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Standard Bank CEO Sim Tshabalala this week talked up National Treasury’s initiative to involve corporate leaders in rapidly pushing for structural reforms to labour law and mining policy.
Resolving the setting of a national minimum wage at a “reasonable” level by year-end was critical – as was resolving the impasse regarding what black ownership targets in the mining sector actually mean, and funding the education system, he said during a presentation on the bank’s financial results on this week.
“However, people complaining that the banking sector’s concentration is also a structural reform in need of attention are wrong,” Tshabalala told City Press later.
“My favourite quote is: ‘You should trust in God, but everyone else needs data,’” he added.
This was in response to complaints – recently endorsed by David Lipton, deputy managing director of the International Monetary Fund – that the country’s big four banks were too dominant and fees were inflated because of the lack of competition.
Banking fees in South Africa were “commensurate” with the costs faced by the industry, said Tshabalala.
“Our cost-to-income ratio is high. Competition is fierce. Look at the nature of the products and the pricing. It is fierce.”
The meetings and teams set up between government, business and labour this year to avoid a downgrade of the South African government’s foreign currency debt rating were more than just a symbolic show of unity, Tshalabala added.
In terms of credit rating agency rules, a country’s corporations cannot have a higher rating than that of their government, making it a material concern for the banking sector in particular.
If a downgrade did occur, it “would not be life-threatening” to Standard Bank, said Tshabalala.
“It would not be catastrophic. The cost of equity would go up and our margins would narrow. We would probably pay more for capital.”
The Treasury-led effort at reforms should go on, even if the risk of a downgrade was completely removed from the picture, he said.
“Those reforms need to happen, regardless of the rating. We need them.”
Tshabalala added that it could be misleading to look only at the aggregate economic statistics on South Africa’s economy.
“Things get hidden in the aggregates. There are segments that are growing very strongly.”
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