SA banks accused of 'collusion' Apart from the multiple allegations of overcharging of black people by the banks, made by commentators, consumers, and their legal representatives alike in recent years, several bank accounts belonging to individuals and companies have also been on the receiving end of unqualified prejudice, after they have been pushed out of the banking system with no apparent rationale or even legal justification. Whether it can be described as a trend or not, is not the subject of discussion, but the increasing prevalence of this has prompted some individuals and politicians to accuse certain South African banks of being used as a political tool by those who have the financial muscle to influence decision-making to exclude political opponents.In March 2019, the EFF called for a judicial commission of inquiry with financial forensic capacity, into alleged discriminatory practices by banks against black people.The party claimed that black homeowners were charged higher interest rates than their white counterparts for home loans. "The scope and mandate of the commission of inquiry should include the withdrawal of banking licences of banks that discriminate on the basis of race. The scope should also include the commission's power to instruct the banks to pay back all the monies overcharged to black people in June last year, EFF leader Julius Malema accused banks of being involved in political battles and said his party would engage in campaigns against some of the biggest banks in the country. At the time, Malema said: "Powerful politicians with the backing of wealthy individuals who have shares in banks use their financial muscle and nonsensical court decision (so) that they can terminate people's accounts without any due process to fight political battles, because they know if you don't have an account you will not be economically active and when you are not economically active, there is no way you can be impactful politically. Absa and FNB are among the banks that have been accused of perpetuating apartheid-era tactics in the country's embattled financial services sector. Industry experts, civil society and political parties have previously raised these concerns after accounts belonging to black-owned businesses continued to be closed with impunity. Private financial consultant and investigator, Emerald van Zyl, said the apartheid tactics were in full swing and that black people, as well as their businesses, were viewed as a "risk". Director and research head at Firstsource Money and founding executive board member of London-based Monetary Reform International, Redge Nkasi, said it was unimaginable that banks were closing accounts of individuals or firms that depend on them for their real economic activities. He said the South African banking system was oligopolistic in nature and thus banks tend to act in "concert" He said this was the challenge researchers and academics see in the banking system, and that was why calls for the diversity of banking systems and models were being loudly made. "It is common knowledge that SA banks are discriminatory in their practices. They do, obviously, not accept this but many people have proven it. But they also exert considerable influence over a number of issues in the economy that are in many ways political in tone Several of the listed companies within the broader Sekunjalo Group have had to communicate to their shareholders and staff that they had received notice of the imminent closure of their transactional accounts. These have been met with either uproar or jubilation-dependent on which side of the "political" fence the observer sits. The African Transformation Movement spokesperson, Sibusiso Mncwabe, expressed shock and dismay at Absa's and then FNB's moves, which it sold, were unwarranted. The party also questioned the criteria which banks have used in targeting certain companies to summarily terminate their facilities and in which law enforcement agencies have not been involved to prove any wrongdoing. The battle lines are drown as South Africans take the fight for financial freedom to the courts Source: Makwakwa, T. (2023). https://www.iol.co.za/dailynews/news/sa-banks-accused-of-collusion-6fd04782-foed-48/6-96d9-64bbb41cc445 Describe the type of market structure the above case study is based on. Thereafter examine in detail, characteristics of this market structure in line with the state of the South African banking industry.
SA banks accused of 'collusion'
Apart from the multiple allegations of overcharging of black people by the banks, made by commentators, consumers, and their legal representatives alike in recent years, several bank accounts belonging to individuals and companies have also been on the receiving end of unqualified prejudice, after they have been pushed out of the banking system with no apparent rationale or even legal justification.
Whether it can be described as a trend or not, is not the subject of discussion, but the increasing prevalence of this has prompted some individuals and politicians to accuse certain South African banks of being used as a political tool by those who have the financial muscle to influence decision-making to exclude political opponents.In March 2019, the EFF called for a judicial commission of inquiry with financial forensic capacity, into alleged discriminatory practices by banks against black people.The party claimed that black homeowners were charged higher interest rates than their white counterparts for home loans. "The scope and mandate of the commission of inquiry should include the withdrawal of banking licences of banks that discriminate on the basis of race. The scope should also include the commission's power to instruct the banks to pay back all the monies overcharged to black people in June last year, EFF leader Julius Malema accused banks of being involved in political battles and said his party would engage in campaigns against some of the biggest banks in the country. At the time, Malema said: "Powerful politicians with the backing of wealthy individuals who have shares in banks use their financial muscle and nonsensical court decision (so) that they can terminate people's accounts without any due process to fight political battles, because they know if you don't have an account you will not be economically active and when you are not economically active, there is no way you can be impactful politically. Absa and FNB are among the banks that have been accused of perpetuating apartheid-era tactics in the country's embattled financial services sector.
Industry experts, civil society and political parties have previously raised these concerns after accounts belonging to black-owned businesses continued to be closed with impunity. Private financial consultant and investigator, Emerald van Zyl, said the apartheid tactics were in full swing and that black people, as well as their businesses, were viewed as a "risk". Director and research head at Firstsource Money and founding executive board member of London-based Monetary Reform International, Redge Nkasi, said it was unimaginable that banks were closing accounts of individuals or firms that depend on them for their real economic activities. He said the South African banking system was oligopolistic in nature and thus banks tend to act in "concert" He said this was the challenge researchers and academics see in the banking system, and that was why calls for the diversity of banking systems and models were being loudly made.
"It is common knowledge that SA banks are discriminatory in their practices. They do, obviously, not accept this but many people have proven it. But they also exert considerable influence over a number of issues in the economy that are in many ways political in tone Several of the listed companies within the broader Sekunjalo Group have had to communicate to their shareholders and staff that they had received notice of the imminent closure of their transactional accounts. These have been met with either uproar or jubilation-dependent on which side of the "political" fence the observer sits. The African Transformation Movement spokesperson, Sibusiso Mncwabe, expressed shock and dismay at Absa's and then FNB's moves, which it sold, were unwarranted. The party also questioned the criteria which banks have used in targeting certain companies to summarily terminate their facilities and in which law enforcement agencies have not been involved to prove any wrongdoing.
The battle lines are drown as South Africans take the fight for financial freedom to the courts
Source: Makwakwa, T. (2023). https://www.iol.co.za/dailynews/news/sa-banks-accused-of-collusion-6fd04782-foed-48/6-96d9-64bbb41cc445
Describe the type of market structure the above case study is based on. Thereafter examine in detail, characteristics of this market structure in line with the state of the South African banking industry.
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