Tag: South Africa

Which IT job pays best in South Africa?

Source: CareerJunction

Jobs portal CareerJunction has published it latest salary review for 2018, showing among others what the average IT employee earns per month.

CareerJunction used actual salary offerings on their jobs portal Web site (16 000+ jobs monthly) for the latest measurable period (December 2017 to May 2018).

Skill levels covered in the report include both intermediate and senior.

IT management jobs saw the biggest jump in salary, moving from R59 490 per month to R66 010 (11%). Systems analysts were the worse hit by decreases, losing 17.1% in value over the year (from R42 420 to R35 170).

Image credit: Business Tech

Regional salary differences

The Western Cape and Gauteng remain favourable locations to work for IT professionals. Salaries in these regions are very close to the national average while salaries in KwaZulu-Natal are not nearly as competitive.

The salary ranges above are based on monthly “cost to company” remuneration and only serve as an indication of the average salary offerings for each occupation.

By Ben Roberts, Prof Sharlene Swartz and Dr Adam Cooper for the HSRC

The current recommendation for a minimum wage of R3 500 for South Africans is far too little. It should be at least twice that. In addition, we should also legally cap the income of company executives.

This is according to the majority of people who participated in the HSRC’s most recent social attitudes survey. They responded to questions related to a minimum wage and whether there should be a limit to what company heads could earn. These questions were included as part of the HSRC’s ongoing work into issues of poverty, inequality and restitution.

Income inequality has grown in post-apartheid South Africa, as the democratic period has brought with it greater disparities in earnings between a small, increasingly deracialised affluent group and the poor Black majority. This has been shown by Prof Murray Leibbrandt and his colleagues at the Poverty and Inequality Initiative at the University of Cape Town who describe a shift in the Gini-coefficient, a measure of income inequality, from 0.6 in 1993 to 0.7 in 2008. According to Leibbrandt and colleagues, wage income is responsible for 85% of income inequality with the labour market playing the defining role in ongoing income differences.

To test how the South African public feels about these differences in wage earnings, questions on the topic were included in the 2017 edition of the annual South African Social Attitudes Survey (SASAS). SASAS is a nationally representative sample survey of adults aged 16 and older that investigates public opinion in the country. The long-term aim of this survey programme is to construct an empirical evidence base that will enable analysts to track and explain the attitudes, values, beliefs and behaviour patterns of the country’s diverse populations by age, sex, population group, educational attainment, province, geographic subtype and class.

The survey questions explored South Africans’ perceptions regarding appropriate legislative interventions in labour market rewards aimed at both the top and bottom end of the income continuum. Specifically, the questions probed what respondents thought were appropriate minimum wages for workers and whether remuneration of corporate executives should be restricted. The participants were asked:

“What do you think is a fair minimum amount that all South African workers should earn each month? (No worker should earn less than this a month).


“To what extent do you agree or disagree that a law should be introduced in South Africa that limits the amount that a person in charge of a large national company can earn?”.

Minimum wage is too low
Results showed that South Africans believe that a mean figure of R6,953 per month is an appropriate minimum amount, substantially more than the R3,500 for a 40-hour week proposed in the National Minimum Wage Bill. Differences between sub-populations within the sample were noteworthy, with figures ranging from rural farm dwellers believing R5,707 to be adequate, in comparison to R9,678 for students and R10,121 among adolescents.

Top-end wages should be capped
Opinions about executive pay were recorded on a five-point scale (ranging from ‘strongly agree’ that a law should be introduced to limit earnings to ‘strongly disagree’). In total, 53% of the participants agreed that executive pay should be limited, 15% disagreed, 22% remained neutral and 11% were uncertain of the appropriate course of action or did not answer the question. Interesting differences between attitudes of sub-groups also emerged from this question, as Black Africans displayed greater support for limiting executive pay, in comparison to White and Indian adults. More unemployed people favoured income restrictions than employed respondents, as did young people in comparison to those over 50 years old.

