Publication of the FSCA Financial Sector Outlook Study

06 April 2022 Financial Sector Conduct Authority

The FSCA today published the Financial Sector Outlook Study, which reviews the South African financial landscape and describes the financial industries regulated by the Authority.

The study details developments within the different industries and the associated risks and trends observed. In addition to analysing individual industries, the report looks at macroeconomic developments and drivers of change, including the impact of the COVID19 pandemic on the financial sector.

Key highlights in the report include:

• South Africa has made significant progress in expanding access to financial products and services, however, active and regular usage of these remains low.

• Digital adoption has been on the rise, with more customers using banking apps and online banking platforms to perform transactions. The increased adoption of digital platforms has heightened risks related to digital banking fraud. While digitisation can support financial inclusion, financial institutions should be conscious of taking customers along the digital journey, to ensure that certain groups, like the aged or those without access to a smart phone, are not left outside of the financial system.

• On average, the insurance industry has seen positive growth in gross written premiums between 2015 and 2020. Issues of disclosure of changes made to a customer’s policy, and the efficient payment of claims, remain of concern to regulators. This partly relates to the rise in business interruption claims processed in 2020, as a result of the COVID-19 national lockdowns. The FSCA held rigorous engagements with the industry, and many concerns have been resolved. Together with the July unrest experienced in 2021 however, there are ongoing discussions regarding considerations on uninsurable risks.

• With assets in excess of ZAR4,6 trillion, South Africa’s retirement industry has one of the highest assets to GDP ratios in the world. However, coverage remains an issue, given that approximately only 7 to 10 million individuals have retirement savings products, out of an employed labour force of about 15 million. Whilst more must be done, progress has been made towards the repossession of unclaimed benefits in the sector, with the FSCA’s unclaimed benefits search engine helping
over 14,000 individuals receive payments worth approximately ZAR1,2 billion.

• The South African investment and asset management industry serves several million consumers and has seen steady growth in consumer numbers, investment activity and assets under management. While growth of the private equity industry over the last 20 years has been significant, year on year growth has been more volatile. Venture capital investment is still nascent but growing, as demonstrated by the 35% CAGR in the value of new investment deals between 2015 and 2019. This is an increasingly important area of focus for the funding of infrastructure development and the transition toward a more sustainable economy.

The study also gives a brief overview of key cross-cutting areas of focus, such as crypto asset activities and sustainable finance.

It can be read in conjunction with the FSCA’s Regulatory Strategy for the period December 2021 – March 2025, which details how the FSCA plans to respond to many of the key trends and risks identified. The key strategic objectives for the period are to:

• Improve industry practices to achieve fair outcomes for financial customers
• Act against misconduct to support confidence and integrity in the financial sector
• Promote the development of an innovative, inclusive, and sustainable financial system
• Empower households and small businesses to be financially resilient
• Accelerate the transformation of the FSCA into a socially responsible, efficient, and
• responsive organisation

Click here to access The Financial Sector Outlook Study

The FSCA’s Regulatory Strategy is available on

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