Special Hearings — Business Hearings — 1997-11-12

MR TAKI: Mr Chairman and Commissioner, I'm here to represent the Banking Industry before your Commission.  I could have walked up with dozens of colleagues, but thought it was probably easier if they didn't all come with me, but you might well have notices that the ranks have swirled and that is specifically the Banking Industry.
 There are the Chief Executives and the very senior - most senior executives of four of the major banks who are here today and I'd like to say that I suspect they're here for three reasons.
 The first one is a very good one which is out of respect for your Commission and the role which it is playing.
 The second one is a very good one and that is that they're here to take responsibility for the role of the Banking Industry in the past and the role it will play in the future.
 The third one I'm suspicious of.  I suspect they're here to watch that I say the right things.
 Mr Chairman, COSAB or the Council of South African Banks has 43 members.  That's 43 out of 57 registered banks are member of COSAB and they represent 99 percent of the total assets of the Banking Industry.  
 So I'm really talking here on behalf of the bulk of the Banking Industry.  I hope that the Commission will understand my difficulty in representing an entire industry, because it is made up of many different institutions which over the years have done very different things and being staffed by different people with different attitudes.
 So what I'm really presenting is a slice of the Banking Industry.  In fact that banks themselves underwent huge change during the late 1980's and early 1990's.  A number of the banks were only established in their present form and COSAB itself was only established in its present form in the 1990's.
 I've been asked to address myself specifically to the economic context within which the banks conducted their business during the Apartheid years and the role which they actually played.
 If you don't mind I'd like to draw the analogy of the cardiovascular system of the human body, because the banks are to an economy what the cardiovascular system is to the human body.
 Banks are essentially the life blood of an economy.  Firstly, because they collect and disperse the capital on which businesses - with which businesses are established.
 Secondly, because they handle all of the transactions.  I don't think that I'd be wrong to say that virtually no transactions take place without a bank being a party to it in one way or another.
 Of course that tells something of a tale when you consider all of the transactions to which the bank were a party during those 34 years.
 Just as the cardiovascular system supplies blood and substance to the healthy and to the unhealthy parts of the body, so the Banking Industry as the cardiovascular system of the economy supplies substance to the entire economy whether it be good or bad.
 At the same time, as some of the banks were deliberately undermining the Apartheid structure, there was no doubt whatsoever that the others were supporting it.
 Now, the actual economic conflicts within which they were conducting their business is the economy - the capitalist economy, any capitalist economy develops in a rather haphazard way as millions of individuals within that society response to the specific opportunities which come their way.
 They respond.  Obviously this haphazard development continues as long as there are no contrary policies or no specific interventions to upset that natural process of growth.
 Much of the fundamental structure of our economy was determined by those natural processes and had nothing to do whatsoever with Apartheid, but it was only when the Apartheid policies and specific interventions were introduced that they had the effect of intensifying and prolonging many of the flawed structures and practices which were an integral part of the natural economy.
 So, in the written submission which we've put in to you, we've dealt firstly with the natural haphazard growth or development of the economy and then with the specific interventions.
 As far as the natural development is concerned, when the White immigrants to this country arrived here, they found South Africa remarkably blessed with mineral wealth and with an abundance of unskilled people.
 So they did what was natural.  They employed the unskilled labour to extract the minerals and exported those minerals and that was where the economy was formed.
 Until well into the 20th century the abundant supply of unskilled labour kept wage rates low.  The economic rent which was earned by the low wage rates and by the mineral wealth, was earned by the owners of the capital and by the managers of the capital and in South African terms that essentially meant people with White skins.  ...(tape ends)
  ... as the economy grew it became increasingly dependent on imports.  So a policy of import substitution was established and that policy of import substitution was absolutely conventional wisdom in post war economies.
 The problem was that in South Africa the economic logic of import substitution and there was quite a sound economic logic, was aggravated by prolonged political isolation which was a consequence of the Apartheid policies.
 So, stimulated by special tax and other incentives the (indistinct) and the private sector energetically developed import substitution industries, including armour mints and synthetic oils.
 This meant that the economy was more severely introverted than would normally have been the case.  Other economies which in the 1980'2 were exposed to world market and globalising forces, began the conversion, the transformation of their economies.  
 We were still isolated from those world market forces and the consequence of it was that the commencement of our globalisation was postponed probably for more then ten years.  Somewhere between ten and 15 years, we remained isolated and introverted.
 An economic strategy relying on unskilled labour, the extraction and export of primary products and on import substitution, proved to be grievously flawed.
 In the 1960's and early 1970's our economy looked like it was performing quite well, but by the mid-1970'2 the weaknesses were becoming very apparent.  The common measure of the wealth of a nation is gross domestic product per capita.  
