Financial sector urged to move faster on transformation issues

The financial sector is a critical component of the country’s economy and a key driver of all other sectors. For the country to move forward and achieve its goals, meaningful transformation in the financial sector is vital.

These views were shared by sector leaders who recently joined Andile Khumalo, co-founder of Sanlam Gauge, in an online workshop to discuss transformation challenges and solutions within the sector.

The workshop was the fifth and last sector conversation after the release of Sanlam Gauge in May, a report that measures the level of BBBEE activity across sectors.

Kicking off the event, Khumalo congratulated Santam for the appointment of Tavaziva “Tava” Madzinga as its incoming CEO, a move that was embraced in the true spirit of transformation in the sector.

Sanlam Gauge measured over 350 companies in the financial sector and placed it at a level one. Giving an overview of the results, the MD of ratings agency Empowerdex, Lerato Ratsoma, warned against complacency and encouraged industry leaders to look at ways to improve transformation that would lead to broader economic inclusion. She also raised the mismatch between skills development and management control as an ongoing concern. 

The finance sector achieved 21.2 out of 25.0 points for black equity ownership, 11.9 out of 20.0 for management control, 15.2 out of 20.0 for skills development, 30.6 out of 35.0 for enterprise and supplier development, and overachieved for socioeconomic development, scoring 6.1 out of 5.0.

Pumla Ncapayi, CEO of the Financial Sector Transformation Council (FSTC), touched on skills development as a concern, and linked its contribution towards an improved performance by the sector on management control.

“The biggest challenge for the FSTC is the design of the code, which tends to incentivise frivolous transformation with substantive points on money spent vs core transformation on elements like ownership, management control and procurement. It is time for us to move to addressing measurement towards qualitative vs quantitative to ensure that the desired impact is achieved in terms of financial inclusion as well as the transformation of the sector,” said Ncapayi.

“Given the size of the sector, it has the ability, the resources and drive to step more rapidly into a forward-looking paradigm to ensure the win-win approach to implement core transformational and sustainable strategies that will address the current challenges of the country.”

Cas Coovadia, CEO of Business Unity SA, said some financial institutions continued to view reporting as a burden and transformation as a grudge action. He said it was pivotal to turn the debate around so that transformation was seen as a critical element for the growth, success and sustainability of the sector.

“Too often we talk about transformation as either an add-on or something that might not be complementary to growth and that is incorrect. The bottom line is that if the financial sector does not create the space to be truly transformed then in the long run it is impacting on its own sustainability,” he said.

“If it does not play a transformative role in the economy and contribute to economic growth, which we won't be able to sustain if the majority of the people in our country don’t have a stake in that growth, then we are essentially undercutting our own business prospect in the long term.”

Coovadia also implored the FSTC to lead strategic discussions to define what a transformed financial sector should look like in 10 years' time and what needed to be done to achieve that.

Association of Black Securities and Investment Professionals (Absip) president Polo Leteka said the lived experience of South Africans contradicted the results of the level of transformation based on the BBBEE scorecards in the sector.

She said Absip had gone back to the drawing board to ask what the BBBEE policy, which was intended to achieve the inclusivity of the previously marginalised, had achieved and what exactly the sector was doing to transform the economy beyond the scorecard.

“There's a big difference between diversity and inclusion. The financial services sector is more diverse today than it was when the code was first gazetted. The challenge is that we are still not inclusive of the broader population.”

Sanlam CEO Paul Hanratty said it was time for the sector to use technology to create better financial inclusion and also invest in skills across the sectors.

“Today we also see technology playing a massive role in transforming economies and economic activity and we need to start thinking about the intersection between finance and technology and what that can do for us.

“We need to think about how we are going to create a much better financial inclusion in the economy because it is absolutely vital to bring as many people into financial services as we possibly can,” said Hanratty.

He urged the private sector not to wait for the government but to be innovative and invest in sectors that can bring about quick economic activity, as well as in new areas such as clean energy and infrastructure that promise to create a lot of value at scale, and much-needed jobs. 

Closing the workshop, Sanlam board chairperson Ellias Masilela said to bring about meaningful change, collaboration needs to be at the heart of all interventions with everyone working together towards a common vision.

“We should not shy away from working together simply because we feel we are competitors. We can rise above competition to be able to deliver what the country and the economy wants and keep business ticking.”

Participants agreed that the sector had to move beyond the sector codes and adopt an inclusive approach to transformation, focusing on impact over and above the scorecards.

This article was paid for by Sanlam.