Christine Lagarde was in South Africa at the weekend for her first visit since taking the helm at the International Monetary Fund. She is not usually lavish with her praise, but she did laud South Africa’s economic performance, describing it as ‘impressive’. The strength and soundness of the financial sector, she said, had mitigated the negative effects of the economic slowdown and more recently the eurozone crisis.
She added that the government’s focus on unemployment is the correct policy. Since the 2009 recession the country has lost 1.56m permanent jobs and the unemployment rate is a whopping 25%, but there are signs of hope.
In December over 100,000 new jobs were created: a growth of 6.5%, the fastest rate in nine months, according to the Adcorp Employment Index released this week. The financial services sector grew by 9%, showing “significant job growth”. In the last quarter 53,000 jobs were created in finance, insurance and related businesses – a massive 90% of the total of the total in the formal, non-agricultural sector - bringing total employment in the sector to 1.63m.
The positive trend will continue this year, according to Loane Sharp, labour market analyst at human capital management group Adcorp: “Banking employment will continue to grow. There is strong growth in the unrecorded economy and it’s their banking needs that are being tapped into. The story is about banking the unbanked.”
Retail banking is set to be a growth area in 2012, as the country’s ‘big four’ banks this year will target the 9m South Africans without bank accounts. First National Bank, FirstRand’s retail arm, has just hired over 800 people to open dozens of news EasyPlan branches in rural and remote locations. Nedbank has been adding new branches across the country, increasing its headcount by 4.7% to over 28,000. All banks, including Absa and Standard Bank, are launching low-income products and focusing on mobile technology to extend their reach.
“The first world standard banking sector remains a strength and its balance sheets relatively healthy”, says Tim Ash, head of emerging markets research at RBS. The positive mood was boosted by Moody’s, which last month said South Africa’s banking sector’s performance will remain stable in the next 18 months, in line with the stand-alone financial strength ratings for rated SA banks. Moody’s believes banks’ profitability will be sustained despite subdued credit growth. With luck, it will be proved right.