South African Financial Sector Research Articles

Analyzing Executive Mindsets in the South African Financial Sector: A Longitudinal Study Revealing a Predilection for Conformity Over Innovation

Analyzing Executive Mindsets in the South African Financial Sector: A Longitudinal Study Revealing a Predilection for Conformity Over Innovation

An analysis of legal accountability for artificial intelligence systems in the South African financial sector

While the deployment and use of Artificial Intelligence Systems (AIS) have continued to grow at an exponential rate in the world, and they are generally viewed as positive for economic growth and productivity. However, there is a concern about how to hold AIS legally liable and responsible just as a person. This is said against the backdrop that AIS has become indistinguishable from humans and as such they should be entitled to a status comparable to natural persons in order for them to enjoy legal rights and incur liabilities like juristic and natural persons. Especially in the financial sector where the use is ubiquitous in virtually all aspects of the sector from credit assessment to credit rating, credit and loan facilities, customer services, and decision-making for and on behalf of corporations. The situation in South Africa is precarious because, presently, the AIS has not been granted clear legal status in any South African statutes. It is pertinent to point out that while there is no legislative framework dealing specifically with AIS and related legal issues in the financial sector such as the banking industry, a raft of legislation is in place to regulate potential risks posed by the use of AIS in the sector in South Africa. These include legislation in the areas of financial and banking regulations. The problem is the fragmented way the regulations and legislation have been approached. Notably, the financial sector in South Africa uses AIS for their operations and as such sometimes, AIS commits errors, omissions, etcetera, making them eligible for accountability. But the problem still remains that there is no single legislation in South Africa upon which AIS will be held legally accountable save for fragmented pieces of legislative frameworks which have accountability components, but these are not adequate. It is against the backdrop of this specific accountability vacuum for AIS in the financial sector that this article explores germane provisions of the Constitution of the Republic of South Africa 1996 (Constitution) as well as existing fragmented legislative frameworks and foreign law jurisprudence where AIS accountability is well developed and have the potential to hold AIS responsible for their omissions or commission was explored and useful lessons are drawn accordingly.

A Mixed Methods Exploration of Measurement, Impact and Strategy for Affirmative Action and Socio-economic Justice in the South African Financial Sector

Socioeconomic transformation in post-apartheid South Africa is regulated by affirmative action (AA) and employment equity legislation. This paper aims to report on the empirical exploration of the measurement, impact and strategy for affirmative action and workforce transformation in the South African financial sector. A mixed methods research design underpinned by the pragmatism paradigm and transformational leadership theory was employed. Qualitative interview data using a purposive sampling strategy (n=20) was analysed thematically. Quantitative survey data using random sampling selection (n=100) was factor analysed. These constructs were measured: AA measurement; AA perception; AA transformation; AA business impact; and AA strategic framework. Qualitative findings indicate that AA targets are being measured as per legislation, yet transformation is slow and hindered by barriers. Quantitative findings reveal that the AA strategy is significant and requires management commitment to represent all population groups in all jobs, provide regular communication on AA, transform previously disadvantaged youth and women, and create a diverse workforce that offers socioeconomic justice. The study adds to the body of knowledge on affirmative action, workforce transformation and socioeconomic justice. The 10-step AA strategic management framework emerged as a practical contribution of the study.

Determinants of emerging technologies adoption in the South African financial sector

Purpose: The fourth industrial revolution (4IR) enables firms to leverage various emerging technologies to reduce operating costs, improve business efficiencies and gain competitive advantage. This article uncovers the determinants influencing emerging technology adoption, particularly artificial intelligence (AI), cloud computing and distributed ledger technologies (DLT), in South African (SA) financial services firms.Design/methodology/approach: Seventeen technology experts from the SA banking, insurance, financial technology and financial regulation and compliance sectors were interviewed. A semi-structured interview was used to conduct one-on-one interviews, followed by a focus group interview. Qualitative data were analysed using a thematic network analysis.Findings/results: The results revealed that the determinants – adopter traits, technology usability, industry characteristics, organisational leadership and organisational characteristics – were influential towards technology adoption. It is suggested that the new model could be strengthened further by incorporating a new construct, leadership diversity, which had not been previously proposed in the literature.Practical implications: By understanding the influential adoption determinants, leaders can take bold, calculated risks in adopting AI, cloud computing and DLT. However, the importance, prior to adopting these technologies, of clearly understanding the need for them, and their business benefits is also emphasised.Originality/value: Research on the adoption of AI, cloud computing and DLT in the SA financial sector is limited. This article leverages the models of the diffusion of innovations (DOI), the technology–organisation–environment (TOE) and the technology readiness index (TRI) to propose a new model that illustrates technology adoption in the SA financial sector at individual and firm levels.

