Big banks helping South Africans dump government services

South Africa’s ‘Big Four’ banks – Absa, FirstRand, Nedbank, and Standard Bank – are increasing their funding of projects to help local businesses and households reduce their reliance on government services. 

PwC’s Major Banks Analysis report for the period ended 31 December 2023 after South Africa’s four largest banks had reported their financial results earlier this month.

PwC’s Major Banks Analysis presents the highlights of the combined local currency results of Absa, FirstRand, Nedbank and Standard Bank and incorporates key themes from other African banks. 

The financial services firm said the country’s major banks registered strong growth in a difficult operating environment. 

The combined headline earnings of these four banks rose 13.8% in 2023 to R113.2 billion, despite their average credit loss ratio rising to 102 bps from 82 bps in 2022. 

PwC said loan production remained resilient, with combined gross loans and advances growing 6.6% in FY23. 

This is despite the banks beginning to close their lending taps due to the rise in nonperforming loans and South Africa’s lacklustre economic growth. 

There were differences across the four banks in terms of what drove their lending growth, reflecting the strategy and risk appetite of the individual banks. 

However, there were some common themes across the four banks, with increasing funding for renewable energy projects ranging from households to utility-scale projects. 

PwC also noted increased funding for water and sanitation projects as South Africa’s water infrastructure continues to deteriorate and shortages become more frequent. 

This is part of the banks’ drive to increase their sustainable financing and reduce carbon emissions from the projects they fund. 

In South Africa, this also results in companies and households reducing their reliance on government-run services such as electricity and water. 

PwC revealed at the beginning of 2024 that South Africans’ use of government services has declined across the board from 2019 to 2023, with the state unable to deliver the quantity and quality of services it once could. 

This, in turn, has led to many South Africans using private companies that provide services similar to those expected of state institutions, such as private security, healthcare, and education. 

In its South African Economic Outlook 2024, PwC outlined the major challenges facing businesses in the country. 

It said that the country’s public sector is overwhelmed and unable to deliver the quantity and quality of services it previously could. 

The degradation or failure of key state institutions, from hospitals to the police and education, has severe implications for the economy and well-being of South Africans. 

In response, South Africans are turning away from government-run institutions and are simply not engaging with the public sector. 

The latest Governance, Public Safety and Justice Survey published by Stats SA found that the share of adults using public hospitals in the 12 months declined 6.3% from 19.9% in 2019/2020 to 13.6% in 2022/2023. 

This decline can be seen across all public sector services, including relatively well-run public institutions such as SARS.