 Today our comparative gross domestic product per capita is five thousand dollars per capita per annum and that is on a comparative spending bases.  It's then helpful to just consider what that means.
 That compares with 2000 dollars, 5000 dollars compared to 2000 dollars in Zimbabwe.  5400 dollars in Brazil and 
27 000 dollars in the United States.  It tells you we are really pretty well about the same level of wealth as Brazil and two and half times better off than Zimbabwe.
 It is also true that the structural defects in our economy and the application of Apartheid policies resulted in a very unequal distribution of wealth.  The only thing that we can take some comfort in, is that that has been changing from the late 1980's.
 For the banks this prolonged and intense isolation had its own set of consequences.  Foreign shareholders were squeezed out and the South Africans became wholly South Africa - the banks became wholly South African owned.
 The banks responded to the introverted market and made loans to the import substitution industries, including the armour mints industry, the atomic energy commission, to a whole variety of parastatals and also to the central and the home loan governments.
 That was the natural market and the banks as the life blood were responding to that market.  Senior bank officials participated on government bodies like their have economic advisory council.  They dealt in central and home loan government stocks and sanctions busting and unfortunately it became a way of business life in South Africa and banking represented it - participated on bodies involved in sanctions busting.
 If I then turn to the specific interventions.  Apartheid was build on three pillars;  political exclusion, social segregation and economic dependence.  Three of the specific economic interventions had a particularly harsh effect on the majority of the population.  
 The first one which was being referred on numerous occasions over the last two days, was the one of land ownership.  Perhaps, and if you don't mind I'm going to use the Apartheid term, Blacks, to refer to Africans.  I suspect more to provoke confusion than to avoid it, but Blacks were precluded from owning land anywhere in White South Africa until 1979.  
 That obviously impacted enormously on the families of Black people, but in economic terms it had a devastating effect on the development of housing stock and it also very badly prejudiced the process of accumulation of capital in the Black communities.
 From the banking point of view it meant that Blacks were unable to get mortgage loans.  The industry played a very key role in pushing through the lease hold title provisions at the end of the 1970's and before the legislation was passed, they granted loans illegally to individual Black home owners and they also granted loans illegally to White nominee companies.
 Once lease hold title became a possibility, the industry granted 6 billion rands worth of home loans to Black people during the first ten years.  Today the banks hold more than 11 billion rands worth of home loans to Blacks.
 Of those 2 billion are currently 3 months or more in arrear and I think the point is that the entry into this market by the banks was a conscious decision on their part to go outside their main line profit maximising business.
 Numerous other obstacles had to be overcome, including the fact that most Black women did not have the necessary legal status to borrow.   That was overcome, surely as a results of the banking - the efforts of the banking industry when one of the building societies granted a large number of loans to women before the legal capacity problem had been resolved.
 But none of those efforts on the parts of the banks could make good for the fact that the normal process of home building and capital accumulation was totally frustrated for most of the population.  The result of that is now obvious in the fact that there is a shortfall of approximately three million houses.
 It is also acknowledged that while positive steps were being taken by the industry as a whole, there is no doubt that there are innumerable instances when the laws which were in place at the time, were used by banking staff as an excuse for not serving the majority of the population. 
 The second specific intervention dealt with employment and the prohibition against the employment of any Black person in the position of supervisor or above, together with the separate and inferior education of Black people in terms of the Bantu education act, very severely inhibited the capacity of Black people to compete in the work place.
 Until early 1980's very few Blacks were employed in the banks in managerial or even clerical positions.  In about 1983 the banks became very concerned about that situation.  It was a combination of political pressure, inadequate number of White to entrance into the Banking Industry and the demand that services be provided by staff of the same race or language group as the clients who were receiving those services.
 It was those three forces which (indistinct) the change.  Before the appeal of the group areas act, banks moved to employ their Blacks into more senior - move Blacks into more senior positions and once the (indistinct) was repealed changes occurred fairly rapidly.
 In 1980 only five percent of clerical staff employed in the Banking Industry were Black and few of them, 20 percent, were so-called non-White.  Effectively no Blacks were employed in supervisory of managerial positions.
 By 1996 more than 40 percent of the clerical staff, 50 percent of the supervisory staff and about 10 percent of the managerial staff were Black and I use Black there in its more modern meaning.
 While there has been significant improvement, the percentages are still much too low.  The banks were committed to the continuing process of improving those ratios.
 The third specific intervention related to business activity.  Black were prohibited from training for their own account anywhere in White in South Africa.  That prohibition effectively condemned Blacks to be hired wage earners of White business or to not being employed at all.
 As a consequence Blacks have not established their own businesses at anything like the rate which one would have expected in an economy as developed as ours.  Bank loans to Black businesses were severely limited by this prohibition.
