Finance: The Hassles of South African Banking

When someone (potential partner, consulting service, trade group. etc.) examines the performance of a small business, one of their most important questions will be whether or not the business in question has sound, predictable finances that can be easily tracked and audited. Legions of small business fail at this point in the questionnaire. Maybe they use their family bank accounts for their business, or they do not keep adequate financial records, or maybe they deal only in cash. For larger companies that have already mastered the basics, the problem might be cash-flow, or bad credit, or a lack of access to more sophisticated financial tools.

The following story sent in by a SAIBL Business Forum participant illustrates why many small businesses are hesitant to take advantage of banking services.

Are your funds safe in the bank account? (Submitted by a SAIBL Business Forum Participant)

When you deposit your money in the bank, the following is what I understand happens:
1. The money belongs to you, and the bank is only a custodian.
2. The bank can only release funds from the given account if you give it an instruction to do so, written or otherwise.
3. No-one should, or can access funds from that account without your consent.

My experience has however shown me that this understanding is not exactly the way it works in the South African banking sector. Over the past four months, my account has been debited by more than two thousand rands. I have never given my account details to anyone or authorized any debit orders on my account. The first time I saw such a debit, with a similar reference, I assumed that it was one of the bank charges. The amount was less than a hundred rand, so I did not bother to call the bank. The latest transactions were seven debit orders. I phoned the bank and their response was “we have no control over debit orders” I took this to mean that if any one instructs the bank to debit an account, the bank will do so without authorization from the account holder.

This is a scary thought if you think about it. I thought the bank is supposed be a custodian of my money, and must act under my mandate. I thought no one can access my account without my consent, written or otherwise. So what does the bank mean by “they do not have control over debit orders?” Yet I believed that that the safest place anyone’s money can be in is with the bank. The way I see it now is that anyone who knows my account number can sign it up for anything even without my consent.

As a solution to the matter, the bank gave me the contact details for the company debiting my account. They advised me to contact these people and ask them to explain what is happening, and stop the debits. I am being asked to sort out the mess I have not created in the first place. They also gave me forms to fill in, so they can reverse the debits. But my concern is how do the funds leave my account without my consent in the first place? What if I had not checked my statement, which may be the case with many people? This got me thinking, do we have a financial sector that does what they stand for?

Are account holders’ funds protected at all? Has this happened to anyone out there? And is this the way it is suppose to be, or am I missing something?