Gazetting of financial sector code will drive transformation, says Coovadia
The code makes provision for R122bn to be spent by the sector on empowerment financing over five years
The gazetting of the financial sector code last Friday would unlock energies and further drive transformation, Banking Association SA MD Cas Coovadia said on Monday.
The code, agreed on within the Financial Sector Charter Council, was submitted to Trade and Industry Minister Rob Davies earlier this year.
Revisions to the code were necessary to align it with broad-based black economic empowerment (B-BBEE) regulations. Having now been gazetted the code will be legally binding on players in the sector.
Davies said on Monday that the newly gazetted code would have to be reviewed again to take into account the recommendations of the report on transformation of the financial sector, which was compiled by Parliament’s finance and trade and industry committees after their public hearings on the issue. There were also other considerations which needed to be taken into account in the review, the minister said.
However, Coovadia clarified that this review would not have to be immediate. "We will relook the code in a year’s time, depending on what comes out of the parliamentary process."
The code makes provision for a total of R122bn to be spent by the sector on empowerment financing over five years.
"The aim for empowerment financing is to ensure support for black-owned entities [including black industrialists], black agriculture funding necessary to assist with the land reform process, transformational infrastructure financing and low-cost housing funding," Davies said. A total of R75bn will be used for these targeted investments.
Another R47bn will be reserved for the B-BBEE transaction financing, for the black business growth fund which will invest directly in black-owned businesses and for funding small-and medium-sized enterprises. Provision has been made in the code for R25bn to cover shortfalls in the value that should have been created through black economic empowerment transactions.
The revised code allows financial services firms to use empowerment financing deals as an equity equivalent in lieu of ownership. The code also has an element to promote access to financial services which is aimed to ensure that marginalised people (those in LSM 1-5) have access to transaction, sales and service points.
"Access to financial services includes aspects such as inclusive banking, access to affordable and understandable long-term insurance risk cover, and access to affordable and understandable short-term insurance risk cover," Davies said.