It’s unimaginable that, while many of us are still trying to crack half the secrets of the little computers we carry around in our pockets that have fundamentally redefined our lives, they are already yesterday’s news!
Anyone eavesdropping in on Davos – which we can now easily do thanks to our smartphones – would have heard talk of exponential advancement in technologies that are reshaping our global economic and financial landscape and impacting us all on both a societal and individual level.
As a country, we are grappling with the right strategy that will prepare us for this new world order, a master plan that must factor in global and local concerns like climate change, rapid population growth and increased urbanisation. And as always, our success will depend on our capacity to implement our strategic plans.
Nowhere are these considerations more urgent than in our financial sector which underpins and binds the economy together. Shored up by a sound regulatory and legal framework, South Africa’s financial services sector punches above its weight globally and shelters a gallery of domestic and international institutions that provide a rich repository of personal, commercial, banking, insurance and investment services that reach well beyond South Africa’s borders.
What’s more, it is an increasingly competitive sector with many institutions demonstrating an ability to adapt to newer technologies to capitalise on new opportunities and changing markets.
It hardly needs to be pointed out that this adaptation is going to be crucial. At a recent Masterclass in Digital Transformation, hosted by the Centre for Disruptive Technologies in partnership with the University of Cape Town Graduate School of Business (UCT GSB), being digitally prepared was highlighted as the number one challenge by senior leaders in the sector. In addition, they highlighted the importance of taking cognisance of key pieces of legislation as they develop their digital transformation strategies.
Notable among these is Principle 12 of the King IV Report on Corporate Governance, which pertains to the responsible governance of information and technology within an organisation. Whilst adherence to King IV is voluntary, failure to act on some of the recommendations increases the risk of directors violating their fiduciary responsibilities.
There is the pending Cybercrime Bill, that builds on Chapter XIII of the Electronic Communications and Transactions Act, 2002. This Bill includes the codification and imposition of penalties on cybercrimes, and demands more vigilance on the part of organisations in how they protect those whose data they hold from cybercrimes.
Allied to the Cybercrime Bill is the Protection of Personal Information Act, 2013 (or POPI), which looks at the safeguarding of personal information held by public and private bodies. And finally there’s the Financial Sector Regulation Act 9 of 2017, which has since April 2018, been incrementally rolled out and introduces to South Africa what’s known as the Twin Peaks model, so called because of the two peak regulatory authorities it creates; one to enforce prudential regulations that would avert a potential financial crisis, and the other to deter misconduct on the part of companies and to protect consumers of financial products and services.
Navigating this legislative labyrinth will require, perhaps above all else, particular leadership characteristics, which are inextricably linked to an organisation’s internal capabilities and readiness to implement digital transformation programmes. Leaders in the sector must take steps to equip themselves with the skills to understand the landscape (legal and otherwise) and plot a path through it, certainly, but also to be able to take others with them on the journey.
One of the most substantial and systemic stumbling blocks is a company’s ability to communicate its digital transformation strategy, and then to successfully conceptualise, design, implement and evaluate this strategy. All too often, we find that no one outside of the C-suite knows or understands the company’s strategy, which bodes ill not just for that company, but also for clients and the ecosystem in which that company operates.
Beyond the private sector, it is equally important that the financial service regulators keep ahead of – or at least abreast of – the digital transformation of the sector, including the assortment of new products that fintech companies are developing to cater to the ever-evolving needs of clients.
How ready are we?
This is all easier said than done. There is some concern as to how ready we as a country are for the changing technological landscape. This country readiness, in turn, directly determines whether the regulatory environment enhances or impedes progress. Having a good macro strategy is meaningless if private sector companies are not on board. Change must start with leadership stepping up to equip themselves with the right tools, while organisations, too, must commit themselves to investing in skills and capabilities.
Neither our business leaders nor our workforce were prepared for the technological advancements of the past two decades, but this must not be a harbinger of how business leaders will respond in the future, or too many South Africans will continue to find themselves on the wrong side of the digital divide. It would be disastrous if we fell even further behind the rest of the world, and let go to waste a wealth of opportunities to substantially change our country for the better.
Sharron McPherson is Adjunct Senior Lecturer at the University of Cape Town Graduate School of Business. A former Wall Street investment banker/attorney, she is also the co-founder and a Director of the Centre for Disruptive Technologies.