Financial sector transformation body will not back BEE targets for assets
CEO Leon Campher warns that prescribed assets will trigger flight of foreign investments of about R3-trillion
The governing body tasked with negotiating new empowerment targets for the financial services sector says it will not support any legislation prescribing that a bigger share of the country’s assets must be managed by black companies.
"It’s not guaranteed that prescription will achieve anything. Under the apartheid government, prescribed assets messed up the market completely. It’s not the way to go if you want to stimulate economic growth," said Leon Campher, CEO of the Association for Savings and Investment SA (Asisa), one of the members of the Financial Sector Transformation Council (FSTC), previously the Financial Sector Charter Council.
By legislating prescribed assets, the government can dictate where and how pension funds should invest.
"SA is sitting with a huge trade account deficit. If we do something like prescribed assets, we will have flight of foreign investments of about R3-trillion. It’s not a solution," Campher said.
But he said Asisa members had resolved to give more black asset managers access to the market through their collective investment schemes platforms and their life insurance licences. "We want them to succeed."
The renaming of the council comes after its mandate was expanded to promote transformation and direct more investment towards black-owned businesses and infrastructure.
In addition to industry bodies, some government departments, labour unions and Absip, the representative body for black professionals, will become part of the council.
The expansion of the FSTC’s mandate comes at a time when SA’s financial sector is facing intense scrutiny for not offering meaningful services to the country’s majority — the poor black population — and for sidelining black-owned financial services companies.
Earlier in September, 27four Investment Managers, one of the asset management companies that have been most vocal about lack of transformation in the industry, released a survey that showed that less than 10% of the country’s R8.7-trillion savings was managed by black firms.
"It’s not enough to talk about transformation, as a council we must drive it. That mandate can only be pushed if we restructure from the top and bring close the people who have influence in their different constituencies," said FSTC CEO Isaac Ramputa.
"Some of the issues we have to tackle include the fact that there are companies who want to invest in infrastructure, but they have shareholders to deliver returns and account to.
"Banks are providing funding, but aren’t always factoring the socioeconomic impact," said senior policy adviser on transformation at Asisa, Trevor Chandler.
Under the Amended Financial Sector code, the FSTC has, for the first time, introduced a BEE scorecard for retirement funds when procuring services. But the council said it did not see a need for further legislation because its charter already penalised untransformed companies by stripping them of a BEE level each time they failed to reach stated targets.
Finance minister Nhlanhla Nene announced during his budget speech in February that the financial services sector had committed R100bn to fund black businesses. Chandler said this would largely come from long-term insurers and banks, which would be allocated targets to provide loans and equity funding.
The R100bn will be split across the major players, and their specific targets will kick in on January 1 2019.
Correction: September 29 2018
An earlier version of this story indicated in the headline that Asisa was not backing BEE targets rather than the Financial Sector Transformation Council. We apologise for the error.