Financial Sector

This policy brief by the Institute for Economic Justice (IEJ) argues that the expansion of the South African financial sector, or 'financialisation', has not benefited job creation and may instead hinder the real economy. The document proposes a series of regulatory interventions to shift bank lending toward non-financial corporations, reduce the cost of credit, stabilise volatile capital flows, and discourage the prioritisation of shareholder value over long-term investment to stimulate labour-absorbing economic growth.

• The South African financial sector has expanded significantly over twenty years, with growth in capital stock and Gross Value Added (GVA) exceeding GDP growth rates. However, this expansion is questioned regarding its impact on jobs, as funds are often diverted from real fixed investment into financial products and markets, and highly skilled professionals, such as engineers, are drawn into the financial sector.
• To improve the impact of finance on the real economy, the IEJ proposes shifting bank lending patterns by imposing lending requirements on major banks, supporting cooperative and local banks, capping user fees, and limiting the investment activities of commercial banks. Additionally, it suggests reducing the high interest rate spread in South Africa and lowering lending costs from the Development Bank of Southern Africa (DBSA) and the Industrial Development Corporation (IDC) via government funding.
• The document recommends stabilising financial flows to reduce short-term speculative activity and capital flight. Proposed measures include implementing capital controls such as minimum stay requirements, introducing a 'Tobin tax' on financial transactions, and using unremunerated reserve requirements (URR) on short-term investments. It also suggests lowering interest rates to make government bonds less attractive for carry trades and providing incentives for greenfield Foreign Direct Investment (FDI).
• The IEJ proposes reducing the corporate focus on 'shareholder value maximisation' to redirect funds toward long-term investment. Suggested actions include banning share buybacks, restricting share-based executive pay, increasing wealth and capital gains taxes, and encouraging activist investment from the Public Investment Fund (PIC) and union investment funds.

APA

Institute for Economic Justice (2018). Financial Sector. https://iej.org.za/wp-content/uploads/2020/07/Stream-1-Policy-Brief-3-Financial-Sector.pdf

Chicago

Institute for Economic Justice. Financial Sector. 2018. https://iej.org.za/wp-content/uploads/2020/07/Stream-1-Policy-Brief-3-Financial-Sector.pdf.

Wikipedia

{{cite report |author=Institute for Economic Justice |title=Financial Sector |date=August 2018 |url=https://iej.org.za/wp-content/uploads/2020/07/Stream-1-Policy-Brief-3-Financial-Sector.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{instituteforeconomicjustice2018financial, author = {{Institute for Economic Justice}}, title = {{Financial Sector}}, institution = {Institute for Economic Justice}, year = {2018}, month = aug, url = {https://iej.org.za/wp-content/uploads/2020/07/Stream-1-Policy-Brief-3-Financial-Sector.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }