Financial sector transformation is superficial, study shows
Ownership among the top 20 managers in the country has not shifted over the past 10 years
Despite a myriad policies aimed at fast-tracking transformation in the financial sector, black investment firms still manage just 7% of SA’s savings pool, the latest survey on transformation in the sector shows.
On Tuesday, 27Four Investment Managers, which has been spearheading transformation in SA’s asset management industry, said while the number of assets being managed by black-owned firms rose by 18% at the end of June compared to the same time in 2018, this was skewed by the inclusion of Prescient Investment Management in which former Liberty CEO Thabo Dloti’s venture Sithega bought a 75% controlling stake. Sithega and Prescient announced the conclusion of their empowerment deal in April.
27Four investment analyst Nadir Thokan said without Prescient’s inclusion, money managed by black-owned companies had in fact plateaued over the past year and so did ownership. Black investment firms manage 11% of money available to private sector players.
“The top 20 managers in the country haven’t transformed in terms of ownership in the past 10 years,” said Thokan. He said one area where there’s been notable improvement was the increase in black investment professionals employed by these top 20 firms who between them manage more than R6-trillion in assets.
The 2019 survey showed there were 50 black-owned asset managers at the end of June, two more than in 2018. But long-term figures show that in the past decade, assets managed by black asset management firms increased by more than sixfold, from R91.4bn in 2009 to R579.1bn in June. The number of black-owned firms increased almost four times from 14 companies in 2009.
Even then, the sphere of black asset management firms is largely populated by small businesses in survivalist mode, with 32% of them not even making a profit. Thokan said it has been extremely difficult for black firms to penetrate the retail market where managers serve ordinary people rather than pension funds. Retail investors still made up only 8.91% of their investor base. As a result, they rely on support from pension funds.
He said the industry was hoping the increase in mergers and acquisition activities will propel the transformation agenda, especially as large incumbent asset managers are also looking to improve their BEE credentials.
“While we are grateful that we have increased assets under management, we can’t ignore the fact that we are struggling to create more asset managers of scale,” said Thokan.
Cosatu president Zingiswa Losi said there was an urgent need to transform the financial sector because it is instrumental in restructuring the economy to reflect the demographics of society.
She said because many private sector companies have entered into an investment strike in the name of an unfriendly investor climate, SA needed more black-owned firms to manage the investment of the country’s savings.
“The majority of owners of listed companies are white and therefore we need to use the space of pension fund investments to deracialise the economy. We need to push for transformation in totality,” said Losi.
She gave the example of black-owned funeral product providers who sell products that are underwritten by big insurance companies. This showed that despite the number of black companies entering the market, the economy was still not deracialised.