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Treasury to ‘sharpen and refine’ Financial Services Charter

As banks come under fire for slow transformation.

The National Treasury is turning up the heat on transformation compliance within the financial services industry and hinted that the Financial Services Charter might be reviewed to fast track Black Economic Empowerment (BEE).

At the first day of public hearings in parliament on Tuesday to assess the progress of transformation in the financial services sector, Treasury’s deputy director-general Ismail Momoniat said the objectives and transformation goals stipulated in the charter were not ambitious enough.

The public hearings were jointly held by parliament’s standing committees on finance and trade and industry, chaired by Yunus Carrim. 

Momoniat suggested that the charter should be “sharpened and refined” as it has not been as successful as initially anticipated. “The current BEE regulations do not sufficiently cover things like financial inclusion and access… We need to look at whether the charter encourages sufficient wealth creation, inclusive growth and massive transformation.”

The big four banks have come under fire in recent months for perceived slow transformation as calls for radical economic transformation and the establishment of a black-owned bank to challenge “white monopoly capital” have been heightened.

The charter was implemented in 2004, serving as a voluntary commitment from the financial services sector to transform on five pillars including ownership, employment equity, procurement and enterprise development, empowerment financing and access to financial services. It has since been amended to align to several changes within the BEE codes of good practice and the Broad-Based Black Economic Empowerment (BBBEE) Act. 

Momoniat said that when the charter was implemented, there was “tremendous excitement”, but it fizzled out between 2008 and 2012 with ownership patterns of SA banks coming under scrutiny. “It has been more of a box-ticking approach. Some people didn’t want to take into account the regulatory issues.”

Individual banks including Barclays Africa and FirstRand, the Department of Trade and Industry, the Association for Saving and Investment SA, Banking Association SA (Basa) and the Black Business Counsel (BBC), among others, made submissions to parliament on Tuesday.

Banks were insistent that they are still committed to achieving their racial transformation record.

Barclays Africa group CEO Maria Ramos, said the bank will launch another BEE transaction after divorce proceedings with its parent company Barclays are concluded. The BEE vehicle would represent 1.5% of its issued capital, which would increase its current BEE ownership of 17.36%.

FirstRand’s CEO Johan Burger, told the committee that the group’s black ownership amounts to 36.5% across its subsidiaries FNB, Rand Merchant Bank, Wesbank and Ashburton Investments.

Basa MD Cas Coovadia, said the country’s banking industry has transformed and the narrative of the industry being the least transformed is incorrect. “If you take access to financial services, black SME financing, financing of infrastructure projects and a range of others, I think we have made considerable progress.”

According to Basa’s figures, SA’s banking industry is made up of 37 licensed banks, with total assets of R4.8 trillion and employing 153 846 people. The direct black ownership of banks reached 26.39% in 2015, a decrease from 2014 figures (see below). 

Source: Basa

In the same year, roughly 800 more black senior managers were recorded (see below).

Source: Basa

Coovadia said the banking sector has similar ownership patterns to the JSE, with 49% of SA’s top six banks owned by foreigners, 34% by institutions including the Public Investment Corporation, and the balance by other investor categories including individuals.

He said the industry doesn’t need further regulation from a transformation perspective, as it’s already “heavily regulated across the broad spectrum”. 

“More regulation would be costly, especially for customers. We have to shift the conversation to the right issues, like focusing on why certain parts of the sector are not transformed [such as asset management].”

The second round of public hearings will resume on March 22 with the Reserve Bank, the National Empowerment Fund, Black Insurance Owners Association, Nedbank, the Black Management Forum and others, who are expected to make submissions in parliament.

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Perhaps to comply with BEE strategy we should only allow Foreign Black owned Companies to invest in South Africa and refuse the money from White Colonialist monopolistic individuals and organizations.

I never knew until now that money and investments had racial classifications.

I think the real question should be, what did the banks do to change the concentrated trade and structure of the very narrowly focused economy. Do we have enough competition in SA, if not, is it not a function to stimulate the economy through enhancing the economy?
This would be a true measure to ensure transformation in the economy.

There is merit in what you have said, but at the present moment in time there will be NO true transformation because of the uncertainty of who in government and which organizations and companies have been part of State Capture.

Excellent point. EXcellent.

It would in fact be against all the rules (eg those that led to Guptas getting the heave ho) to transfer a single ZAR to a tranfotmation benficiary without 1st determining their capture credentials.

while treasury is busy with this transformation how about allowing clients a choice of which banking consultant they can confer with.
i am white and find i am increasingly having non white consultants foisted on me to discuss sensitive and relatively high value investment and loan arrangements.
i often find these people on a completely different page of thought to me- it is called freedom of choice. or does that only work the other way round these days ?
surely if the population is 90% plus blacks there should be enough black clients with money( considering the rampant bbeee rollout)
for them to deal with!!!!

Totally agree, it’s about time that the 90% start contributing to this country, after 23 years they still claim and blame the 10%, or maybe it’s a matter of the 10% owns 90% of the brain power, and the 90% just can not accept the fact.

“Transform” wtf does that even mean?

Do it as slowly as possible. Guvmunt has shown what happens with this “transformation”

Are we insane in following this proven highly destructive path?

The constant creep and changes to BEE and charter rules are like a parasite. It is busy killing the host.

Rather spend time on building new things like when Iscor, Sasol and Volkskas were built. Make the cake bigger and solve the growth problem.

To late, 23 years to late. They are broke. This is what happened when “freedom fighters” become politicians and a government, it’s all about the “cause” and the ANC/SACP alliance, and not the country. They only ride the past, praise the struggle, and the “freedom” they orchestrated for them. After that its the blame game for their incompetence.

The other side of the coin is that govment is creating a new bottle neck, forcing incompetent into BEE positions, trying to fill the workforce from the top and than downwards. the problem what BEE has created – all want to be at the top now, their ladder has only one step.

Excluding the after ’94 “free born” white, from the same opportunities as their counter parts, due to BEE, and transformation. After 23 years, just show and prove that their will never be any equality in this country for as long as the term BEE and transformation exist.

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