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Banks forging ahead to meet empowerment code targets

Banks continued to meet many of the empowerment and transformation targets set in the FSC, despite the severe economic contraction of -6.4 percent in 2020, which reduced opportunities for job creation and inclusive economic growth. File photo

Banks continued to meet many of the empowerment and transformation targets set in the FSC, despite the severe economic contraction of -6.4 percent in 2020, which reduced opportunities for job creation and inclusive economic growth. File photo

Published Jul 27, 2022

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Sustainable black empowerment at the banks will continue to be hampered until the local economy recovers from the years of state capture, maladministration, political uncertainty and a lack of urgent economic reforms, the Banking Association of South Africa (Basa) said yesterday,

It said the findings of its latest Transformation in Banking Report, compiled by Intellidex and which researched empowerment at the banks between 2017-2020, showed that in hard numbers, the narrative that banks “are falling far short of their Financial Sector Code (FSC) targets is based on an incorrect interpretation of the numbers, as guided by the FSC.”

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“This can distort facts and discredit the contribution of banks to the transformation of the financial services sector and economic empowerment in South Africa,” Basa said in a statement yesterday.

It said banks continued to meet many of the empowerment and transformation targets set in the FSC, despite the severe economic contraction of -6.4 percent in 2020, which reduced opportunities for job creation and inclusive economic growth.

However, the banks remained committed to meeting and exceeding the transformation targets set out in the FSC.

In 2020, black ownership of banks was slightly above target, with black people holding 28.4 percent of voting rights in banks, against a target of 25 percent.

However, black economic interest was at 23.6 percent against a target of 25 percent.

“Black ownership of banks is likely to continue to drift down as bank BEE deals have vested and black investors are now free to sell their shares and benefit from their profits,” Basa said.

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Black management control of banks fell short of their targets at all levels. Eighty-seven percent of junior bank managers were black, against a target of 88 percent; 41 percent of bank directors were black, against a target of 50 percent; and 45 percent of senior managers were black from a target of 60 percent, among other categories.

However, the percentage of black managers and directors in banks increased every year for the three years and this was expected to continue because of the strong pipeline of black managers at all levels.

Banks procured 82 percent of their goods and services – worth R137 billion – from BEE compliant businesses in 2020, against a target of 80 percent.

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Banks provided R271bn in empowerment financing, including R34.5bn to small black businesses.

They provided access to transaction points to 88 percent of South Africans in low-income households, against a target of 85 percent; and provided 20 million products that contribute to financial inclusion, against a target of 15 million.

The FSC stated that “the stability and soundness of the financial sector and its capacity to facilitate domestic and international commerce is central to the successful implementation of broad-based BEE”.

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The Basa report also demonstrated how banks and other financial institutions had been central to transformation in the energy sector by financing the Renewable Energy Independent Power Producer Programme (REIPPP).

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