For the ANC government, who refused to go to the
International Monetary Fund (IMF) for financial loans on the grounds of
revolutionary ideology when Nelson Mandela became the first black president of
the new South Africa in the early 1990s, it is the ultimate irony that
successive administrations have failed to rein in the banks who even charge
people to deposit and withdraw cash from their current accounts. Investec, for
instance will charge customers 11 rands for withdrawing every 1,000 rands.
Banks have a litany of fees and service charges, and some so-called free
banking services are either highly conditional or peripheral - charges which
many customers take for granted as free in the UK and European Union. For
instance, First National Bank (FNB's) Islamic check account must have a minimum
of 3,500 rands before qualifying for free banking.
With both retail and business customers complaining
bitterly about the ever-rising fees and customers, the government of President
Jacob Zuma has started to put pressure on the banks to lower their charges and
fees. ANC stalwarts such as Seddick Isaacs, who spent 13 years on Robben Island
with Nelson Mandela and the other ANC hierarchy as a fellow "prisoner of
apartheid" and who taught President Zuma, a fellow inmate, regret what
they call the emergence of a "corporatocracy" in South Africa.
The big corporates including the banks, they suggest, are
still controlling the South African economy and financial system, and
effectively riding roughshod over the government. They remain powerful and
exert strong influence over government policy. In many respects social and
economic apartheid is very much alive in South Africa, almost 17 years after
the ANC was first elected to power.
Muslim members of the ANC, including some high-ranking
ones, agree that the situation is unsustainable, and is exacting a heavy cost
for ordinary South Africans, especially at a time of economic and financial
uncertainty. Only last week, Gill Marcus, the governor of the Reserve Bank of
South Africa, the central bank, warned that the global economy, especially the
US and the European union, may be heading for double-digit recession, which
would inevitably impact upon the South African economy.
Islamic banks such as Albaraka Bank (South Africa) and
the Islamic banking windows of FNB, ABSA, Nedbank and Standard Bank have come
under heavy criticism from Muslim customers from following the greed culture of
conventional banking and in some cases actually charging higher fees and
service charges than their conventional counterparts.
FNB, for instance, in its Shariah-compliant business
check account, says it offers similar features and pricing to the (mainstream
conventional) business check account. "The main differences,"
according to the FNB, are that "juristic entities must have a minimum
balance of 1,000 rands. Sole proprietors must have a minimum balance of 750
rands. There is no debit or credit interest, and there is no overdraft
facility."
It is Albaraka Bank, which is part of the Bahrain-incorporated
Albaraka Banking Group (ABG), which in turn is a subsidiary of the Dallah
Albaraka Group, headed by Saleh Kamel, that has come under a fair bit of
criticism, especially from its Muslim customers and organizations.
They point to a litany of charges by Albaraka Bank
including the increase of a monthly penalty from 3 rands to 75 rands if an
account remains inactive; a 10 rands fee for cash withdrawals up to 2,500
rands; 45 rands for each check withdrawal; a fee of 0.75 rand for each 100
rands cash deposit or part thereof; 20 rands for a post-dated check deposited;
to 100 rands for an unpaid check and a host of other fee categories and
charges.
South African bankers privately concede that their
charges are the most expensive in developed economies, but they blame the
Reserve Bank of South Africa for lack of clarity in terms of policy and a lack
of political will to deal with the situation.
The government of President Thabo Mbeki did set up a few
years ago a commission to look at the high fee structures that banks were
charging. But the half-hearted approach to the issue meant that the commission
dragged its feet and any policy change was effectively still-born because of
this political inertia.
Not only are customers of banks at the receiving end of
this greed culture, but also bank employees. For instance, in the past bank
employees used to get free banking services on credit cards or ATM withdrawals.
But last year Nedbank for instance introduced a 50 percent charge of the usual
tariff for Bank employees for the above products.
The South African economy has had less of an impact as a
result of the global financial crisis and the credit crunch. But local banks as
elsewhere have clamped down on lines of credit that has made it difficult for
especially small-and-medium-sized-enterprises (SMEs) who are faced with severe
cashflow and liquidity problems.
Islamic banking could have filled this void to a certain
extent, but the providers of Islamic banking in South Africa not surprisingly
are over-cautious and taking their cue from counterparts in other countries in
the developed world.
South Africa has a Muslim population of over two million
and many of them are well established in business and in the professions. In
Durban, they even have a Muslim millionaires club. Private wealth amongst South
African Muslims - largely of Indian and Malayan origin - has increased
substantially especially since the collapse of apartheid.
But the uptake of Islamic financial products by these
Muslim-owned businesses is at best ordinary. Local experience of ownership of
Islamic banks is not good following the collapse of Islam Bank Ltd. in the
1990s.
There is still much naivety about Islamic banking amongst
the Ulema and the ordinary Muslims, with basic assumptions such as "cost
of capital" and "development costs" conveniently ignored by
those critical of Islamic banks per se.
The absence of the big global Islamic banks is also a
factor because competition amongst the local windows and the sole Islamic bank,
Albaraka Bank, is not as healthy as in other markets.
HSBC is reported to be considering a bid for Nedbank. If
the deal goes through HSBC Amanah may well be set to become South Africa's
"local Islamic bank" given the latent demand for Islamic bank in
South Africa and the surrounding southern African countries. After all, HSBC
Amanah is a dominant player in markets in the GCC and Malaysia.