Note: The data are provided for informational purposes only and in some cases, the information may be incomplete, not fully accurate or out of date. For more information on how data are compiled, see "A Note About Sources." The date of the last update for each country is marked in the section "Country Indicators." We welcome updates and comments. Click here to write to us.
South Africa
Country Indicators
Information Last Updated
May 2008
Information Compiled by
Chiara Chiumya, Consultant
Population (Millions)
45.2 [2005]
Population Density (per sq km)
37 [2005]
GNI per capita (US$)
4960 [2005]
GNI per capita (PPP US$)
12120 [2005]
Total Unemployment (% of labor force)
28 [2003]
Employment in Agriculture (% of total employment)
36 [2003]
Gross domestic saving (% of GDP)
21 [2005]
% Population under $2/day (PPP)
13 [2003]
Depth of Financial Sector (M2/GDP)
66 [2005]
Exchange rate
1 USD : 7.62313 ZAR, as of 15 May 2008
Percentage of population with access to banking services
58% of the adult population (16+) have access to banking services (FinScope 2006).
Capitalization of banks, NBFIs, stock market
BANKS: Bank capitalization is ZAR 203 billion (SARB). STOCK MARKET: Stock market capitalization is ZAR 5,845 billion (JSE).
Ownership structure of banks (and financial institutions if available)
There are 13 locally-controlled banks, 7 foreign-controlled banks, 14 branches of foreign banks, 2 mutual banks, and 31 representative offices. The 5 largest banks accounted for approximately 90% of the total banking sector assets at the end of December 2006 (SARB).
Formal and Semi-Formal Sources of Microfinance
Microlenders registered with the MicroFinance Regulatory Council (MFRC), savings and credit cooperatives (SACCOs), and banks with microlending activities.
Regulated sources of microfinance include: microlenders registered with the National Credit Regulator (NCR); savings and credit cooperatives; and banks that offer microfinance services.
Non-regulated sources of microfinance
With the enactment of the National Credit Act of 2005, all organisations offering microcredit services are required to be registered with the National Credit Regulator. This applies to all credit providers who have entered into at least 100 credit agreements or have a total outstanding book of credit of more than ZAR 500,000 and are juristic persons and individuals. It excludes those who provide incidental credit as a result of outstanding transactions (Registration). There are also a number of Government Initiatives that provide microfinance services, such as the Umsobomvu Youth Fund Umsobomvu).
Rotating savings and credit associations (commonly known as Stokvels) and burial societies.
Wholesale Lender(s)
Wholesale lenders include the following:
(1) Established in April 2006, the South African Microfinance Apex Institution finances Microfinance Institutions (MFIs) and Partner Organisations (POs) through its Micro Enterprise Development Loan for on-lending to clients earning above R1500 per month. The maximum exposure per MFI is R10 million and per PO is R4 million. Funds are advanced at a rate ranging from 6%-8% per annum (SAMAF);
(2) Khula Enterprise Finance, established in 1996, provides wholesale financing and guarantees to retail financial intermediaries (RFIs) (http://www.khula.org.za);
(3) the National Empowerment Fund (NEF) established by the National Empowerment Fund Act No. 105 of 1998 provides wholesale funding through its iMbewu Fund (National Empowerment Fund);
(4) The Industrial Development Corporation of South Africa Ltd (IDC) is a self-financing, national Development Finance Institution (DFI) established in 1940 to promote economic growth and industrial development in South Africa. It extends credit lines to financial intermediaries if the funds will be applied to economic and social developmental objectives and/or microfinance transactions that address a specific market gap, and provides commercial small, micro-entrepreneurial finance (Industrial Development Corporation); and
(5) the Central Finance Facility (CFF) acts as an apex organization for SACCOs, investing surplus funds and providing short-term liquidity support (SACCOL Member Services).
Definitions of microfinance or microcredit
There is no definition of "microfinance" per se. However, Section 9 of the National Credit Act categorises credit agreements as "small agreement," "intermediary agreement," and "large agreement." A small agreement is for an amount of up to ZAR 15,000; an intermediate agreement is for an amount between ZAR 15,001 and K250,000; and a large agreement is for an amount over ZAR 250,000 or any mortgage, regardless of the amount NCA, Section 9.
NGO microfinance provider formalization or transformation issues
1) All credit providers who: (i) are juristic persons and/or individuals; and (ii) have entered into at least 100 agreements or have a total outstanding book of credit of more than R500 000, including NGOs, must register with the National Credit Regulator (NCR). The NCR is not a prudential regulator (NCR). In order to take deposits, the NGO must be licensed by the Central Bank as a bank or mutual bank (Banks Act, 1990).
2) Cooperatives exclusively concluding transactions with members are temporarily exempted from the requirements of the Banks Act and may mobilize deposits from their members up to a certain amount, but only if they maintain a business relationship with a formal bank (pg 46, Government Gazette, 1 December 2006, Government Gazette).
