Lower bonuses, but no mandatory deferrals for SA bankers

City or Wall Street directors who are frustrated with the controversy over banking salaries and bonuses may want to consider a move to South Africa. Not only have SA banks come out of the recession in good shape - largely thanks to tight regulation and conservative lending practices - but SA bankers have escaped much of the censure and kept their perks and rewards.

According to a report on practices and remuneration trends just published by PricewaterhouseCoopers (PwC), last year the total remuneration (base pay, benefits and performance bonuses) paid to executive directors in the financial services sector increased by a healthy 7%, compared to an average 1% increase for FTSE 100 executives in the same period. SA's first recession in 17 years still took its toll, as in 2008 the average increase in banking salaries was a much juicier 23 per cent, but "while 1% is much smaller, it is still an increase", says Gerald Seegers, PwC SA director for human resources and author of the report.

Bonuses in the financial services sector, however, did fall last year to 48% of total remuneration from 65% in 2008.

"Given the difficult market conditions experienced in 2009 we might expect a further fall in performance bonus payments made in 2010 which relate to 2009," says Seegers.

According to experts, moderation will be the rule for the foreseeable future.

The mood of restraint is not just a passing phase, according to Madge Gibson, partner at Jack Hammer Executive Headhunters in Cape Town: "It is unlikely we will return to the bonus highs of 2007/2008 within the next few years."

So far, the SA Reserve Bank has not followed other central banks' example and has not issued regulations or codes of practice about executive remuneration.

Inevitably, South Africa will have to catch up with the rest of the world, predicts Seegers: "As yet we have not seen the global developments such as deferral and risk adjustment impact on the SA market, but this is likely to come through the global desire to ensure a level playing field. The financial sector will be looking in particular at the use of deferred payment mechanisms so that the achievement of long-term strategic targets is rewarded rather than a focus on the short term."