Financial Sector Development In South Africa, 1970-2002

The importance of financial sector development to overall economic development is well documented in the literature. Financial sector development literature has historically emphasized the connection between a country's financial superstructure and economic development. In this paper we discuss development of the financial sector in South Africa from the early 1970s to 2002, a period that comprises about two decades of the apartheid period and more or less a decade of democracy. We use various indices of financial development to draw some conclusions as to where the country is heading. Pertinent positive findings suggest a move towards the cashless economy, a trend of increasing credit allocation to the private sector as well as the ability of banks to extend mortgage loans, short term savings being better and more effectively mobilized than before, and the deepening of the JSE Securities Exchange. On the negative side, long-term savings which were on the decline have now stabilized; the banking sector has not been quite successful in attracting more savings from the wider population; the entry of new banks and the introduction of financial instruments have not significantly impacted on interest rate spread.