The persistent lack of inclusivity in the country’s capital markets and the dearth of the appropriate financial instruments and support to afford black South Africans the ability to buy-in to business will have a long-term negative effect on the nation’s economic growth and sustainability if nothing is done about it.
“The capital markets in this country, have for far too long, been a playground for the privileged few and it is time to change that,” said prominent businessman Dr Iqbal Survé, chairman of the 100% B-BBEE company, Sekunjalo Investment Holdings (Sekunjalo). Survé has been outspoken on this matter for many years. Currently, he and the Sekunjalo Group, are involved in a number of legal cases against nine of South Africa’s largest transactional banks, whom he has accused of discriminatory practices against him and the companies he is involved in.
He asserts that the lack of transformation, particularly in South Africa’s monopolistic financial sector, is stifling the country's economic potential and impeding its progress towards becoming a more equitable society, remarking that, “whilst there have been many strides over the past 29 years to redress the imbalance of ownership of business, it falls short of what is really needed to drive meaningful and impactful socio-economic participation and transformation.
Surve's sentiments echo the frustrations shared by many who believe that a more inclusive financial sector would drive greater investment, foster innovation, and provide opportunities for broader participation in the economy.
Emphasizing the significance of transforming the financial landscape, he added, "A diverse and inclusive financial sector can act as a catalyst for economic empowerment, helping South Africa to overcome its historical challenges and unlock its true potential, but South Africa’s banking sector, for example, appear to remain extraordinarily averse to wanting to make this a reality, instead holding onto their power with both hands – what are they afraid of?”
Following the release of the 3rd Annual Sanlam Transformation Index, concerns are being raised about the sluggish pace of transformation in South Africa's business sector.
The report notes that the pace of transformation is not as advanced as the scorecards of industry players suggest and that Broad-based-black economic empowerment (B-BBEE) policy is not keeping pace with the changes happening in corporate SA.
The index, which measures the progress of transformation across various industries, and this year included some 14, 452 companies across 10 sectors, has at its core, a purpose to promote a deep understanding of the significance of B-BBEE and its role in creating a more equal society in South Africa.
Worryingly, and nearly 30 years after the advent of democracy, the report reflects yet again, that management control is largely untransformed mostly as a result of racism due to corporate SA’s resistance to seeing black people in positions of power, although a lack of skills development is also included in reasons for lack of progress.
Further, the report highlights that although the financial sector has come a long way, a lack of black equity, is hampering efforts for a fully transformed South African business sector.
Much of this could be alleviated by providing access to finance to help transfer ownership into black hands, especially in the small to medium business sector, where it is most needed.
But, as we have reported on many occasions, there are many barriers to entry for black South Africans in accessing the capital required to fund equity transactions from the country’s financial institutions.
The Sanlam Transformation Index report notes comment from Halekopane Matsipa, CEO of Kleoss Capital, who suggests that to overcome this state of affairs, Government could institute a “guaranteed global facility” along the lines of a bank guarantee, which would also encourage financial institutions to participate in helping black South Africans access capital for ownership or expansion initiatives.
By fostering an environment that supports diverse perspectives and fosters equal opportunities, South Africa's financial sector could lay the foundation for a more resilient and inclusive economy.
Adri Senekal de Wet is the executive editor of Business Report.