Results showed that South Africans believe that a mean figure of R6,953 per month is an appropriate minimum amount, substantially more than the R3,500 for a 40-hour week proposed in the National Minimum Wage Bill. Differences between sub-populations within the sample were noteworthy, with figures ranging from rural farm dwellers believing R5,707 to be adequate, in comparison to R9,678 for students and R10,121 among adolescents.

Opinions about executive pay were recorded on a five-point scale (ranging from ‘strongly agree’ that a law should be introduced to limit earnings to ‘strongly disagree’). In total, 53% of the participants agreed that executive pay should be limited, 15% disagreed, 22% remained neutral and 11% were uncertain of the appropriate course of action or did not answer the question. Interesting differences between attitudes of sub-groups also emerged from this question, as Black Africans displayed greater support for limiting executive pay, in comparison to White and Indian adults. More unemployed people favoured income restrictions than employed respondents, as did young people in comparison to those over 50 years old.

Source: Business Tech

The results resonate with data from elsewhere in the world – for example in the US, between half and three-fifths of Americans concur with this kind of regulatory policy. Populations in the highly unequal societies of South Africa and the US therefore agree that measures to restrict corporate salaries should be introduced.

The survey results indicate that the public is astutely aware of existing wage disparities and favours courses of action to reduce these differentials. This was true both at the top end, in terms of executive pay, and for attitudes towards those most vulnerable in our society, people who receive very low wages. At the very least, the minimum wage should be closer to R40 per hour according to the South African public. Importantly, these findings were consistent across the class spectrum, suggesting that a broad consensus exists in relation to this issue, one that can only function to bolster the South African democracy.


The recession that never happened

The South African economy grew 3.1% during the fourth quarter compared with the previous quarter — putting growth for the year at 1.3%, beating Treasury’s and other forecasts.

Compared with a year earlier, gross domestic product (GDP) increased by 1.5% in the fourth quarter of 2017.
Treasury had expected growth of 1% for the year.

The largest positive contributor to fourth-quarter growth was the remarkable recovery in the agriculture, forestry and fisheries sector, which increased 37.5% and contributed 0.8 of a percentage point to GDP growth.

The trade, catering and accommodation industry grew 4.8% and contributed 0.6 of a percentage point.

The primary sector (which includes agriculture and mining) increased by 4.9%, the secondary sector (manufacturing, electricity and construction) grew by 3.1% and the tertiary sector (trade, transport, finance, government and personal services) grew by 2.7% compared with the third quarter.

This signals that the country’s economy is poised for a recovery.

It is a vast improvement on the dismal 0.3% GDP growth achieved in 2016 but still remains weak by the country’s historic standards.

In the third quarter, the economy grew by 2% quarter on quarter, demonstrating a resilience that suggested it was in better shape than most economists had previously thought.

Expenditure on real GDP increased by 3.1% in the fourth quarter of 2017, while final consumption expenditure by general government increased by 1.3%.

Treasury is forecasting growth to rise to 1.5% in 2018 on political and policy certainty, renewed confidence and rising private fixed investment.

Finance Minister Nhlanhla Nene said on Monday that it was likely that the growth forecasts would be revised upwards due to improved business and investor confidence.

Growth for 2016 was revised up to 0.6% from 0.3%.

Third-quarter GDP growth in 2017 was revised higher, from 2% to 2.3%.

The changes were based on better access to data sets, said Statistics SA deputy director-general Joe de Beer.

The revisions indicate that SA wasn’t actually plunged into a recession last year. A recession is based on two consecutive quarters of negative growth.

The performance in the fourth quarter of 2016 has been revised from a 0.3% contraction to growth of 0.4%.

By Sunita Menon for Business Day

BankservAfrica’s latest take-home pay and private pensions indices show that 2018 is off to a good start, with growth experienced in both nominal and real terms.

The BankservAfrica Take-home Pay Index shows average formal sector pay was R14,675 in January 2018, 5.8% higher than January 2017 before inflationary adjustment.

This increase was lower than December’s growth of 7.3%. However, when adjusted in line with inflation, take-home pay increased by 1.2% on a year-on-year basis, and represents the slowest increase in five months.

“This positive real increase for money banked by employees’ points to a gradual increase in living standards for most formally employed people,” said Mike Schüssler, chief economist at Economists dot coza.

