South Africa's financial sector is undergoing a critical examination as it uncovers a pervasive disconnect between compliance and the lived experiences of customers.
Image: File
South Africa’s financial sector has become highly skilled at something that looks like competence but often is not. It has learned how to comply with rules, generate documentation, and satisfy audit requirements and still fail the people those systems are meant to protect. Forms are completed.
Disclosures are issued. Audit trails are clean. On paper, everything works. In practice, customers often experience something very different. When people claim insurance policies, they wait. When families try to access funeral benefits, they are asked for documents they may not have at the worst possible moment.
When borrowers take on credit life cover, they frequently do not understand what is covered, what is excluded, or what will actually happen when they die, lose income, or become ill. This is not a series of isolated service failures. It is a pattern that points to a deeper structural problem in how compliance has been defined, measured, and rewarded.
The industry has optimised for process integrity rather than lived outcomes. A disclosure is treated as effective because it was delivered. A decision is treated as fair because it is legally defensible. A complaint is treated as managed because it has been logged, processed, and closed. In this system, success is defined by whether the institution can prove it acted correctly, not whether the customer experienced fairness.
This is governance theatre. It is the performance of compliance without the delivery of meaningful outcomes. Over time, this theatre has become embedded in how the system operates. Entire ecosystems have grown around it.
Compliance teams expand. Reporting frameworks multiply. Governance committees proliferate. Institutions generate increasingly detailed evidence of oversight. Yet the lived experience of customers changes far less than the paper trail suggests. The system becomes more impressive to itself while remaining frustrating to those it is meant to serve.
Nowhere is this gap more visible than in claims handling. In South Africa, the Ombud for Long-Term Insurance has repeatedly highlighted that a large share of funeral policy complaints relate to delays, documentation gaps, or repudiations linked to technical requirements. Behind those statistics are families trying to bury loved ones while navigating administrative processes designed for certainty rather than urgency.
The process is procedurally correct. It is also emotionally misaligned with the reality it is meant to serve. A similar dynamic appears in credit life insurance. Products are often bundled into loans with limited explanation, only for customers or their families to discover at the point of claim that exclusions, definitions, or procedural conditions limit what they assumed was protection. The documentation exists.
The disclosures were made. Yet understanding was not achieved in any meaningful sense. The system is not broken in a conventional way. It is functioning as designed. The problem is that it is designed around defensibility rather than dignity. This is the paradox at the centre of South Africa’s financial sector. Institutions can comply fully with rules and still produce unfair outcomes. The gap between compliance and fairness is not accidental. It is structural.
The Conduct of Financial Institutions framework, known as COFI, is designed to confront this paradox directly. It signals a shift in regulatory philosophy from procedural compliance to accountability for outcomes. Under the old model, the central question was whether firms followed the correct process.
Under COFI, the central question becomes whether customers experienced fair outcomes in practice.This is not an incremental reform. It is a redefinition of what regulation is trying to measure. Compliance is no longer about proving that something was done. It becomes about demonstrating that what was done worked in the real world.
That shift is simple to state and difficult to execute. Because outcomes cannot be fully engineered through process alone. They emerge from how systems behave under pressure, complexity, and human uncertainty. As COFI approaches implementation, two futures begin to take shape.
The first is an upgraded version of governance theatre. In this version, institutions respond by layering new structures onto old systems. More committees are created. More dashboards are introduced. More metrics are tracked. New reporting frameworks are built to demonstrate that customer outcomes are being monitored and governed.
On the surface, this looks like progress. It is orderly, documented, and responsive. But underneath, the core experience remains largely unchanged. Products are still complex. Language is still technical. Claims processes remain slow and documentation heavy. Customers still struggle at the point where clarity matters most.
When poor outcomes occur, institutions point to oversight structures, governance frameworks, and monitoring systems as evidence that they acted responsibly. Under an outcomes-based regime, that defence weakens.
The existence of governance is no longer the point. The lived outcome becomes the test. Governance theatre, in other words, becomes easier to see through. The second path is more difficult and far more consequential. It involves structural redesign rather than procedural refinement. This path requires institutions to shift their centre of gravity from internal process convenience to external customer reality.
It means designing products that ordinary people can understand without expert interpretation. It means testing comprehension, not just disclosure. It means treating complaints as design intelligence rather than reputational risk. It means means measuring success not by volume of sales or compliance completion, but by whether customers are actually better off after interacting with the system.Most importantly, it requires confronting incentives directly.
As long as revenue is driven primarily by volume and complexity, complexity will persist because it protects margin and reduces transparency. As long as success is measured in short-term performance rather than long-term trust, fairness will remain subordinate to growth. COFI does not resolve these tensions. It exposes them.
And that exposure is the real test. Because regulatory change on paper is easy. Institutional change in practice is not. It requires organisations to accept that some of what currently counts as success will no longer qualify. It requires acknowledging that defensibility is isnot the same as legitimacy.
The transition will not be smooth. Legacy systems will struggle to produce meaningful outcome data. Smaller firms may face disproportionate compliance burdens. Definitions of fairness will be tested in edge cases where rules and reality do not align neatly. But these are not implementation problems in the narrow sense.
They are the substance of reform. The real question COFI introduces is not whether South Africa's financial sector can comply with a new framework. It is whether it is willing to stop confusing procedural excellence with customer protection.
Because once outcomes become the measure, theatre is no longer enough. And once lived experience becomes the standard, the gap between compliance and fairness can no longer be explained away as complexity. It must be closed.
Qwesha is a trade finance consultant with expertise in global commerce and risk management and regularly contributes to a number of publications