CALLS FOR TRANSFORMATION
What to expect from the hearings on financial services
Chairman Yunus Carrim acknowledges progress since 1994, but calls for ‘more effective transformation consistent with the country’s needs"
The first day of the public hearings into the "untransformed" financial services sector kicks off in Parliament on Tuesday amid heightened calls for radical economic transformation and the creation of a state bank to facilitate a process that critics believe has stalled.
The hearings of the finance and trade and industry committees will air much of the opposition to the dominance of the banking sector by four major banks, which expressed itself in the fight against the Financial Intelligence Centre Amendment Bill. Critics of the financial services sector such as the Black Business Council (BBC) point to the lack of black ownership and the difficulty black entrepreneurs experience in obtaining loans.
For their part, the banks and other financial service companies such as asset managers, life assurers and short-term insurers will be intent on highlighting the progress they have made in achieving transformation.
Transformation of the sector is vital for broader economic transformation. Not only does the sector manage more than R8-trillion in assets and employ over 250,000 employees, but it is vital for providing funds for investment, enterprise and infrastructure development, and the housing market.
As well as presentations by individual banks, there is an impressive line-up of interested parties including the Treasury, Department of Trade and Industry, Banking Association SA (Basa), Association for Saving and Investment SA, Financial Sector Charter Council, Financial Sector Campaign Coalition, BBC, Cosatu, Association of Black Securities and Investment Professionals, and the Black Insurance Advisors Council.
The second day of public hearings is scheduled for March 22 when Nedbank, the Reserve Bank, the Broad-Based Black Economic Empowerment (BBBEE) Commission, the National Empowerment Fund, the South African Insurance Association, Black Management Forum and Black Insurance Owners Association among others are scheduled to make submissions.
Finance committee chairman Yunus Carrim noted that while the financial sector had transformed since 1994, there still needed to be "more and more effective transformation consistent with the country’s needs".
Any suggestion that the banking industry is the least transformed industry … is incorrect
DA finance spokesman David Maynier expected "bank bashing" at the hearings. He believed that the ANC MPs would be "desperate to establish their radical economic transformation credentials and are likely to work themselves up into a banker-bashing frenzy".
The Department of Trade and Industry and the BBBEE Commission argue that the transformation in the financial services sector as a whole is still low.
According to the Financial Sector Charter Council there was a fall in the achievements of the financial sector on the ownership and representation of blacks in senior management scorecards of the sector codes in 2014 compared with the previous year’s. The Commission for Employment Equity report for 2015-16 showed that African male representation in top management in the finance and business services sector amounted to 8.9% and African females at 5.3% compared with their white counterparts’ 53.1% and 15.3% respectively. At senior management the representation was 9.4% for African males and 6.8% for African females versus 37.4% and 23.2% for white males and white females respectively.
Basa CEO Cas Coovadia said that progress with employment equity had been slow but was on par with the rest of the economy. He insists that "any suggestion that the banking industry is the least transformed industry or refuses to transform is incorrect". He said there should not be a trade-off between transformation and the soundness of the banking sector which was held in high regard internationally.
"Banks are accountable for what they do with depositors’ money. To ensure that they remain true to their responsibilities and protect depositors’ money, banks are subject to a significant number of regulations. This in itself makes it difficult for new entrants to enter and be successful in this industry."
Coovadia said that the largest share (49%) of the top six South African banks was owned by foreigners, followed by investment schemes such as the Public Investment Corporation (34%) and the remaining 17% by other investors. The share of black ownership of banks reached 26.7% in 2014, declining marginally in 2015.