The typical formal employee experienced a real increase of 2.2% – nearly double that of the average take-home pay increase.

The share of employees who receive up to R4,000 per month declined to 13.7% in January 2017 compared to 15.2% in January 2018. This is a 7.8% decline in the number of employees receiving less than R4,000 per month over the last year.

Those earning monthly salaries between R12,000 and R1,000 now stand at 474,000 people, which is more than the 436,900 who earn below R4,000.

While the number of employees taking home between R12,000 and R16,000 only grew by 1.2% , this number is still higher than the number of earners in the low-income category.

A quick review of the salary index shows that the real increase average was 1% more than in 2016, the group said.

Real take-home pay declined in the first two months of the year and then gradually increased. In the last three months of 2017, take-home pay increased by 2.8% on average after inflation.

Source: Business Tech

Even before being elected as South Africa’s new president, Cyril Ramaphosa was a people person, joining some for walks, and then jogging along Sea Point promenade. He is clearly liked, but for how long will that honeymoon last?

Coming after the extended period of uncertainty in South Africa resulting from Jacob Zuma’s reluctance to resign, Cyril Ramaphosa’s first State of the Nation address restored dignity and decorum to Parliament, and pressed all the right buttons.

He was gracious to all (even giving thanks to Zuma for facilitating what the ANC has termed “the transition”), before launching into the delivery of a peroration which proclaimed the breaking of a new dawn. South Africa’s “moment of hope”, which was to be founded on the legacy of Nelson Mandela, had returned.

Ramaphosa combined extensive tribute to the heroes of the ANC’s liberation Struggle with the gospel of social inclusion according to the holy writ of the Freedom Charter. This was time to move beyond the recent period of discord, disunity and disillusionment.

The speech was delivered with panache and confidence. It had style, declaring to the nation and the world that he, Cyril Ramaphosa, was in charge.

But along with the style, there was the solid substance. The overall impression was that Ramaphosa intends to impose a new coherence and efficiency on government. Although acknowledging the calamity of the dismally low rate of economic growth, he was upbeat about the future, about the reviving fortunes of the commodities market, and the upturn in the markets.

Deservedly, Ramaphosa was to be allowed to enjoy the applause, as opposition members rose to their feet alongside the ANC MPs to give him a standing ovation which went far beyond ceremonial ritual. After the disaster of Zuma, it would seem to have given a massive fillip to South African pride and confidence.

It also gave the opposition parties a problem. With Zuma gone and a credible ANC president in place, they are facing an uphill electoral battle.

The new president committed to ensuring ethical behaviour and leadership, and to a refusal to tolerate the plunder of resources by public employees or theft and exploitation by private businesses. Critically, this would entail a transformation in the way that state-owned enterprises such as the power utility Eskom would be run.

There would be a new beginning at state-owned enterprises. They would no longer be allowed to borrow their way out of their financial difficulties. Competent people would be appointed to their boards, and there would be an appropriate distancing of their strategic role from operational management. And board members would be barred from any involvement in procurement.

This would all be part and parcel of a much wider reconfiguration of government, presumably a code for the reduction in the number of departments and a reduction in the size of ministerial ranks.

Ramaphosa also committed to hands-on government, promising he would be visiting each department over the forthcoming year.

The forging of a social compact between government, business and labour would define the new era. A part of it would come from a new presidential economic advisory council. There would be summits for jobs and investment; convening of a youth working group to promote youth enterprise and employment and a summit for the social sector to forge a new consensus with NGOs and civil society.

This would add up to the construction of a “capable state” to foster much needed economic recovery. There would be concerted efforts to promote and aid small and medium business and revive manufacturing. Stress was laid on the importance of arriving at consensus around a mining charter, a document designed to guide transformation in this industry.

Due reference was made to preparing South Africa to embrace the fourth and fifth industrial revolutions and the encouragement of scientific innovation and new technology. And there was an explicit undertaking from Ramaphosa that he would take personal responsibility to ensure social grants be paid. And “no individual person in government” would be allowed to obstruct social grants delivery, a brutal, albeit indirect, put-down of the minister concerned.

