The implications of South African Reserve Bank (SARB) decisions on workers and black South Africans are significant, considering the history of financial exclusion and discrimination that has affected the majority black population in South Africa. The lingering effects of apartheid-era policies continue to impede the economic advancement of black individuals and businesses.

Of particular concern is the indifference of the central bank towards the plight of marginalised communities. 

On May 25th, the SARB’s monetary policy committee (MPC) raised the repo rate for the tenth consecutive time, resulting in the repo rate reaching 8.25%, while the prime lending rate stood at 11.75%. This decision not only caused the rand to hit its all-time low of R19.74 to the dollar but also drew widespread criticism from various sectors of society.

In this opinion piece, we delve into the consequences of the central bank’s decisions on workers and the black community as a whole. Specifically, we strongly argue that the financial system overseen by the SARB perpetuates inequality and necessitates meaningful reforms to address long-standing issues.

Discriminatory laws and policies during apartheid have led to a financial system that marginalises black workers and communities. Residential segregation, redlining, biased appraisal markets, and algorithmic models have all contributed to unequal access to capital and credit.

Black consumers often encounter racial profiling and indignities when attempting to engage in basic financial transactions. This systemic discrimination has resulted in a significant racial wealth gap in South Africa.

Despite nearly three decades passing since the end of apartheid, South Africa still lacks a truly black-owned bank. Black-owned banks have the potential to enhance access to capital for black individuals and businesses since they are more likely to approve loans for black applicants. 

We strongly believe that this would be a significant step towards levelling the playing field and addressing the racial wealth gap. Despite a considerable portion of South African adults having bank accounts and relying on traditional banking services, disparities in banking access persist. Many South African adults are unbanked, meaning they do not possess basic savings accounts. 

According to the University of Stellenbosch Business School’s Diana Bresendale, the current number of unbanked or underbanked individuals in South Africa stands at an estimated 11 million, constituting 18% of the population. These figures highlight the ongoing challenges in achieving widespread financial inclusion and the reliance on cash or non-formal financial institutions among many individuals. 

The lack of access to formal banking services disproportionately affects the black community, further contributing to their economic marginalization. The emergence of the #RacistBanksMustFall movement exemplifies the frustration and anger experienced by many in the black community. Demonstrations in Johannesburg and Cape Town in recent years shed light on the racism black individuals face when dealing with banks. 

The movement calls for an end to discriminatory practices and demands greater support for black businesses. Adil Nchabeleng, the convener of this movement, expressed the fatigue with racism inflicted upon black people by racist banks, stating, “We are tired of the racism metered against black people at the hands of racist banks. We are tired of being victimised.”

The SARB, as the regulator of the banking and financial sector, bears significant responsibility for addressing financial inequality. However, it appears to lack the will to curb discriminatory practices and support black businesses. 

In addition to its role in managing the country’s monetary policy, the SARB holds the responsibility of regulating the banking and financial sector. However, the unfortunate reality is that it has remained a passive observer while the house is in flames. It has taken no meaningful action beyond enabling the arrogant and unscrupulous behaviour of banks.

Furthermore, there exists an imbalance of power and an unhealthy relationship between the banking cartel and the SARB, which serves as the controlling institution. This relationship can be characterised as incestuous, as the banks themselves hold shares in the SARB, blurring the lines between being players and referees in the regulatory process. 

Such a situation raises concerns about conflicts of interest and compromises the effectiveness of the regulatory framework. The rising interest rates disproportionately impact the black community, jeopardising the baby steps made in creating a black middle class in South Africa. Nevertheless, this group heavily relies on credit for essential purchases such as homes and cars. 

Higher interest rates wreak havoc since they lead to increased defaults and financial hardships, further exacerbating existing economic disparities. South Africa’s credit scoring system aggravates financial exclusion. Many black borrowers lack credit scores due to limited access to mainstream financial services. As a result, they face challenges in obtaining credit, hindering their ability to invest in businesses and improve their financial well-being. 

The SARB’s inaction on this issue also undermines the transformative agenda necessary for fostering inclusive economic growth. Additionally, higher borrowing costs result in reduced consumer spending and business investments, which can lead to job losses and increased unemployment rates. Employers may be compelled to restructure their businesses or terminate employees’ contracts, worsening the already critical issue of unemployment in South Africa.

Nonetheless, employers must take heed of the Labour Appeal Court’s cautionary message highlighted in the General Food Industries Ltd v FAWU case when they find themselves in a position where employee retrenchment becomes necessary. The court emphasised that the loss of jobs resulting from retrenchment has a severe negative impact on the lives of workers and their families.

The SARB must reflect on its role in serving the country and the community it represents. Calls for reform are justified, including the suggestion of adopting a dual mandate similar to that of the Federal Reserve in the US. 

A revised mandate that focuses on both maximum employment and price stability would prioritize the needs of workers and the broader community. A more holistic approach is necessary to address the systemic issues perpetuating financial exclusion and discrimination.

By adopting a more comprehensive mandate and taking proactive measures to tackle discrimination, the SARB can contribute to the development of a more equitable and prosperous South Africa.