3) "Mutual banks" were created in 1993 to act as a second-tier deposit-taking institution, but due to high minimum capital requirements, they do not play a significant role in the microfinance market (Mutual Banks).
Ongoing microfinance policy development status
1) There is no comprehensive national microfinance policy. However, the Government has acknowledged the role that microfinance can play in promoting development through the establishment of viable small and medium enterprises. In this regard, it has set up a number of institutions (such as Khula and SAMAF) to provide wholesale funding to the microfinance sector, as well as institutions such as the Umsobomvu Youth Fund (Umsobomvu) that provide financing directly to clients.
2) Secondly, there is the Financial Sector Charter (FSC), which came into effect in January 2004 and was a culmination of negotiated agreements between the Nedlac partners - government, business, labour, and community constituencies - on transforming the financial sector. The Charter commits participants to, amongst others, providing accessible financial services through the provision of first-order retail financial services, including sustainable and affordable banking services and credit for small, micro-enterprise, and poor households. One of the outcomes of this initiative was the introduction of the Mzansi Account, a basic account for anyone over the age of 16. Account fees are minimal, and it is provided with an ATM card. This has had a significant impact in increasing the proportion of the adult population that has access to financial services (FinScope 2006).
3) Thirdly, there was the enactment of the National Credit Act, which is considered to be the most far-reaching consumer legislation; the Act was enacted in 2005 and became fully effective in 2006. The main objectives of the Act are: (i) to promote and advance the social and economic welfare of South Africans; (ii) to promote a fair, transparent, competitive, sustainable, responsible, efficient, effective, and accessible credit market and industry; and (iii) to protect consumers, by, amongst others, promoting the development of a credit market that is accessible to all South Africans, and in particular to those who have historically been unable to access credit under sustainable market conditions NCA.
Safety net availability: insurance, pension, etc.
South Africa's social grants target elderly and disabled people, poor families with children, war veterans, and households taking care of children and people in need. The Government spends over ZAR 3 billion a month on social security grants, providing support to over 10 million South Africans through benefits for old age, permanent disability, sickness and maternity (limited), work injury, family allowance, and unemployment (SSB).
General Participation in the Financial Services Market
No. of institutions
Total Assets
Deposits
Target Market
Constraints to provision of microfinance services
Banks
Commercial Banks
20 registered banks; 14 branches of foreign banks; and 31 representative offices as at 31 December 2007 (SARB)
ZAR 2,121,201 million (as at 31 December 2007) (SARB)
ZAR 1,353,220 million (as at 31 December 2007) (SARB)
All segments of the market.
Transaction costs are too high. Therefore, banks are reluctant to serve the microfinance segment, although this is changing in light of the Financial Sector Charter (FSC) (see "Ongoing Microfinance Policy Development Status").
Mutual banks are specifically set up to serve the segment of the population that is perceived to be unserved by the traditional banking sector, including the microfinance sector.
Non-bank Financial Institutions
Credit Providers
The number of credit providers temporarily registered with the NCR as at 31 March 2007 was 3,968 (This figure includes all credit providers regardless of their institutional type; pg 16, NCR Annual Report 2007). As at 28 February 2007, there were 8 banks, 5 public companies, 290 private companies, 1,927 close corporations (CCs), 70 trusts, 27 cooperatives and 19 Section 19 companies registered under the old Exemption Notice of the Usury Act which was repealed with the enactment of the National Credit Act.
All credit providers are required to register, regardless of whether they are licensed/registered under another Act. Therefore, this category includes a diversity of organisations that are in the business of providing credit, including banks, mutual banks, cooperatives, NGO MFIs, and micro-lenders (NCA, Section 40) . All segments of the market are targeted by the different microlenders.
Cooperatives/Credit Unions
Savings and Credit Cooperatives
Mutual Banks
General Approach to Regulating
Legal basis for regulating
Definition or description of institution
Regulator(s) and role of regulator(s)
Activity that determines required regulatory status
A bank is a public company that solicits for, advertises for, and accepts deposits from the general public -- including persons employed by the institution accepting the deposits -- on a regular basis (section 1 of the Banks Act).
The South African Reserve Bank (SARB) is responsible for the prudential regulation of banks; the National Credit Regulator (the National Credit Regulator (NCR)) is responsible for the regulation of credit agreements; and the Financial Services Board (FSB) is responsible for regulating financial institutions specifically with regard to their conduct in relation to their non-banking financial services.
The soliciting of, advertising for, and acceptance of deposits from the general public (including persons in the employ of the person so accepting deposits) as a regular feature of the business.
