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FirstRand’s Dippenaar on size of SA’s big four and state capture

‘Banks are national assets… they should be preserved by our government, not undermined.’
FirstRand chairman Laurie Dippenaar argues that FirstRand and the banking sector as a whole has made, and continues to make, a significant contribution to transformation. Picture: Moneyweb

FirstRand chairman Laurie Dippenaar has argued strongly in an attempt to debunk two myths perpetuated in what he describes as a “significant attack” on the banks, “with the worst assaults emanating from a certain group of individuals and companies whose bank accounts were closed, and those in government who supported them”.

Writing in the annual report of the country’s largest banking group by market capitalisation, Dippenaar says that the decision was not a “capricious” one, given that the “individuals… referred to… were undeniably politically connected and the banks faced enormous regulatory and reputational risk if they had not acted”.

“The actions of the banks unleashed a tsunami of fury from certain quarters of government, in addition and even more worryingly, it precipitated an attack on the South African Reserve Bank (Sarb) and the Minister of Finance, and hinted of intended further attacks on the country’s constitution. It also gained further momentum through the white monopoly capital campaign with the banks often singled out as the worst examples. This then morphed into attacks on the oligopolistic nature of the sector and its unwillingness to transform.”

Myth one: The banks are ‘too big’ and anticompetitive

Dippenaar cites deputy governor of the Reserve Bank, Kuben Naidoo, who said in March that “one of the advantages to having four large banks is that there’s more resilience in the event of a financial crisis.” Naidoo went on to point out that “though market dominance is relevant for competition, it is not necessarily indicative of the ‘absence’ of competition”.

“This resonates with me,” writes Dippenaar. “I don’t know how many new banking licences have been issued since 1995 but FBC Fidelity, Real Africa Durolink, African Merchant Bank, Abil and Capitec all come to mind. Indeed, there are currently three new licences waiting in the wings all of which are likely to be ratified before the end of the year. This does not signify a lack of competition or high barriers to entry, this looks healthy.”

He argues that “one of the reasons the South African banking system is dominated by the big four is that over the past two decades they have absorbed the financial fall-out of second-tier bank failures”.

This has been the case in the curatorship of Saambou and BOE (both in 2002), as well as African Bank Investments Limited (Abil) in 2014. FNB took over most of Saambou’s operations, including absorbing R12.8 billion in deposits and R4.9 billion in home loans. Nedbank acquired BOE, and in 2014 the country’s large banks, together with the PIC and the Reserve Bank rescued Abil in a R17 billion plan.

“The reality is that the size and scale of the big four banks in South Africa is key to financial and economic stability and to public confidence. This does not mean that competition is killed off in the process. Community banks, specialist banks and fintech banks operate successfully but they certainly do not have the balance sheets to rescue failed institutions or lend billions of rand to state-owned enterprises (SOEs), renewable energy programmes and BEE deals.”

Dippenaar references the country’s renewable energy programme as a “good example of why financial strength is important”. At R194 billion over five years, he makes the point that it is “six times the amount invested in infrastructure for the 2010 Fifa World Cup”.

“As much as the white monopoly capital rhetoric tried to tap into the sinister aspects of big business the facts show that banks are national assets [Dippenaar’s emphasis]. They should be preserved by our government, not undermined.”

Myth two: The banks ‘refuse’ to transform

Dippenaar says that “one could speculate that the public hearings run by the standing committee [on finance] in March this year were in some ways an attempt to call the industry to account. This turned out to be a positive exercise as personally I believe the sector gave a good account of itself, and the hearings were professional, factual and in the most part rational.”

He cites the submission by independent research house Intellidex and says its conclusion “that the banks have already proved to be effective instruments of transformation, and their infrastructures are key to unlocking deep and systemic transformation going forward” is “fascinating”.

Source: Intellidex submission to Standing Committee on Finance

He offers five facts about the group, but does skirt around the fact that its executive ranks remain largely pale and male (read: Where banks fail (and win) on transformation):

  1. “RMB has provided R53 billion of funding for transformational infrastructure projects, including South Africa’s world leading renewable energy programme;
  2. RMB has also provided R36 billion of funding for BEE deals;
  3. FNB and WesBank have provided R33 billion of funding to the SME sector with nearly a third of that (R8.3 billion) to black-owned SMEs;
  4. Through its innovative eWallet product, FNB is providing instant cash access to 4.3 million South Africans and 3.2 million people get it for free; and
  5. Of the group’s total workforce 76% of staff are African, Coloured and Indian.”

He argues that “this group and the banking sector as a whole has made, and continues to make, a significant contribution to transformation. Given South Africa’s legacy this was never going to be an easy journey and there is still a great deal to be done to ensure that every South African participates fully in our economy. We recognise we have much more to do but we also ask for fair recognition of our intent and what we have already contributed”.

This is not the first time the FirstRand chair has used his annual letter to shareholders to weigh in on political matters. Last year, he cautioned – preemptively – on a downgrade which was then a “strong possibility” and described ‘Nenegate’ as a “body blow to the banking sector which saw billions wiped off valuations”.

Read: FirstRand chair cautions on state capture, downgrade, risks

It is somewhat curious that he did not pass comment on the March removal of Pravin Gordhan as finance minister in this year’s letter.

“Despite the efforts of the media, the judiciary and civic society, many of the practical mechanisms of state capture remain in place and until these are properly dealt with and the individuals who stole the assets of this country are brought to account, the country’s wounds will not heal. I hope that the ANC finds unity and repairs itself at the end of this year, only then can we look forward with renewed optimism.”

* Hilton Tarrant works at immedia. He can still be contacted at

* He owns shares in FirstRand, first purchased in July 2011.




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Well said and backed by actual facts, refreshing to see after the ANC roll out their race based political noise making with no factual base to it.

The problem is, politicians go to a rural area, talk about how the banks are anti-transformation and are holding up wealth flowing to poor rural voters (ironically to undermine the banking sector to facilitate corruption). I seriously doubt whether those voters are coming onto Moneyweb and reading this information to make up their own minds. A global issue currently (Brexit was similar) but a big problem in SA, perhaps the reason why the ANC have not invested heavily into educating the country, harder to come up with false statements to a educated crowd.

You are so right re: rural areas. This is where they have kept 30 million odd people uneducated. No books, schools shortage, burned out etc. These people are quick to suck up anything that is misinformation.
Problem is when they have to reverse the misinformation. Those that spread it for short term election results, like the promise of land and jobs and wealth, have disappeared and even if they were around they would not be believed.

this is why political misinformation to uneducated people is so dangerous. It basically cannot be undone. Example: Peter Mokaba songs of one bullet one farmer, one settler one bullet has stuck and cannot be undone, the impression is that killing a farmer is progress.

Vote of thanks to guys like this. In the group include the Ruperts, Paul Harris, GT Ferreira, Janny Mouton the list of is endless. How many pension funds have FNB or Remgro as core holdings. How many of us have any of these stables in our portfolios.

thanks guys you make our lives easier and knowing that you will speak out against the corrupt ANC and WMC propoganda is heartwarming.

Don’t forget to mention Nasionale Pers’s role in Pension Funds!

End of comments.





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