Penalties for non-compliance with BEE codes mooted
The B-BBEE Commission says an analysis of compliance reports shows the financial sector is regressing in ownership and management control
The council that is pushing for a transformed financial services sector is considering imposing penalties on companies that don’t comply with codes governing broad-based BEE (B-BBEE).
Some of the constituents of the Financial Sector Transformation Council (FSTC), which comprises representatives of trade associations, organised labour, communities, black businesses and the government, have been pushing for the introduction of penalties as a way to ensure the transformation of the financial sector, which has regressed, parliament’s finance committee heard on Tuesday.
Ismail Momoniat attributed the lack of progress in the sector to the slow rate of economic growth and the adverse affect of state capture on mass-based transformation. He was speaking during a hearing by parliament’s finance committee on the transformation of the sector.
This has been an ongoing concern of the committee and led to the compilation of a report in December 2017. The report recommended that a financial sector summit be convened by the National Economic Development and Labour Council (Nedlac), but this has not taken place yet and chair of the finance committee Joe Maswanganyi urged that it take place in 2020.
Other contributors to Tuesday’s hearing were the B-BBEE Commission and the Reserve Bank.
FSTC acting CEO Busi Dlamini said that targets in the financial sector B-BBEE code are not being met and the council is considering the introduction of penalties for non-compliance.
The B-BBEE Commission’s Zodwa Ntuli said that an analysis of compliance reports submitted by JSE-listed companies indicated that the financial sector is regressing in ownership and management control.
“Financial sector performance against targets needs to be improved significantly given that the sector code sets targets that are lower than the generic codes in some instances,” Ntuli said. “Funding for B-BBEE transactions and new black businesses could be improved and the sector needs to consider partnering with government funding agencies.”
Momoniat said the financial sector has to do more to transform and be transformative. “Some sub-sectors, such as asset management, need to do more than others as they have made little progress in transforming. To truly transform the financial sector in SA a significantly higher savings rate will have to be achieved. This can only happen when the economy grows in an inclusive manner and at a higher rate.”
The FSTC’s Dlamini said the council started reviewing the financial sector codes earlier in the year with a view to amending the targets so they are aligned with the country’s race and gender demographics. The review includes ownership targets that were not being met.
The sector is below targets on skills development, procurement, socio-economic development and access to financial services, but exceeds empowerment financing targets in rand terms, though not in terms of scoring. Dlamini said this indicates that large companies are achieving the target, but not smaller entities.
Proposals included in the review Dlamini said were that reporting by retirement funds (now voluntary) should be made compulsory for all funds; support for black suppliers be considered key for transformation; increasing support for black women-owned businesses; job creation be used as a measure of transformation progress; and penalties be introduced for failure to meet targets, as penalties will enforce compliance and make it compulsory.