A mutual bank is a "juristic person" (i.e. a legal entity recognised in law, but not including natural persons) that has registered as a mutual bank under the Mutual Banks Act. It is distinguished from a bank registered under the Banks Act in that it is not required to be a public company, and it is restricted: (i) in its right to issue negotiable certificates of deposit; (ii) in its power to invest in immovable property and shares; (iii) in making loans and advances to subsidiaries and associates; and (iv) in its right to issue shares and and to pay dividends and bonuses (sections 56-57 of the Mutual Bank Act).
The South African Reserve Bank (SARB) is responsible for the prudential regulation of mututal banks; the National Credit Regulator (the National Credit Regulator (NCR)) is responsible for the regulation of credit agreements.
The soliciting of, advertising for, and acceptance of deposits from the general public (including persons in the employ of the person so accepting deposits) as a regular feature of the business. However, lower prudential requirements than that for banks, e.g. the minimum nominal capital requirement is ZAR 10 million compared to ZAR 250 million for banks (section 48 of the Mutual Bank Act).
Non-bank Financial Institutions
Credit Providers
National Credit Act [No. 34 of 2005] and all other applicable acts specific to that particular type of credit provider in relation to its provision of financial services.
A credit provider as defined by the NCA is: (i) a party who supplies goods or services under a discount transaction, incidental credit agreement, or instalment agreement; (ii) a party who advances money or credit under a pawn transaction; (iii) a party who extends credit under a credit facility; (iv) the mortgagee under a mortgage agreement; (v) the lender under a secured loan; (vi) the lessor under a lease; (vii) the party to whom an assurance or promise is made under a credit guarantee; (viii) the party who advances money or credit to another under any other credit agreement; or (ix) any other person who acquires the rights of a credit provider under a credit agreement after it has been entered into (section 1 of the NCA).
The National Credit Regulator (the National Credit Regulator (NCR)) is responsible for regulating all credit agreements except for:
(1) where the consumer is: (a) a juristic person whose turnover is greater than ZAR 1 million, or (b) the State or an organ of the State;
(2) a credit agreement greater than ZAR 250,000, even if the consumer is a juristic person whose asset value or annual turnover is less than ZAR 1 million;
(3) where the credit provider is the Reserve Bank of South Africa; and
(4) where the credit provider is located outside of South Africa (section 4 of the NCA).
The provision of : (i) credit facilities; (ii) credit transactions which include a pawn or discount transaction, an incidental credit agreement, an installment agreement, a mortgage agreement or secured loan, a lease of movable property, and any other agreement which is not a credit facility but where payment is deferred and a charge, fee, or interest is payable; and (iii) credit guarantees. However, it does not include insurance policies, a lease of immovable property, and a transaction between a rotating and savings group (ROSCA - locally known as Stokvels) and its member under the rules governing that ROSCA (section 8 of the NCA).
A cooperative bank is a financial institution which is made up of members who share a common bond, either professionally or through their employer, geographical area, or because they are members of the same association or organisation (section 1 of the Co-operatives Bank Act).
Financial cooperatives are potentially subject to three regulators -
(1) The Registrar of Cooperatives (appointed by the Minister of Trade and Industry) is responsible for registering cooperatives and has powers to monitor and inspect cooperatives.
(2) Cooperatives that are involved in the provision of financial services and hold deposits in excess of ZAR 20 million are also subject to regulation and supervision by a supervisor appointed by the SARB (section 41 of the Cooperatives Bank Act).
(3) Cooperatives that are involved in the provision of financial services and hold deposits of ZAR 20 million of less are subject to regulation and supervision by a supervisor appointed by the Development Agency for Cooperative Banks (section 41 of the Co-operatives Bank Act). The Savings and Cooperative League of South Africa Limited (SACCOL), a self-regulatory industry body recognised by SARB, section 3(d) also regulates SACCOs and ensures that SACCOs meet all legislative requirements, including prudential and adminstrative standards as determined by SACCOs from time to time (The Role of SACCOL).
No person shall own more than 15% of the total nominal value or total voting rights in a bank or controlling company without the prior permission of the Registrar of Banks (section 37(1) of the Banks Act).
(1) Application for Authorization to Establish a Bank, Branch, or a Controlling Compnay in respect of a Bank - ZAR 20,520; (2) Registration as a bank, branch, or a controlling company in respect of a bank - ZAR 6,840 (Chapter V, Regulations relating to banks, 2008)
A "juristic person", i.e. a legal entity recognised in law, not including natural persons (section 1 of the Mutual Banks Act). The Mutual Banks Act specifically mentions companies but not any other organisational forms (section 19 of the Mutual Banks Act).
Application for Authorization: ZAR 8,550; Registration or Renewal of Registration as a Mutual Bank: ZAR 1,140; Registration of Mutual Bank created by the Amalgamation of two or more Mutual Banks: ZAR 11,400 (Chapter IV of the Mutual Bank Regulations).
