underserved by traditional financial institutions.

The legislative groundwork for this transition was laid in March 2024 when President Cyril Ramaphosa signed the South African Postbank Amendment Act into law.

This act transferred ownership of Postbank from the ailing South African Post Office to the government, enabling the creation of a Bank Controlling Company to oversee its operations.

Historically limited to basic savings services, Postbank is now applying for a new banking license from the South African Reserve Bank to offer a broader range of services, including transactional accounts and credit facilities.

Postbank’s evolution is seen as a critical step in addressing the shortcomings of the existing banking sector, particularly for low-income citizens and small and medium-sized enterprises (SMEs).

The finance minister emphasised that institutions like Postbank could significantly enhance competition in the sector, which he described as essential for driving reform.

In collaboration with the Department of Communications and Digital Technologies, discussions are ongoing to secure appropriate funding for Postbank’s expanded operations.

Once finalised, these developments are expected to create a more competitive and inclusive banking environment, offering South Africans greater access to affordable financial services.

With growing public and governmental pressure, the banks face the dual challenge of defending their practices and demonstrating a commitment to the country’s broader economic development.

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