Politicians should fear financial crisis. It is certain to upend them. Studies worldwide, from pre-Nazi Germany to post global financial crisis Hungary, show that financial crises tend to enable right-wing populists, who vent their anger at economic elites.

In SA, the financial system is robust, yet many people still feel excluded. Technically, there is a 90% inclusion rate, among the highest in Africa, but many people harbour resentment towards banks. Among them are the 10-million South Africans with impaired credit records (a third of all those who have borrowed), who struggle to access finance.

Almost all mortgages go to those earning more than R15,000 a month. In the first quarter of 2024, for example, only 350 were approved for those earning less, of the 28,754 mortgages issued. According to a study by the University of Cape Town in 2022, 7-million households are not poor enough to receive subsidised housing from the state (and even these face a backlog of 2.4-million houses) but are too poor to access a mortgage.

The political world is conflicted on how to manage it. Government needs a safe, stable financial sector that can finance the budget deficit to the tune of R9bn weekly, but it must also cope with a large part of the population that harbours deep discontent. That discontent needs to be met with appeasing political sentiment, or it may spur a populist backlash.

That background helps make sense of the bizarre tirade against banks unleashed by human settlements (as the housing ministry has been known since 2009) minister Mmamoloko Kubayi last Monday, alleging the industry discriminates against black home loan applicants. Kubayi is no novice in the politics of finance, given that she is head of the ANC’s economic transformation committee, which leads economic policy development for the party, and has previously worked in banks herself.

Human settlements has the responsibility of ensuring access to housing, which includes weighing in on access to finance to acquire homes. In its efforts, it promulgated the Home Loan and Mortgage Disclosure Act in 2000, compelling all home loan providers to give information to the department about home loans made or declined per category of borrower, per geographic area, both the number and amount, and any other information that may be prescribed.

Compliance

Home loans are defined (in summary) as any loan for the purpose of purchasing or improving in any way a person’s home, with a mortgage or any other form of security. This means mortgages as well as loans such as those made by building supplies retailers.

For a brief period of just more than a year in 2015/16, the department published quarterly reports based on the data submitted. These were quite detailed but noted only a 65% compliance rate among registered banks (though those not complying don’t, to my knowledge, provide any home loans). The department noted then it was working on amendments to the legislation to compel better disclosure.

Kubayi’s presentation was odd. It included some data for black borrowers but excluded the same data for white borrowers. While headlines made much of Kubayi’s claims that banks were discriminating against black borrowers, the content of the presentation doesn’t support that.

In fact, the data shows that the acceptance rate for applications by white borrowers was 50%, the same as for black borrowers. It shows, with a bit of calculation, that the number of loans made has been growing far faster for black borrowers than for white borrowers — a compound annual growth rate of 26% versus 10%.

Of the 3-million loans granted in the five years analysed (2018 to 2022 — why those five, which were interrupted by Covid? I don’t know, dear reader), two-thirds were to black borrowers and one-third to whites. That is out of whack with population numbers (7.4% of the population is white), but the respective growth rates indicate that things are changing fast. Far from the claim that banks are discriminating, the data actually suggests that there is rapid growth of black home finance.

Better disclosure

The data is out of whack with data from the National Credit Regulator that shows in the same five years, 850,000 mortgages were issued. The balance could be made up of non-mortgage finance such as home improvement loans, but that implies a much larger number than I would have expected. The department did not give a breakdown of the types of loans in its figures.

The minister, though, declared that amendments to the legislation were required to compel better disclosure. I don’t understand why, given that the act as it is written allows the minister to prescribe in regulation what information she wants and fine banks R100,000 for each disclosure failure.

The minister could also have explained why the last time data was released by her department was in 2016. If this data is meant to empower everyone to understand what is going on in trends in home lending, the disclosure deficit does not appear to be on the part of banks.

The presentation was, however, an opportunity to vent anger on behalf of those who feel excluded from the financial system. That may be politically useful. However, if we really want to do something about the excluded middle and improving access to finance, there are much better conversations to be had.