As any natural person or legal entity can be a credit provider, no single legal form has been specified (Registration). Possible legal forms include pivate or public companies, close corporations, cooperatives, trusts, and NGOs.
This will depend on the legal form of the organisation and laws applicable to it.
Must have a minimum of 5 members for primary cooperatives, 2 primary cooperatives for a secondary cooperative, and 2 secondary cooperatives for a tertiary cooperative (section 6 of the Cooperatives Act).
Application to Register a Cooperative - ZAR 100; Application to Convert a Company into a Cooperative - ZAR 100; and Application for the Amalgamation of Two or more Cooperatives - ZAR 100.
Licensing Requirements and Standards
Standards for ownership officers
Feasibility study/business plan
Audit of Proposed Founders, Owners, Officers
Operating Manuals
Banks
Commercial Banks
Directors and executive officers must be fit and proper: i.e.
(1) they must be competent, possess and maintain the knowledge and skill needed, and be able to exercise sound judgment for the post that they hold;
(2) they will fulfil their duties diligently;
(3) their previous conduct in similar occupations was exemplary;
(4) they have not been convicted of any crime related to fraud, theft, forgery, perjury, corruption, money laundering, or any other offence involving dishonesty or broken any other laws as described in the Banks Act; and
(5) they are not a former director or executive officer of a bank or any other bank where their actions contributed to that institution's failure (section 13 of the Banks Act).
Directors and executive officers are audited. Application form must be accompanied by a "statement by individuals who are proposing to hold the office of a director or an executive officer of a bank" on Form BA 020 with CVs attached, as per regulation 42 (Chapter III, Regulations relaing to banks, 2008).
A number of policies must be submitted together with the application. These policies should address the management of the risks identified -- and the effect of the policies (quantified if possible) in relation to the risks identified -- for the following: solvency risk, liquidity risk, credit risk, currency risk, market risk (position risk), interest-rate risk, counterparty risk, technological risk, and operational risk, as well as the policies in relation to the maximum deposits (in relation to total deposits) to be accepted from a single depositor (Chapter IV, Regulations relating to banks, 2008).
Mutual Banks
Directors and executive officers must be fit and proper: i.e.
(1) they must be competent, possess and maintain the knowledge and skill needed, and be able to exercise sound judgement for the post that they hold;
(2) they will fulfil their duties diligently;
(3) their previous conduct in similar occupations was exemplary;
(4) they have not been convicted of any crime related to fraud, theft forgery, perjury, corruption, money laundering or any other offence involving dishonesty or broken any other laws as described in the Mutual Bank Act; and
(5) they are not a former director or executive officer of a mutual bank or any other bank where their actions contributed to that institution's failure (Section 11 of the Mutual Bank Act and Chapter III of the Mutual Bank Regulations).
Directors and executive officers are audited. Application form must be accompanied by a "statement by individuals who are proposing to hold the office of a director or an executive officer of a mutual bank" on Form DI 020 with CVs attached, as per regulation 39 (Chapter III of the Mutual Bank Regulations).
A number of policies must be submitted together with the application. These policies should address the management of the risks identified -- and the effect of the policies (quantified if possible) in relation to the risks identified -- for the following: solvency risk, liquidity risk, credit risk, currency risk, market risk (position risk), interest-rate risk, counterparty risk, technological risk, and operational risk, as well as the policies in relation to the maximum deposits (in relation to total deposits) to be accepted from a single depositor (Chapter III of the Mutual Bank Regulations).
Non-bank Financial Institutions
Credit Providers
Standards are specified for banks, mutual banks, and cooperative banks as noted in their respective categories.
With the exception of banks, mutual banks, and cooperative banks, feasibility studies/business plans are not required.
Cooperatives/Credit Unions
Cooperative Bank
Directors and executive officers must be fit and proper: i.e.
(1) they must be competent, possess and maintain the knowledge and skill needed, and be able to exercise sound judgement for the post that they hold;
(2) they will fulfil their duties diligently;
(3) their previous conduct in similar occupations was exemplary;
(4) they have not been convicted of any crime related to fraud, theft forgery, perjury, corruption, money laundering or any other offence involving dishonesty or broken any other laws as described in the Cooperative Bank Act; and
(5) they are not a former director or executive officer of a cooperative bank or any other bank where their actions contributed to that institution's failure (section 33 of the Cooperatives Act and section 16 of the Cooperative Banks Act).
The lending policy (if applicable) and savings policy are required to be submitted together with the application (section 6 of the Cooperatives Bank Act).
The minimum prescribed ratio is 8% of risk-weighted assets, but there is an additional systematic requirement specified by the Registrar of 1.50%. The minimum required capital ratio is, therefore, 9.50% (Capital Adequacy Regulations).