The one aspect of the speech which would have raised eyebrows among the Davos crowd was Ramaphosa’s re-iteration of the ANC government’s commitment to the expropriation of land without compensation as part of radical economic transformation. This highlighted the ANC’s proposed change to the constitution adopted at its recent national conference.

But that commitment was also fudged by linking any expropriation to ensuring agricultural production and food security. Cynics may argue that this was simply a form of words. In the context of Ramaphosa’s general investment seeking demeanour, agricultural capital and international business are unlikely to be unduly alarmed. But if they are wise, they will take it as a warning to come to the party of “social transformation”.

Ramaphosa has played a long game since he was passed over for president in the mid-’90s in favour of Thabo Mbeki. After playing a key role in crafting the constitution, he left politics, made a lot of money by spearheading the first round of black economic empowerment, and then returned to politics to play what must at times have been a mortifying role as deputy president under Zuma.

He suffered a great deal of criticism for being complicit in the Zuma-era corruption because of his silence – silence he would have reckoned was necessary to secure his rise to the top.

Clearly, Ramaphosa is not above criticism. He is no saint. He lives in the shadow of the massacre of miners at Marikana. Only towards the end of the ANC leadership race did he let fly against corruption and state capture.

Yet it could so easily have been so different. What would the mood have been now if Nkosazana Dlamini Zuma had won the ANC leadership?

Few would have been convinced that she would have been able or willing to leave the legacy of the corruption of the Zuma years behind. In contrast, although there is extensive acknowledgement that Ramaphosa will meet considerable opposition from within the ANC patronage machine if he is to realise his ambitions, he has indeed provided hope.

Yet the irony is that we need to pay due deference to David Mabuza, premier of the province of Mpumalanga.

If it had not been for his last moment tactic of throwing his provincial delegates’ votes behind Ramaphosa at the ANC conference to thwart a Dlamini Zuma victory at the ANC national conference, South Africa would be having to face a very different future.

In true ANC style, the irony is that the moment of hope was facilitated by someone who has been portrayed, even from within the party, as a political hoodlum.

By Roger Southall for The Conversation, published on IOL

South Africa’s largest retailers

As retailers in South Africa look to support the economy through turbulent times, five of the country’s top retailers feature in global professional services firm Deloitte’s ranking of the 250 biggest retail groups in the world. Pre-scandal Steinhoff is the highest on the list, while Shoprite and Spar also feature.

Few sectors offer reliability at the moment in the South African economy. Although the country is the second richest in Africa behind only Nigeria, and is endowed with economically promising demographic trends, the last few years have represented a slump in economic growth, resulting from a severe dip in global oil prices in 2015.

Most sectors of the economy have been struggling since, including the ever-lucrative mining industry, which has suffered from a plummeting of prices and a spike in costs. However, amid this struggle, one sector that appears to be on the mend is the retail sector, which had its own mini-crisis in 2016, but has since recovered strongly with growth of almost 5% annually.

Now, a report from Big Four accounting and advisory firm Deloitte has revealed the primary drivers of growth in the sector. The report, which ranked the 250 biggest retailers in the world, featured five of South Africa’s major retail groups.

Top five retailers in South Africa

The highest-ranking South African retailer on the list was Steinhoff International at 68th on the global list. The firm was founded by Bruno Steinhoff in 1964 in the town of Stellenbosch in South Africa. Today, Steinhoff International operates in 31 countries, and recorded retail revenues of nearly $13.6 billion in 2016. In 2017, the firm went on an expansion drive, acquiring five firms, including Mattress Firm in the US and Poundland in the UK.

However, since Deloitte conducted its research, the firm has been shrouded in scandal, as sustained irregularities were found in the firm’s accounts for the last few years, forcing the resignation of its CEO and causing an 80% collapse in its shares. Steinhoff’s ranking may, therefore, be affected in retrospect.

The largest retailers in South Africa

The second-highest South African retailer on the list was Shoprite at 94th, with operations stretching across 15 countries, and retail revenues of just over $10 billion in 2016. The firm was founded four decades ago in 1979, and has since grown to employ 144,000 people across its international operations. Alongside the Johannesburg stock exchange, Shoprite also has secondary listings on the Namibian as well as the Zambian stock exchanges.