 From 1976 onwards key players in the industry became acutely aware of the damage which was being caused by the Apartheid system.  They became very involved in organisations trying to break the strangle hold of Apartheid, including the Urban Foundation and the CBM.
 I've given you some indication of those initiatives on page nine of our submission.  It is not intended to suggest that those actions compensated in the remotest way for the damage which was being done by Apartheid, but the story would not be complete without mentioning them.
 So, the damage.  It is quite clear that the Apartheid system had a devastating effect on the country and on the Black population in particular.  That damage - the damage that was done cannot be undone in a year or even in a decade.  
 The world will not wait while we do the repair work.  We are part of a global village and direct competition with countries which see the entire world, including South Africa as their market.  So we have to find ways of doing the repair work and the redistribution while we travel.
 In the interest of all South Africans, we also have to be careful to limit the damage to the actual wealth generating machine itself, while we try to fix up the past.
 As an industry we are convinced that the repair work can only be done if we all work together.  All of us will have to make sacrifices in the interest of future generations of South Africans.
 As I have already indicated, actively or passively, consciously or unconsciously, banks were and still are party to virtually every transaction in South Africa.  They were involved in the provision of banking services and lending money to the Apartheid Government and its agencies, to businesses and individuals who were profiting at the expense of the majority.
 They were illegally used for taking money out of the country then and regrettably they still are today.  At the same time they were involved in the movement of funds from overseas donors to the Anti-Apartheid Movement and in making loans to large numbers of people who were vigorously opposed to Apartheid.
 On behalf of the Banking Industry I would like to say that as an industry we deeply regret all acts of omission and in particular of comission which contributed to the damage which has been done.  We also acknowledge specific action needs to be taken to address that damage suffered by the worst effected members of our society and that the banks must (indistinct) be key players in that process.
 The banks are committed to play a constructive and co-operative role in the reconstruction of the country on democratic principles and in which all its citizens enjoy equal opportunity.
 In that then the banks commit themselves to three specific initiatives as their contribution to that process.  The first one is housing.  It is pertinently obvious that one of the most crucial needs is the provision of housing.   In response to Government initiatives that banks have already lent a further seven billion rands on low income housing in terms of the record of understanding signed between the Minister of Housing and the banks and a further two billion rands on pension backed education and housing loans.
 This has been done at considerable risk and is testimony to the industry's commitment to playing its role to the full, but we know that much more has to be done and we will continue to work closely with the Department of Housing and its agencies in developing appropriate initiatives to address the housing back log.
 The second specific initiative to which we commit ourselves is the recognition of the need to extend banking services to as many people as is economically feasible, regardless of their level of income.  Massive investment beyond that which would be justified by pure economic logic has therefor been made in infra-structure to do this.
 The logistic acknowledges have been used to provide those services and it is significant that South African banks are regarded as being world leaders in the provision of appropriate banking services for low income communities.
 The banks will continue pursuing this objective and ensuring that the disadvantages which Blacks in particular have suffered as a result of inadequate access to banking services, is overcome.
 The third specific initiative relates to micro-enterprise.  We are keenly aware of the need to develop a vibrant, small and micro-enterprise sector.  Central to the development of such a sector is an understanding of its size and needs and the development and mentors necessary for people who have not had the opportunity to trade for their own account in the past.
 The banks undertake to work with the Department of Trade and Industry in researching the sector and establishing and funding co-operative ventures to do the necessary training and mentors to address the disadvantages of the past.
 On the final page of our submission I have mentioned a number of other initiatives with which the banks are busy and those, all of those initiatives will be pursued with energy.
 Specific mention should however be made of two.  The first one is that the grand funded social responsibility programmes which are run by all the banks, will be continued.
 The second is that the affirmative action programmes and the ongoing commitment of the banks to Black advancement and skill transfers within banks, is one which will be pursued with energy.
 In conclusion, on behalf of the industry, I'd like to make the observation that measurable damages have been suffered by the people to whom reparations will hopeful be paid as a result of your Commission.  
 The problem is that there are very large numbers of South Africans who have suffered immeasurable damages which can never be satisfactorily addressed.  The bank programmes which I have mentioned are serious attempts to apply the available resources to employ - to improve the lot of the disadvantage, but we believe it is up to everyone of us and at the end of the day, it actually comes down to individuals and this is a point that I'd like to emphasize;  that industries don't have energy, individuals have energy and commitment.
 At the end of the day it is up to each one of us as an individual to devote ourselves to making sacrifices and doing whatever we can to rebuild our society in the interest of future generations and we will all thus have to ensure that the things which brought this all to pass, are never allowed to happen again.
 On behalf of the banks I'd like to say that we accept our ongoing responsibility and role in both regards.