(1) PRIMARY CAPITAL: includes issued primary share capital (ordinary shares, percentage of non-redeemable, non-cumulative preference shares and preferred securities); primary unimpaired reserve funds (share premium, retained earnings, current-year appropriated profits, other appropriated or special reserve funds); specified approved amounts in relation to consolidated supervision (surplus capital in insurance entity & minority interests); LESS deductions (goodwill, establishment costs, capital requirement in respect of foreign branches, accumulated losses, instruments used in respect of which no value was received, financial assistance provided to persons acquiring qualifying instruments, qualifying capital instruments held in banks or orther regulated insitutions, specified increases in capital arising from securitization schemes, acknowledgment of debt issued to fund qualifying instruments, and other deductions as listed in Regulation 38 of the Banks Act, 1990).
(2) SECONDARY CAPITAL: includes hybrid debt instruments; perpetual cumulative preference shares; cumulative debt instruments other than term debt instruments; 50% of qualifying revaluation reserves and prescribed categories of term debt instruments; LESS non-qualifying primary share capital instruments eligible to qualify as secondary capital (non-redeemable preference shares and preferred securities) and secondary unimpaired reserve funds (50% of revaluation surplus, general allowance for credit impairment, excess amount in respect of eligible provisions and other reserve funds as prescribed in Regulation 38 of the Banks Act, 1990).
(3) TERTIARY CAPITAL: issued subordinated term debt instruments; LESS tertiary capital not qualifying due to prescribed limits and deductions (Capital Adequacy Regulations).
There are 8 risk weight buckets. These are 0%, 10%, 20%, 35%, 50%, 75%, 100%, 150%. The classifications are quite detailed and can be found regulations 23 to 25 of the Banks Act, 1990 that deal with credit risk (See Credit Risk Returns).
Non-performing loans are classified into 4 categories: Special mention, substandard (90 - 180 days), doubtful (180 - 360 days), and loss (more than 360) days. The classification also takes into account the underlying security as prescribed in the regulations 23 - 25 of the Banks Act, 1990 (see Credit Risk Returns).
The minimum liquidity requirements are as follows: Average daily liquid asset holding should not be less than 5% of liabilities less funding received from head office or from branches within the same group and amounts owing by banks, branches and mutual banks in the country. At the close of business, minimum liquid assets should not be less than 75% of the required minimum average daily liquid asset holding. During the day, minimum liquid assets should not be less than 50% of the required minimum average daily liquid asset holding. At least 95% of the liquid assets must be owned outright by the bank. Instruments acquired as security as part of a transaction and foreign-currency assets, except bullion and gold coins, do not qualify as liquid assets (regulation 27 of the Banks Act).
(1) PRIMARY CAPITAL: includes ordinary shares; non-redeemable, non-cumulative preference shares; share premium; accumulated profits; surplus on realization of capital assets; and other general or special reserves.
(2) SECONDARY CAPITAL: includes cumulative preference shares; debt instruments issued; 50% of revaluation surpluses; general debt provisions; and undisclosed reserves (Regulation 23, Chapter II of the Mutual Bank Regulations).
RESERVES: The reserve requirement is 1% of [(total funding-related liabilities to the public plus acknowledgements of debt endorsed and rediscounted, but still outstanding on behalf of clients plus other liabilities and trade creditors) less (loans received under repurchase agreements, deposits pledged as security for loans granted, amounts owing by banks and mutual building societies and 50% of remittances in transit)] (regulation 21 of the Mutual Bank Regulations). LIQUIDITY: The minimum liquidity requirements are as follows: Average daily liquid asset holding should not be less than 5% of its total funding-related liabilities to the public plus acknowledgements of debt endorsed and rediscounted, but still outstanding on behalf of clients plus other liabilities and trade creditors. During the day, minimum liquid assets should not be less than 75% of the required minimum average daily liquid asset holding. Foreign-currency assets, except bullion and gold coins, do not qualify as liquid assets (regulation 22 of the Mutual Bank Regulations)
Member capital includes: entrance fees; membership fees/subscriptions; loans to members; member funds; and consideration for membership shares or additional shares (section 40 of Cooperatives Act).
RESERVE FUND: Min. 5% of annual surplus must be deposited in a reserve fund (section 46 of Cooperatives Act). Other reserve and liquidity requirements wiill be prescribed in forthcoming Regulations (section 20 of Cooperative Banks Act).
Risk Management Guidelines
Guidelines & restrictions on financial services
Guidelines & restrictions on operational rules
Guidelines & restrictions on interest rates
Concentration of risk
Connected/insider business
Banks
Commercial Banks
PERMITTED: the mobilisation of deposits from the general public and granting of advances (section 1 of the Banks Act). PROHIBITED: A bank shall not: (1) lend money against security of its own shares or shares of its controlling company; or (2) for the purpose of promoting the sale of its shares, lend money without security or against security deemed inadequate by the Registrar to promote the sale of its shares (section 78 of the Banks Act).
