Financial Sector Reforms Gain Momentum in South Africa
A comprehensive review of South Africa’s financial sector has been conducted, highlighting areas that require strengthening and proposing reforms to improve the country’s regulatory framework.
Regulatory Framework Assessment
The International Monetary Fund (IMF) and World Bank-led Financial Sector Assessment Programme reviewed the country’s financial sector, finding that the regulatory framework is operating effectively under the supervision of the Prudential Authority and Financial Sector Conduct Authority. However, it also identified areas that require updating, including:
- Regulations on corporate governance
- Related entities
- Large exposures
Ongoing Reforms
The National Treasury has been working on various reforms to enhance competitiveness and dynamism in financial markets. These include:
- A discussion paper, “Building Competitive Financial Markets for Innovation and Growth,” published in February 2020, which aims to adjust the Financial Markets Act (2012) in line with international standards.
- A draft bill will be published this year to implement these reforms.
Strengthening Financial Institutions
The National Treasury has been reviewing comments received on the Conduct of Financial Institutions Bill, which aims to strengthen financial institutions’ governance and risk management practices. A revised draft of the bill will be tabled in Parliament this year.
Retirement Fund Reforms
Retirement fund reform is also underway, with government considering allowing individuals to access their retirement savings as an interim relief measure during the COVID-19 pandemic. The National Treasury has published explanatory notes on the issue and continues to engage with trade unions, regulators, and other stakeholders to discuss how to allow limited pre-retirement withdrawals.
Annuitisation for Provident Funds
Another development in the financial sector is the introduction of annuitisation for provident funds, which takes effect from March 1, 2021. The National Treasury has also published draft amendments to Regulation 28 of the Pension Funds Act (1956), aimed at making it easier for retirement funds to increase investment in infrastructure.
Financial Sector Levies Bill
A Financial Sector Levies Bill will be submitted to Parliament this year, providing for levies enabling financial sector regulatory bodies to carry out their duties.
Conclusion
These reforms aim to improve the stability and resilience of South Africa’s financial system, enhance investor confidence, and promote economic growth.