Johannesburg - South African banks are headed for a crisis if they do not deal with the increase in unsecured lending, the SA Communist Party said on Monday.
"Unless this trend is halted, the banks are headed for a
crisis," SACP spokesperson Malesela Maleka said in a
Maleka was backing comments made on Friday by SACP general secretary and Higher Education Minister Blade Nzimande.
"The South African banking industry is developing
towards a huge crisis, likely to lead to a serious bubble, not
dissimilar to that of the rest of the global banking and financial
sector, unless drastic action is taken to prevent this," Nzimande wrote
in the SACP newsletter Umsebenzi Online.
He attributed this to South African banks changing their lending patterns from 2008 onwards.
"During this period, there has been a huge increase in
the number of unsecured credit transactions, a phenomenon exactly
similar to that which led to the bursting of the housing bubble in the
United States, triggering the current global capitalist crisis."
Unsecured lending refers to debt where the borrower does not have to provide any form of security, such as credit card debt.
Finance Minister Pravin Gordhan told the Foreign
Correspondents' Association in Johannesburg on Monday that there was "no
crisis in the banking system".
He said South Africa's banking sector was one of three
which had withstood the financial crisis. The others were those of India
Gordhan admitted that there had been a change in the
lending patterns of financial institutions. He said it was not clear by
how much unsecured lending had grown, as figures from various
organisations differed widely, but it had significantly increased.
"If it feeds into consumption rather than investment, then that is a worrying sign."
Gordhan said according to some reports, higher income
groups were taking chances with their levels of indebtedness. He said
the government would look a lot more carefully at unregulated
microlenders to see if they were overcharging on credit.
Banking Association SA managing director Cas Coovadia
said on Monday that he was extremely concerned about Nzimande's
"We must emphasise unambiguously that the South African
banking sector is not in crisis and any allusion to a bubble is
irresponsible," Coovadia wrote in The New Age.
He said the South African
banking industry was rated second in the world for its stability.
However, the SACP said it would not be silenced by the
"bullying tactics" of the Banking Association. Maleka said the National
Credit Regulator's consumer credit market report for the third quarter
of 2011 "paints a picture of how reckless lending, as manifested by
amongst others, unsecured credit transactions, is on the rise in the
"These are the figures that the Banking Association pretends to be unaware of," he said.
Maleka said the financial and retail sectors worked together to promote reckless lending.
Nzimande's comments formed part of an attack on Nedbank
chairperson Reuel Khoza who, in Nedbank's annual report last month,
criticised South Africa's leadership.