The SPAR Group of South Africa was next on the list, at 156th, operating across 11 countries and closing fiscal 2016 with just over $6 billion in revenues. The group began operations in 1963, when eight wholesalers were handed exclusive rights to the SPAR brand, which they utilised to supply 500 small retailers. The group now works out of six distribution centres and supplies to more than 1000 SPAR stores across South Africa.

In fourth for the South African list, and 156th in the global ranking is Pick n Pay Stores, with seven countries of operation and revenues of nearly $5.5 billion in 2016. Founded in Cape Town in 1967, the firm now employs approximately 50,000 people worldwide, and stretches across the African continent with operations in Botswana, Mozambique, Zambia, Namibia, and others.

Woolworths of South Africa rounded out the South African presence on the list, with operations in 14 countries and revenues just short of $5 billion. The Cape-Town-based retailer, which was founded as early as 1931, has achieved an impressive compounded annual growth rate of 18.9% since 2011.

Global leaders
Meanwhile, the list of leading retailers across the world had some predictable names on it, with Wal-Mart Stores leading by an enormous margin, followed by another US-based retailer, Costco, in second.

Source: Supermarket & Retailer

If South Africa’s richest man, Johann Rupert, had to run South Africa with his personal wealth, he wouldn’t even be able to keep the government going for a full month.

This is one of the findings of Bloomberg’s latest Robin Hood Index for 2018, which measures how global billionaires could improve the lives of the poor if they gave all their money away.

In the 2018 iteration of the index, the data and media firm questioned how far billionaire wealth could stretch if the world’s richest had to cover the costs of running their home-country government daily.

According to the index, the typical running cost, per day, for South Africa is $333.5 million (approximately R3.98 billion). With an estimated net worth of $8.1 billion (Bloomberg data), Rupert’s wealth would only keep South Africa going for 24 days – hitting around the middle mark of the 49 countries assessed.

Cyprus’ richest man, John Fredriksen ($10.4 billion) could keep his home country running for well over a year (441 days), while China’s top billionaire, Jack Ma ($45.5 billion) could only keep his government running for four days, Bloomberg said.

To calculate government running costs, Bloomberg took total government spending spread over 365 days. It stressed that the index was simply an ‘intellectual exercise’ and not reflective of governments’ priorities or the intricacies of each individual country’s positioning.

South African billionaires

According to Forbes’ real time ranking of billionaires, there are only five dollar-billionaires in South Africa, down from eight billionaires in the official ranking for 2017.

Market movements during 2017 and the start of 2018 – as well at the widely publicised fall of Steinhoff International – saw a three super-rich businessmen lose their billionaire status: retail magnate Christo Wiese, investor Allan Grey, and ‘boere Buffett’ Jannie Mouton have all dropped off the list.

Forbes differs from Bloomberg in that it ranks diamond magnate Nicky Oppenheimer as the richest man in the country, with Johann Rupert ranked second.

Expanding on Bloomberg’s index model, South Africa’s billionaires, combined, could keep the government running for just under 63 days.

This is how long South Africa’s billionaires can keep the government running, individually:

Giving all their money away

If South Africa’s billionaires were to give all their wealth away to the country’s poorest, each person living in poverty would walk away with a once-off payment of about R11,400.

According to Stats SA’s poverty data released in 2017, approximately 40% of the population live below the lower-boundary poverty line – or 21.9 million people.

Using Forbes’ data, total billionaire wealth in South Africa amounts to $20.9 billion – or R249.55 billion . The table below shows how much each billionaire would contribute.

Billionaire wealth data as at 12 February 2018. Currency exchange at 1 USD = 11.94 ZAR

Source: Business Tech

South African salaries: what top executives earn

PwC has released its annual non-executive directors report, detailing the average salaries and increases given to South African executives across every major sector.

The data is based on PwC’s internal resource base and the 343 active companies listed on the Main Board of the JSE.