High Prevalence of Non-Communicable Diseases Risk Factors in 36,074 South African Financial Sector Employees: A Cross-Sectional Study.

To determine the prevalence of non-communicable disease (NCD) risk factors, total NCD risk category and 10-year risk for cardiovascular diseases (CVD) in financial sector employees. This descriptive observational cross-sectional analysis, data from 36,074 employees was analysed. NCD risk factor data was obtained from health risk assessments that included a questionnaire and clinical measures. The 10-year risk for CVD was calculated using the Framingham non-laboratory based equation. Inadequate fruit and vegetable intake (89.3%), insufficient physical activity (77.4%), and being overweight (66.8%) were the most prevalent risk factors. Women had significantly higher prevalence ratios for central obesity (2.28; P < 0.001), insufficient physical activity (1.21; P < 0.001), hypercholesterolaemia (1.15; P < 0.001), and overweight (1.08; P < 0.001) compared with men. A more concerted effort is required to provide employees with appropriate tools and education at the workplace to decrease and manage NCDs.

Bank stability in South Africa: what matters?

The study examined the determinants of bank stability within the South African banking sector. By controlling for individual bank characteristics and market characteristics, the study determined possible determinants of solvency, a proxy for bank stability, measured by z-score within the South African financial sector. The South African financial sector is highly concentrated but with a significantly large number of banks, the greater portion being foreign owned banks. The business models of some of the financial intermediaries differ from the big four and therefore the influence of the type of business model is of great interest in this study, as it highlights a unique feature of the South African financial sector. The study’s investigation used panel data estimation techniques and found that among the specific bank characteristics, lending activity and capitalization do significantly affect solvency of banks and at sector level concentration was significant. The crisis dummy also revealed that the presence of a financial crisis heightened insolvency. The results have implications for financial institutions and therefore are of interest to regulators, bank management and researchers. Policy prescription in the form of Prompt Corrective Action framework is made to ensure proactive reaction to trends likely to cause instability.

Measuring the systemic risk transfer from the United States to the South African financial sector

ABSTRACTThe sub-prime crisis in 2008 illustrated how systemic risk in the financial sector of one country could spread to the financial sectors in other countries, and subsequently result in a global financial crisis. This direct transfer of systemic risk was made possible by phenomena such as contagion and common shocks. The way in which these elements of interconnectedness can magnify seemingly small levels of systemic risk, and subsequently transfer between financial sectors illustrate the necessity for a more in-depth analysis. This measurement is done using three approaches. A dynamic conditional correlation (DCC) model is used to investigate contagion. To analyse the volatility spillover effect from the US to SA, an exponential generalized autoregressive conditional heteroskedastic (EGARCH) model is employed. Finally, a new contribution is made where a marginal expected shortfall (MES) model is used to set the FTSE/JSE All-Share Index (ALSI) as a hypothetical bank in the financial sector of the S&P 500. All approaches show weak evidence for a direct systemic risk transfer and therefore indicate that any systemic risk transfer is more likely to take an indirect form through changes in capital flows or interest rates.

Measuring the systemic risk in the South African banking sector

Background: In the aftermath of the sub-prime crisis, systemic risk has become a greater priority for regulators, with the National Treasury (2011) stating that regulators should proactively monitor changes in systemic risk.Aim: The aim is to quantify systemic risk as the capital shortfall an institution is likely to experience, conditional to the entire financial sector being undercapitalised.Setting: We measure the systemic risk index (SRISK) of the South African (SA) banking sector between 2001 and 2013.Methods: Systemic risk is measured with the SRISK.Results: Although the results indicated only moderate systemic risk in the SA financial sector over this period, there were significant spikes in the levels of systemic risk during periods of financial turmoil in other countries. Especially the stock market crash in 2002 and the subprime crisis in 2008. Based on our results, the largest contributor to systemic risk during quiet periods was Investec, the bank in our sample which had the lowest market capitalisation. However, during periods of financial turmoil, the contributions of other larger banks increased markedly.Conclusion: The implication of these spikes is that systemic risk levels may also be highly dependent on external economic factors, in addition to internal banking characteristics. The results indicate that the economic fundamentals of SA itself seem to have little effect on the amount of systemic risk present in the financial sector. A more significant relationship seems to exist with the stability of the financial sectors in foreign countries. The implication therefore is that complying with individual banking regulations, such as Basel, and corporate governance regulations promoting ethical behaviour, such as King III, may not be adequate. It is therefore proposed that banks should always have sufficient capital reserves in order to mitigate the effects of a financial crisis in a foreign country. The use of worst-case scenario analyses (such as those in this study) could aid in determining exactly how much capital banks could need in order to be considered sufficiently capitalised during a financial crisis, and therefore safe from systemic risk.

