MONEY makes the world go round, and in the intricate financial landscape that has infiltrated every aspect of our lives, banks have always held immense power and influence.
Their collective financial clout can be harnessed to drive economic growth and societal development, but it also raises important questions about the potential for this power to be “weaponised”.
Is it possible for banks to wield their influence in ways that could harm citizens, and if so, what would the repercussions be?
The potential for weaponisation
The banks are significant players in the country’s economy. Indeed, the “Big 5” have a combined asset base of several times more than the country’s gross domestic product (GDP), and, as such, they have the potential to exercise their power in ways that may not always align with the best interests of the nation’s citizens as well as businesses.
The concept of “weaponisation” in this context refers to the misuse of financial influence and people’s personal data to pursue agendas that could harm individuals, businesses, or the entire economy.
One glaring example of this, and one that seems to have been ignored by the establishment and mainstream media, is the ongoing situation faced by the Sekunjalo Group.
The closure or threat of the imminent termination of all bank accounts related to the Sekunjalo Group (more than 50 companies) should be a stern warning to the business community. Such a move, collectively taken by banks, has the potential to wreak havoc on the livelihoods of numerous individuals and companies and the economy at large.
It forces us to question whether banks should possess the unchecked power to make such determinations without proper transparency and accountability.
Risk to the unbanked
On the flip side, to prevent an entire business group of historically disadvantaged individuals from operating by shutting them out of the economy, the banks have increasingly focused on un-banking such individuals, and shutting them out of the formal financial system.
The banks’ message to everyone is to “trust” them to look after consumers and businesses’ financial security and growth.
While a commendable initiative aimed at fostering financial inclusion, there is, however, a potential downside to this endeavour. Encouraging the unbanked to open accounts can inadvertently contribute to the growing credit burden of already cash-strapped consumers, for example.
By extending credit to individuals who have previously been outside the formal financial system, banks may unintentionally (or intentionally) push them into a cycle of debt. The ease of access to credit can lead to over-indebtedness, as borrowers may lack the financial literacy to manage their newfound financial resources effectively.
It also puts consumers under the total control of the bank.
A prime instance of this was in the run up to the introduction of the National Credit Act 34 of 2005, when the banks, knowing it was coming, opened the taps to loans and credit extensions without doing the requisite due diligence.
Once consumers started to fall short of their repayment responsibilities, the banks cashed in, leaving tens of thousands of people without homes, transport and in debt for what they still owed.
The consequences of over-indebtedness are dire, impacting not only personal financial stability but overall economic health of the country.
The vulnerability of bank account holders
The current predicament faced by the Sekunjalo Group is a stark reminder of the vulnerability of consumers when banks possess significant influence.
While the closure of business accounts is at the forefront of this issue, the potential for banks to pull the plug on consumers is a chilling prospect. This power, if misused, could leave countless South Africans stranded, both financially and emotionally.
Transparency, fairness, and due process should be at the heart of every financial decision made by banks. The ability to close accounts or withdraw services should be exercised judiciously, ensuring that individuals and businesses are not unduly harmed.
The recent events serve as a call for stringent oversight and regulation to prevent the misuse of power by financial institutions.
* Dlamini is editor of the Sunday Independent.