The total market capitalisation of these companies on the cut-off date was R16.49 trillion. This excludes preference shares, special purpose listings and suspended companies.

Because fees rarely follow a normal distribution curve, the report used a quartile/percentile range in preference to averages and standard deviations that assume normality.

It further broke down the earnings for large, medium and small-cap companies:

  • Large-cap: The top-40 JSE-listed companies, valued by market capitalisation;
  • Medium-cap: 41 to 100 of the JSE-listed companies, valued by market capitalisation; and
  • Small-cap: 101 to 343 of the JSE-listed companies, valued by market capitalisation.

Chairpersons and deputy chairpersons|

The report found that median chairperson fee across the entire JSE was R566,000 in 2017 – a 8.8% increase year on year.

Some listed companies also appoint a deputy chairperson. The purpose of the appointment is to deputise for the chairperson in the event of the absence of the latter from scheduled board meetings or to represent the chairperson due to time or other constraints.

The median salary for a deputy-chairperson was R933,000 in 2017.

This substantial difference in earnings is likely due to the fact that only large and medium-cap companies tend to appoint deputy-chairpersons.

Lead independent directors

Lead independent directors serve as independent directors and may help deal with difficult or underperforming executives as well—a task that has traditionally fallen to the chairperson.

Possibly the most significant contribution is the lead director’s dialogue with the CEO about substantive business matters or governance issues.

Most lead independent directors say they speak with CEOs many times between board meetings. Relations between CEOs and boards can be rocky and lead directors help maintain open communication in the boardroom.

“As companies gain more experience and feel higher levels of comfort with lead directors, their role is likely to continue to evolve. This role has proved to be successful for most, with 65% saying their positions have provided significant benefit for their companies,” the report said.

The median remuneration for lead independent directors was R1,007,000 in 2017.

Non-executive directors

Non-executive company directors saw some of the biggest increases among South African executives in 2017, with the median earning R377,000 (2016: R345,000).

“Although the increase awarded to incumbents is above CPI, when considering the shortage of talent to fill the positions and the responsibility shouldered under current regulations, we believe effective NEDs fulfilling these roles in JSE-listed companies are underpaid,” PwC said.

Remuneration among “super-caps”

This year’s analysis included 343 companies listed on the JSE, excluding preference shares and special purpose listings. It is of interest to note that only five (2016: 6) companies account for 50% of the total market capitalisation and 29 account for 80% (2016: 34).

In examining other large stock exchanges, similar market-cap scenarios appear most notably on the LSE and NYSE.

In categorising the top 10 full-year trading companies by market cap as the ‘super caps’ and perform an analysis of the fees paid to NEDs on their boards, PwC found that their fees are exponentially higher than our analysis of all 343 trading companies.

The median remuneration for chairpersons at these “super-cap” companies was R5,190,000.

The median remuneration for non-executive directors was R2,134,000.

Source: BusinessTech 

Entities involved in South Africa’s national payments system, including BankservAfrica and the Payments Association of South Africa (Pasa), have begun work on a major architectural and technical overhaul of the system to facilitate speedier settlements and to add new features to encourage fintech innovation.

BankservAfrica CEO Chris Hamilton said at a press conference in Johannesburg on Tuesday that the existing payments system was developed in the 1980s, and that a major upgrade is required. This, however, will take time as inputs have to be considered from a wide range of industry role players.

“The basic architecture of the South African payments system was laid down in the 1980s, and it was at one time among the best in the world,” said Hamilton. “But our social priorities have changed; our economy is rapidly digitising and going mobile, so we need to rethink our payments plumbing, including much greater focus on the key issue of our time: how to bring underbanked communities into the mainstream economy.”

Bankserv, which was founded in 1972, is owned by the major banks, with FirstRand Group, Absa, Standard Bank and Nedbank each holding about 23.1% of its equity. The organisation, which is heavily regulated, facilitates interbank settlements on behalf of its 23 members, most of them licensed banks.

In the 2017 financial year, Bankserv processed 452.6m ATM transactions worth R188.2bn. It handled R52.5bn worth of point-of-sale transactions and R290.9bn worth of credit card authorisations. It handled electronic funds transfers of R9.4 trillion.

