UNATHI KAMLANA: Transformation is much more than a tick-box exercise

A fully inclusive and transformed financial sector remains a prerequisite for achieving a dynamic, thriving and transformed economy. Recent developments in relation to the government’s procurement rules caused some to call SA’s policy on transformation into question.

In response President Cyril Ramaphosa has reiterated the country’s commitment to transformation, while acknowledging the challenges that still lie ahead in this regard. Legislative frameworks such as the Broad-Based Black Economic Empowerment Act, the Financial Sector Code and the Employment Equity Act remain relevant levers to create opportunities for greater inclusivity and more broad-based growth outcomes.

However, laws alone are unlikely to bring the necessary change. Transformation of the financial sector must ultimately be driven and shaped by the sector itself. As a regulatory authority in the financial sector the Financial Sector Conduct Authority (FSCA) aims to continue to work with the sector to drive transformation as a strategic opportunity rather than a “tick-box” exercise.

As a market conduct regulator of the financial sector, the FSCA has an important role to play in promoting its transformation. The Conduct of Financial Institutions Bill — under development by the National Treasury — proposes a more active role for the FSCA in promoting transformation. The bill proposes that all licensed financial institutions should have in place a transformation plan that promotes transformation initiatives in a manner consistent with what has been outlined in their plans.

The bill further proposes that the FSCA be empowered to monitor institutions’ compliance in accordance with their transformation plans and to take reasonable supervisory and enforcement actions against financial institutions that fail to uphold their transformation commitments.

The draft transformation strategy published by the FSCA earlier this year embraces the envisaged role of the regulator and encourages all financial institutions — big and small — to see transformation as more than just a compliance exercise. Ultimately, transformation should be viewed as a moral and business imperative, embedded in the organisational culture and business strategies of individual financial institutions.

The FSCA will continue to support market development where possible, including by minimising barriers to entry and reducing regulatory compliance burdens. For example, over the years the authority has worked with the industry to develop the Financial Advisory & Intermediary Services Act exemption framework, empowering previously disadvantaged people by granting specific and general exemptions to allow for the progressive realisation of legislative compliance.

This was aimed at facilitating the registration of black-owned small businesses as financial service providers. It enables these enterprises to participate in the financial sector while creating a competitive and market-focused financial services landscape that provides lower-cost and appropriate products and services. The FSCA also provides support to small businesses through training and workshops focused on issues of compliance, readiness for licensing and support for regulatory examinations.

It is important to appreciate that when promoting financial sector transformation the authority has an obligation to ensure this happens in an environment where due consideration is given to other public policy imperatives. For example, transformation must be pursued where the integrity of the financial system remains intact, the sector remains sound and financial customers are protected. There is always a need to strike the right balance between promoting transformation and ensuring that financial customers are protected and treated fairly by financial institutions.

Transformation and its associated legislative frameworks continue to be necessary for creating an inclusive economy and achieving sustainable economic growth and development. SA's unequal society derives from laws that institutionalised racial discrimination. Redress will not be a quick fix; rather, all sectors of the economy — including the financial sector — must be innovative and take responsibility and ownership of the transformation agenda through commitments that translate into concrete actions.

For its part, the FSCA will continue to be the strategic anchor of the regulatory contribution to the transformation agenda of the financial sector.

• Kamlana is FSCA commissioner.