1) Approval is required from the Minister of Finance for: (i) any compromise, amalgamation, or arrangement as referred to in Chapter XII of the Companies Act that involves a bank as one of the major parties; or (ii) an arrangement for the transfer of >25% of the assets, liabilities, or aggregated assets and liabilities of a bank to another person (section 54 of the Banks Act).
2) All banks are required to comply with: (i) the Prevention of Organised Crime Act [No. 121 of 1998], as amended, which deals with matters relating to organised crime, money laundering, and criminal gang activities; (ii) and the Financial Intelligence Centre Act [No. 38 of 2001].
There are no restrictions on interest rates, except those stipulated in Regulation 42 the National Credit Act for credit agreements. Maximum interest rates are calculated using the following formulas (NOTE: RR is the South African Reserve Bank’s Repurchase Rate): (1) FOR MORTGAGE AGREEMENTS: [(RRx2.2)+5%] per year; (2) FOR CREDIT FACILITIES: [(RRx2.2)+10%] per year; (3) FOR UNSECURED CREDIT TRANSACTIONS: [(RRx2.2)+20%] per year; (4) FOR DEVELOPMENTAL CREDIT AGREEMENTS: [(RRx2.2)+20%] per year; (5) FOR SHORT-TERM CREDIT TRANSACTIONS: 5% per month; (6) FOR OTHER CREDIT AGREEMENTS: [(RRx2.2)+10%] per year; and (7) FOR INCIDENTAL CREDIT AGREEMENTS: 2% per month. (Regulation 42 of the NCA).
1) A bank shall not make investments or grant loans or advances to a person in excess of 10% of the bank's qualifying capital and reserves as calculated in accordance with regulation 38 of the Banks Act, without prior approval by the Board of Directors (or a committee appointed for such purpose whose composition has been approved by the Registrar). 2) A bank shall not be exposed to a single private-sector person in excess of 25% of the bank's qualifying capital and reserves without prior written approval of the Registrar (section 73 of the Banks Act).
A bank shall not lend or advance money to any associate (as defined in section 37(7) of the Banks Act 1990), or provide guarantees for its associate's liabilities, in an amount exceeding 10% of the bank's qualifying capital and reserves as calculated in accordance with regulation 38 of the Banks Act (section 77 of the Banks Act).
Mutual Banks
PERMITTED: The acceptance of deposits from the general public and granting of advances (section 54 of the Mutual Banks Act). PROHIBITED: A mutual bank shall not issue negotiable certificates of deposit except in accordance with such conditions as may be prescribed (section 54 of the Mutual Bank Act).
1) The Registrar's approval is required for any amalgamation between two or more mutual banks and the transfer of part of the business to another mutual bank or institution approved for the purpose by the Minister of Finance (section 71 of the Mutual Bank Act).
2) All mutual banks are required to comply with: (i) the Prevention of Organised Crime Act [No. 121 of 1998], as amended, which deals with matters relating to organised crime, money laundering, and criminal gang activities; (ii) and the Financial Intelligence Centre Act [No. 38 of 2001].
There are no restrictions on interest rates, except those stipulated in Regulation 42 the National Credit Act for credit agreements. Maximum interest rates are calculated using the following formulas (NOTE: RR is the South African Reserve Bank’s Repurchase Rate): (1) FOR MORTGAGE AGREEMENTS: [(RRx2.2)+5%] per year; (2) FOR CREDIT FACILITIES: [(RRx2.2)+10%] per year; (3) FOR UNSECURED CREDIT TRANSACTIONS: [(RRx2.2)+20%] per year; (4) FOR DEVELOPMENTAL CREDIT AGREEMENTS: [(RRx2.2)+20%] per year; (5) FOR SHORT-TERM CREDIT TRANSACTIONS: 5% per month; (6) FOR OTHER CREDIT AGREEMENTS: [(RRx2.2)+10%] per year; and (7) FOR INCIDENTAL CREDIT AGREEMENTS: 2% per month. (Regulation 42 of the NCA).
A mutual bank shall not make investments or grant loans or advances to a person in excess of 10% of the net qualifying capital and reserves of the reporting bank, foreign branch, foreign subsidiaries or foreign associate, without prior Board (or a committee appointed for such purpose) approval (regulation 30 the Mutual Banks Act). Any investments with or advances to a person in excess of 25% must be reported to the Registrar (regulation 30, Mutual Bank Regulations).
A mutual bank shall not lend or advance money to any associate, or provide guarantees for its associate's liabilities, in an amount exceeding 10% of its liabilities, excluding its liabilities in respect of capital and reserves (section 56 of the Mutual Banks Act).