The innovating firm as corporate entrepreneurship

PurposeInnovation is a multi-dimensional phenomenon and at the firm level incorporates the behaviors and interactions of individuals and various organizational factors. Not only are entrepreneurship and innovation complementary, but a combination of the two is vital to organizational success. The purpose of this paper is to respond directly to research calls to provide an integrated model of corporate entrepreneurship (CE) which encompasses both organizational- and individual-level factors.Design/methodology/approachA model was formulated in accordance with the study hypotheses and statistically tested. A sample of 784 responses from the South African financial sector was surveyed. Structural equation modeling (SEM) was used to test for model fit.FindingsThe results support the hypotheses that it is through the interaction of the firm (in establishing corporate building blocks), and the individual (through entrepreneurial alertness and metacognitions) that CE activity is realized. SEM results showed that entrepreneurial alertness had the greatest direct path impact on CE.Practical implicationsManagers need to understand and leverage corporate building blocks in a manner that influences employee’s respective levels of entrepreneurial alertness and metacognitions in order to foster CE.Originality/valueThe study is one of the first to model and empirically test causal links between corporate building blocks, entrepreneurial alertness, metacognitions, and CE at the firm level. Moreover, the study takes place in an under-researched African context, allowing for fresh insights to evolve.

The extent of benchmarking in the South African financial sector

Benchmarking is the process of identifying, understanding and adapting outstanding practices from within the organisation or from other businesses, to help improve performance. The importance of benchmarking as an enabler of business excellence has necessitated an in-depth investigation into the current state of benchmarking in South Africa. This research project highlights the fact that respondents realise the importance of benchmarking, but that various problems hinder the effective implementation of benchmarking. Based on the research findings, recommendations for achieving success are suggested.

Assessing the strategic alliance between Industrial and Commercial Bank of China and Standard Bank

Many financial experts, scholars and politicians around the world took notice in 2007, when the Industrial and Commercial Bank of China (ICBC), the world largest bank by market capitalization, announced that it would invest US$5.6 billion to acquire a 20% stake in the South African Standard Bank (SBSA). After all, SBSA is Africa‟s top bank by assets with a continent-wide footprint. At the same time, the announcement of the deal set off an avalanche of assumptions that this deal “fits nicely” into China‟s “go global” strategy and was therefore mainly initiated by the Chinese government. Moreover, it was assumed that the alliance underpins a new shift of China‟s engagement from a resource-seeking strategy to a more knowledge-seeking and strategic-asset-seeking strategy in Africa, and that more Chinese banks would follow ICBC‟s example, thereby considerably impacting Sino-African relationships in the long run. Four years after the announcement of the deal, this study intends to evaluate these before-mentioned assumptions. Therefore, it investigates the general reasons and motivations for Chinese banks to enter to the South African banking sector. Within this context, the strategic alliance between ICBC and SBSA is used as a case study, which is studied against the above mentioned broader context to gain a better understanding for the Chinese engagement in the South African banking sector and its importance for the Sino–African relationship in the long run. The research is based on the analysis of public documents, reports and theoretical papers as well as valuable insights from 13 interviews, which were conducted during August and September 2011 in Cape Town, Johannesburg and Pretoria with key representatives from the South African and Chinese banking industry, the South African financial sector regulatory body, the South African government, scholars, financial experts as well as the private sector.2 The interviews were mainly conducted as semistructured, mostly (11 out of 13) face-to-face interviews and some (2 out of 13) via telephone.

Espoused organisational values in relation to lived values experiences in the South African financial sector

The present study explored the alignment between espoused (formally stated) organisational values and organisational members’ actual experiences of the lived behavioural values. The research was conducted within four companies (n = 249) in the South African financial sector. Formal documentation on the companies’ espoused values statements, semi-structured interviews and team sessions with organisational members representing all hierarchical levels in each company were used to collect data. Teamwork, customer and shareholder partnership, integrity, performance excellence and innovation, and respect appear to be important core espoused values for the four companies. The lived values experiences emphasised consensual-oriented behavioural values relating to teamwork, integrity, and collaboration as important aspects of the experienced organisational identity in each of the four companies. Clear alignment between the espoused entrepreneurial-oriented values (for example, performance excellence and innovation) and the lived values in each of the four companies was not revealed. Organisational leaders and practitioners should strive to introduce interventions that could help to achieve closer alignment between the espoused and lived organisational values to create authentic signature experiences of the organisational identity. The findings contribute new insights that may be considered in retaining key talent in the financial sector.