Hamilton said it is engaging with its partners in the financial services ecosystem to modernise South Africa’s payments infrastructure in a “phased approach”.

“This involves developing a quantifiable view of what modernisation looks like — and the design thereof — and engaging with stakeholders and the related industry in this process to facilitate collaboration.”

He said the less friction that exists in the payments system, the more efficient South Africa’s economy can be. “Having a really good payments system doesn’t necessarily give you a great economy, but you can’t have a great economy without a great payments system.”

Fintech challengers
As more and more fintech players challenge the incumbent banks, however, there’s a need for a new, more efficient system that allows for innovation while at the same time continuing to protect consumers.

Hamilton emphasised that South Africa “has among the best payments infrastructure in the world” but that it can’t afford to stand still.

For one thing, the system hasn’t served the entire economy, and there’s a pressing need to address demands for “financial inclusion”.

“In a way, South Africa has two economies side by side. One of the challenges for the guys in charge of the payments infrastructure … is to start to find ways to bridge that gap,” he said.

The second challenge is that the economy is “changing in fundamental ways”, he added. “The economies of the world’s nations … are on a very broad trajectory of digitisation. This will take financial services in increasingly different ways.”

He said it is imperative that the national payments system doesn’t hinder innovation, particularly around mobile money. “Luckily, we have a number of examples to draw on from around the world on how the payment system should start to change to deal with that challenge.”

He said BankservAfrica has been working to renovate its existing infrastructure “to ensure it’s in the best state it can be”, while at the same time collaborating with the the Payments Association of South Africa (Pasa), the Reserve Bank and industry players to define what a future payments architecture should look like.

Most payments systems today were designed in the 1980s, when the benchmark was cheques, which would clear after three to five days
“These things take a long time because there are a lot of organisations involved. I’m delighted that it has gained some traction and the banks are putting their senior strategic people on it,” Hamilton said.

“We have our own ideas of what that architecture should be, but we don’t get to make those decision by ourselves. The central bank needs to ensure what we are doing in the public interest.”

One of the key elements of a new national payments architecture is ensuring it is speedy, with real-time settlement. “Most payments systems today were designed in the 1980s, when the benchmark was cheques, which would clear after three to five days. These systems are not designed to give you instant value, but rather to give you next-day value.”

Although South African banks have had real-time payment systems for several years, Hamilton admits it “hasn’t taken off as expected”, in part because of cost. This needs to be addressed in the new architecture.

But there are also other features that need to form part of a new payments system. These include “data richness” and “data flexibility”.

Netflix era
“The systems designed in the 1980s tried to minimise the amount of data being moved around. In an era where our kids are streaming Netflix, large volumes of data aren’t an issue any more.”

When significantly more data is added to the payments system, banks and fintech innovators will be able to offer more applications and new ways of supporting the economy, he said.

A new system must offer greater flexibility and adaptability, to allow people to try new things and innovate. “You want to make a system that is open and secure and yet allows innovators to have a go more easily and cheaply.”

BankservAfrica and Pasa last year released a joint research report, which provided insight into the current state of low-value, high-volume payments infrastructures across the globe. The research showed that a modernised payments system is critical.

“We are delighted at the response and engagement from the banks on the research and we are looking forward to the industry design phase starting in 2018,” Hamilton said. Bankserv hopes to be able to start considering technology choices for the new system by later this year.

The research report found that current payments systems are no longer as effective in a digital world. The research identified that South Africa is not alone in its desire to modernise payments, but that this is a global challenge which is being addressed by global players at varying levels.

“Modernisation can only be achieved through industry collaboration, which includes both private and public partnerships, as the success of implementing industry change should be as open, inclusive and transparent as is practical,” said Martin Grunewald, acting chief payments officer at BankservAfrica.

“The approaching digital economy brings the need to future-proof the design of South Africa’s existing national payments system infrastructure to accommodate the demand for efficiency and cost reduction to facilitate economic growth and competitiveness, while serving unbanked communities for financial inclusion.”

By Duncan Mcleod for TechCentral 

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