Non-bank Financial Institutions
Credit Providers
PERMITTED: The provision of credit and any other activities allowed under the legislation which regulates the credit provider's legal organisational form and licencing. PROHIBITED: Those activities prohibited under the legislation which regulates the credit provider's legal organisational form and licencing.
Loan term disclosure rules, fee regulations, cooling-off period, limits on collection methods, must use standard written loan agreements approved by the MFRC.
The maximum interest rates and fees chargeable are prescribed in Regulation 42 of the NCA. Maximum interest rates are calculated using the following formulas (NOTE: RR is the South African Reserve Bank’s Repurchase Rate): (1) FOR MORTGAGE AGREEMENTS: [(RRx2.2)+5%] per year; (2) FOR CREDIT FACILITIES: [(RRx2.2)+10%] per year; (3) FOR UNSECURED CREDIT TRANSACTIONS: [(RRx2.2)+20%] per year; (4) FOR DEVELOPMENTAL CREDIT AGREEMENTS: [(RRx2.2)+20%] per year; (5) FOR SHORT-TERM CREDIT TRANSACTIONS: 5% per month; (6) FOR OTHER CREDIT AGREEMENTS: [(RRx2.2)+10%] per year; and (7) FOR INCIDENTAL CREDIT AGREEMENTS: 2% per month. (Regulation 42 of the NCA).
Cooperatives/Credit Unions
Cooperative Bank
PERMITTED: solicit and accept deposits from its members, grant secured and unsecured advances to its members, and provide trust and custody services to its members (section 14 of the Coopertative Banks Act). PROHIBITED: Provision of financial services to the general public (i.e. those who are not members).
For amalgamations, divisions, conversions and transfers of assets and liabilities, special resolutions are needed and apporval must be obtained from the Registrar (sections 57, 60, & 63 of the Cooperatives Act) and Supervisor (section 29(1) of the Cooperative Bank Act). If a transfer involves more than 25% of the assets and/or liabilities of a cooperative bank, then written consent from the Minister of Finance is needed (section 29(3) of the Cooperative Banks Act). Requests for approval must be accompanied by: (1) the revised constitution(s) where applicable; (2) notice of registered office and contact details, where applicable; (3) directors and their details, where applicable; and (4) a directors' declaration.
The maximum interest rates and fees chargeable are prescribed in Regulation 42 of the NCA. Maximum interest rates are calculated using the following formulas (NOTE: RR is the South African Reserve Bank’s Repurchase Rate): (1) FOR MORTGAGE AGREEMENTS: [(RRx2.2)+5%] per year; (2) FOR CREDIT FACILITIES: [(RRx2.2)+10%] per year; (3) FOR UNSECURED CREDIT TRANSACTIONS: [(RRx2.2)+20%] per year; (4) FOR DEVELOPMENTAL CREDIT AGREEMENTS: [(RRx2.2)+20%] per year; (5) FOR SHORT-TERM CREDIT TRANSACTIONS: 5% per month; (6) FOR OTHER CREDIT AGREEMENTS: [(RRx2.2)+10%] per year; and (7) FOR INCIDENTAL CREDIT AGREEMENTS: 2% per month. (Regulation 42 of the NCA).
Regulations will prescribe a maximum percentage of total investment or loan portfolio that may be lent to a single individual or related group. Investments or loans above this percentage are only permitted with supervisor's approval (section 23 of the Cooperative Banks Act). As at 30 April, no regulations had been issued.
A director or manager must disclose to the cooperative, in writing, any interest in a material existing or proposed contract or transaction with the cooperative (section 37 of the Cooperatives Act). As at 30 April, no regulations had been issued regarding limitations on lending to insiders or connected parties.
Reporting and Supervision
Supervision Method
Supervision costs and fees
Disclosure and reporting requirements
Depositor protection mechanisms (e.g., deposit insurance or lender of last resort)
Annual licence fees are calculated using the formula [(ZAR 30 million/ZAR 2,000 million) * (total capital & liabilities)], subject to a minimum of ZAR 6,000 and maximum of ZAR 300,000 (Chapter V, Regulations relating to banks, 2008).
REPORTING: Banks are required to submit the following returns:
(1) DAILY - selected risk exposure;
(2) MONTHLY - Balance sheet, off-balance sheet activities, income statement, credit risk, liquidity risk, minimum reserve balance and liquid assets, market risk, interest rate risk -- banking book, equity risk in the banking book, derivative instruments, securitisation schemes, and capital adequacy;
(3) QUARTERLY - restrictions on investments, loans and advances, credit risk;
(4) SEMI-ANNUALLY - credit risk, operational risk;
(5) ANNUALLY - operational risk. DISCLOSURE: Banks are required: (1) to publish their audited financial statements on an annual basis; (2) to publish quantitative and qualitative information, as prescribed in regulation 43(2), on a semi-annual basis; and (3) to publish material information as soon as possible after it becomes apparent (Chapter II, Regulations relating to banks, 2008
and Chapter III, Regulations relating to banks, 2008).