Burnout and Work Engagement for Different Age Groups: Examining Group-Level Differences and Predictors

This study examined age-related differences of burnout and engagement levels among employees in the South African financial sector, including influences of perceived job characteristics and personal sense of coherence. Data on burnout and work engagement, job characteristics and sense of coherence were collected from a convenience sample of 582 of junior managers (females = 55.50%, majority language was English, 54.1%). The results from this study reveal that young and middle-aged employees experience higher levels of exhaustion when compared to older employees, while older employees seemed to be more dedicated than their younger counterparts. Different job demands and resources seemed to predict burnout and work engagement of the three age groups. SOC was a significant predictor of burnout and work engagement across the three age groups. To conclude, the results of this study highlight the differences in the antecedents of employee well-being. These differences can therefore not be ignored in the workplace.

A longitudinal analysis of the corporate strategic stance and actions employed by South African banks in response to the global economic crisis

The South African financial sector largely proved resilient to the consequences of the global financial crisis and did not experience the financial upheaval seen in advanced economies. This paper investigated and compared the strategic stance and actions employed by eight South African banks listed on the Johannesburg Securities Exchange in response to the global crisis. The research was conducted through content analysis of the annual reports of these banks for the periods 2006 through 2011. Findings illustrated that, although structural and industry drivers played a key role in ensuring the relatively unscathed survival of SA banks, banks generally had a clear corporate strategic direction that remained relatively stable during the financial crisis. It was found that the industry was balanced in terms of the strategic positioning of banks. Of the eight banks, four were classified as strong niche players that were categorised as “defenders”. The big four banks were classified into two groups. ABSA and Nedbank were categorised as “analysers”, since they are generally cautious and conservative in their growth and expansion strategies. FirstRand and Standard Bank were classified as prospectors, since they tend to be more open to new opportunities. Key words: Financial sector, strategic stance, defenders, analysers, prospectors.

Job Retention Factors, Perceived Career Mobility and Organisational Commitment in the South African Financial Sector

This study explores job retention factors, perceived career mobility and organisational commitment among early career employees. Participants were professional auditors, accountants and financial staff (N = 82) in the finance industry in South Africa (57% = females, 70% White, age range between 17 and 29 years). They completed a career mobility survey and an organisational commitment measure. Data were analysed to identify key retention factors and relate employee demographics to their perceptions of career mobility and organizational commitment. The results suggest that older employees perceived the cost of leaving to influence their career mobility and organisational commitment. Younger Black employees regarded career advancement important for their career mobility and organisational commitment. Talent retention strategies for professional staff members in the financial sector should take into account their need for intra-organisational career mobility, work-life balance, knowledge and skills utilisation and competitive compensation.

South Africa's financial sector ten years on: performance since democracy

The South African financial sector, defined as the banking, insurance and securities industries, has contributed to the growth of the economy since democracy in terms of growth in assets and value added, although its provision of financial services to the poor has been less impressive. The article takes a broad approach to evaluating the performance of the sector in terms of the balance between stability and innovation, and the balance between efficiency and allocation of resources. While the financial system has proved to be stable, innovation has generally been for the high‐value, contested market. In terms of cost efficiencies and provision of services to small businesses and poorer consumers, there is room for improvement. The performance of the sector is linked to the regulatory regime, and the extent to which the sector will be able to improve its allocative performance will be influenced by mooted regulatory changes.

Benchmarking as an enabler of business excellence in the South African financial sector

Benchmarking is the process of identifying, understanding, and adapting outstanding practices from within the organization or from other businesses to help improve performance. The importance of benchmarking as an enabler of business excellence has necessitated an in‐depth investigation into the current state of benchmarking in South Africa. This research project highlighted the fact that the respondents realized the importance of benchmarking, but that various problems exist regarding the effective implementation of benchmarking. Based on the research findings, recommendations for achieving success are suggested.

Change and development in short-term insurance in South Africa 1950–1985

Abstract The South African economy in the three decades from the end of the Second World War through to the mid-1970s experienced a period of unprecedented growth. This growth not only saw the South African economy expand in absolute terms, but it also saw the effective transformation of the economy. From being almost entirely dependent on the production of primary products at the outbreak of the Second World War, the South African economy by the mid-1970s had come to possess a very substantial industrial sector. While this process of industrialisation was the most notable feature of the post war economy, a parallel process of development occurred within the financial sector. Up until the Second World War the South African financial sector had been characterised by a very low level of development. This was reflected both in the lack of specialisation within this sector and in the overwhelming dominance of foreign institutions. From the late-1940s this began to change with growing specialisation and the ra...