South Africa is experiencing a proliferation of illegal financial institutions, which have attracted the attention of authorities.
The South African Reserve Bank’s (SARB) prudential authority’s recent annual report shows that the number of illegal banks and insurance companies the authority is investigating has shot up to 287 from 79 in the 2021/2022 financial year.
The authority explained in the report that the number of illegal deposit-taking schemes under investigation, including get-rich-quick schemes, increased to 39 in the 2024/2025 financial year from nine in 2021/2022.
It also revealed that the number of unlicensed insurance businesses investigated in the 2023/2024 financial year ballooned to 248 from 70 in 2021/2022.
These illegal financial service providers have come at a great cost for the South African Reserve Bank Group, as they are partly responsible for the 51% increase in expenditure on consultants from R287-million in 2021 to the current R431-million.
Reserve Bank head of communications Thoraya Pandy told Sunday World, “The increase is mainly due to costs associated [with] an increase in investigations related to foreign exchange control violations, as well as an increase in the number of investigations on illegal deposit-taking schemes, as well as enhanced regulatory activities.”
The authority also noted that the penalties for non-compliance raised from persons within the regulated sector have risen to R20-million from R1-million in 2024.
The SARB also unpacked reasons that saw its computer software costs shoot up to R698-million in 2025 from R46-million in 2023.
“The SARB has also increased investments in IT systems to support new initiatives such as the Corporation for Deposit Insurance (Codi), as well as increased investment in cybersecurity to address rising cyber threats,” Pandy said.
Codi, which recently reported on its first full year of operations, was established to help protect vulnerable bank depositors and bolster confidence in the financial system.
She said some of the companies that were awarded computer software contracts include Microsoft, IBM, Oracle, and OpenText.