The South African Reserve Bank acts as lender-of-last-resort, providing liquidity to banks during periods of temporary cash shortages (SARB).
Annual licence fees are calculated using the formula: ([ZAR 1 million/ZAR 270 billion) * total liabilities] (line item 34 of form DI 100 of regulation 19, Balance Sheet and Off-Balance-Sheet Activities), subject to a minimum of ZAR 1,000 and a maximum of ZAR 50,000 (Regulation 42, Chapter IV, Regulations relating to banks, 2008).
REPORTING: Mutual banks are required to submit the following returns:
(1) MONTHLY - balance sheet; off-balance sheet activities; income statement; liquidity risk maturity ladder; minimum reserve balance and liquid assets; counterparty risk; interest rate risk; market risk (position risk); trading risk; currency risk; institutional and maturity breakdown of liabilites and assets; institutional breakdown of issuers of and transactions in selected assets; and interest rates on deposits, loans, and advances at month-end;
(2) QUARTERLY - capital adequacy; credit risk; and analysis of installment sale and leasing transactions;
(3) ANNUALLY - investments in companies and immovable assets; restrictions on investments, loans and advances; asset-backed securitisation; and return describing investments and interests held. Mutual banks are also required to submit thier audited financial statements to the Registrar annually (Chapter II of the Mutual Bank Regulations).
Non-bank Financial Institutions
Credit Providers
Credit providers are required to submit to the NCR: (1) annual compliance reports within 6 months after the financial year end; (2) statistical returns - (i) for credit providers with turnover of over ZAR 15 million, Form 39 on a quarterly basis and (ii) for all other credit providers, Form 39 on an annual basis for the period 1 January to 31 December; (3) Annual financial statements and auditor or accounting officer's report within 6 months of the financial year end; and (4) assurance report within 6 months of the financial year end (Regulations 62 - 68 of the NCA).
The Board of Directors is required to submit a copy of the financial statements and auditor's report to the Registrar within 15 days of its approval (section 48 of the Cooperatives Act). Cooperative banks are required to notify the registrar of any amendments to its constitution, and changes in the directors and/or their details within 30 days of such changes having been made (section 39 of the Cooperatives Act), The auditor of a cooperative bank is required to provide the supervisor with a copy of any report submitted to the Regulatory Board in accordance with section 45 of the Auditing Profession Act as well as inform the supervisor in writing of any matter relating to the affairs of a cooperative bank which in the opinion of the auditor may negatively affect the cooperative banks ability to continue as a going concern and put depositors funds at risk. Furthermore, a cooperative bank is required to submit a copy of the minutes to the supervisor within 30 days after the AGM (Sections 18 and of the Cooperatives Bank Act)
Corporate tax rate is 28% and secondary tax on companies is 10%. Marginal income tax rates range from a minimum of 18% to a maximum of 40% for income level above ZAR 490,000. (PWC 2008, Breaking new barriers Budget 2008)
VAT rate is 14% (PWC).
Other Relevant Business Legislation
Debt Enforcement and Collection
Credit Rating and Reporting Requirements, Services
Credit Rating and Reporting Requirements: Formatting requirements (e.g., CGAP, GAAP, or other international standards)
Security interests: Forms accepted
Security interests:
Security interests: Recording
Competition/Consumer protection rules: standard disclosure formats
General Applicability
General Applicability
Sections 129 - 133 of the NCA outlines the procedures that need to be followed before debt enforcement and the debt procedures in a court of law, the repossession of goods, and prohibited collection and enforcement paractices.
Credit providers are required to report to the national register or a credit bureau details of of credit agreements entered into and provide the following information:
(1) the credit provider's name, principal business address and registration number;
(2) the name and address of the consumer and their indentification number (in the case of an individual) or registration number (for a jurisitic person);
(3) for credit facilities, the credit limit and expiry date;
(4) for a credit transaction or guarantee, the prinicpal debt, the amount and schedule of each payment due under the agreement, and date when the consumer's obligations will be fully satisfied if the agreement is fully complied with (section 69 of the NCA).
Must follow generally accepted accounting principles
A variety of forms of security are accepted, including residential property and motor vehicles. Some MFIs use the group lending methodology, which also acts as a form of security.
Recording procedures, if any, depend on the type of security. A single comprehensive registry for security does not exist.
Recording procedures (if any) depend on the type of security. No comprehensive secured transactions registry exists.
Consumer credit rights relating to:
(1) applications for credit and eligibility;
(2) the disclosure of all information regarding the credit facility;
(3) the language and manner in which it is communicated and delivered to the consumer; and
(4) variations in the terms of the credit facility are found in sections 60 - 66 of the NCA.
