The recent Financial Sector Assessment Programme (FSAP) undertaken by global finance body the International Monetary Fund (IMF) highlighted that the financial system faces risks from outside of it, and that these need attention, says business organisation Business Leadership South Africa (BLSA) CEO Busi Mavuso.

"What made last week’s meeting with the IMF so important is the wider engagement with the real economy. The financial system is not important for its own sake, what matters is how it works in conjunction with the rest of the business world, as well as all South Africans.

"Risks can arise not only from economic shocks and problems with the plumbing of the system itself, but from how companies manage their assets and liabilities into the financial system. That is an important conversation and I thought it was particularly appropriate that BLSA could work with the IMF to share insights with the wider business community," she notes.

BLSA hosted the team responsible for the FASP – a voluntary process that countries can go through in which the IMF undertakes a detailed assessment of a country’s financial systems.

This was the third done on South Africa in the last 20 years and it provides an important external judgment, Mavuso says.

Over the past few years, it is remarkable how well South Africa's financial system has coped with the ravages of Covid-19, natural disasters like the floods in KwaZulu-Natal and the “many economic slings and arrows endured”. The resilience of the sector does not happen by accident, Mavuso emphasises.

The sector and its regulators focus extensively on ensuring the appropriate regulation and infrastructure is in place to support the system. The systems that ensure banks and other key institutions work effectively, from how they lend money to each other to the role the South African Reserve Bank plays to ensure liquidity and manage through crises, is a remarkable achievement.

"It is constantly developing as we learn from each experience,” she adds.

"The Covid-19 crisis was completely unexpected. No one modelled a scenario in which the entire economy would shut for an extended period, yet the toolbox that was assembled following the Global Financial Crisis provided a critical set of capabilities for regulators to intervene and manage the Covid-19 disaster.

"Capital buffers and liquidity windows that were developed after the lessons of that crisis a decade earlier were very important in the beginning of this crisis," Mavuso illustrates.

"The industry and its regulators are working on improving various details of it. Overall, though, the financial system passed the Covid-19 test with flying colours. The IMF team praised the quality of regulation of the system, though it made several recommendations on areas that could be improved.

"We cannot take our financial sector for granted. The linkages with the wider economy need to be understood and factored into how the system manages risk. The external assessment by the IMF team of the quality of our financial system supports wider confidence in our economy. Business stands ready to play a key part in developing it further," she avers.