The financial sector, including less than half of South Africa’s banks, have missed key transformation targets including empowerment finance and loans to small black businesses, slowing the progress towards an inclusive economy.
This is according to the Financial Sector Transformation Council’s (FSTC) amalgamated state of transformation report for the period 2018-2020 into the financial industry which was released this week.
FSTC chairperson Solly Mapaila was scathing in his assessment of the report.
“The government has failed to ensure the transformation of this critical sector so that it can benefit the majority of the population,” said Mapaila.
He said the ownership of every industry was increasingly falling into the hands of big financial institutions and that the government was being bullied by financial institutions and unable to assert any authority on the sector.
Mapaila was also highly critical of the behaviour of South Africa’s banks during the Covid-19 lockdown, saying that their actions in the disbursement of the Loan Guarantee Scheme credit showed who was actually in charge.
The report says, “unfortunately, the recent experience of the FSTC indicates that the key government institution responsible for the regulation and oversight of the financial sector at large – the National Treasury – has exhibited a limited interest in engaging in matters relating to the transformation of the sector and has largely contributed, albeit unwittingly, to the lethargic posture the sector has adopted towards necessary changes”.
South Africa continued to be one of the most unequal societies in the world with a Gini index of 63, an exceptionally high unemployment rate and with a skills gap that hampered growth.
Key to redressing this, was the support from the financial services sector, but which the report shows, “underperformed on empowerment financing targets which has an effect on the quantum and effectiveness of necessary support towards funding black-owned enterprises in line with the FS Code’s Black Business Growth Funding provisions”.
Access to financial services products and services, as per the FS odes, was a financial sector-specific pillar that carried the intent of ensuring financial inclusivity and applies to banks, long- and short-term insurers.
The purpose was to create access to appropriate financial products and services for people who historically were not afforded these benefits.
This includes affordable banking products as well as understandable insurance policies, which albeit marginally improved between the 2018/19 period to the 2019/20 period, still fall woefully short of set targets.
Further, the report detailed how many of the measured entities did not submit B-BBEE Reports, as prescribed by the B-BBEE Act and the FS code, with only partial submissions in some instances, and a decline in the number of submissions between the reporting periods.
FSTC reporting working committee chairperson, Fatima Vawda, said “it is unfortunate that there was a decline in the number of reports submitted between the two reporting periods.
Preparing B-BBEE reports is an integral part of good governance and affords companies the opportunity to meaningfully reflect on their respective transformation trajectories and adjust their social and governance strategies accordingly.”
The Association of Black Securities and Investment Professionals (ABSIP) weighed in on the performance of the financial sector in the measured period and remarked that B-BBEE targets had been set well below the population demographics, and observed that “while there may have been some progress in transformation, it is, however, misleading to say it is enough as the targets and bar have been set too low”.
The association also commented that missing targets should have consequences, with the FSTC’s Mapaila saying that for the sector to meet the required targets, “it would need to do certain things – including developing legally binding measures to enforce transformation and the transformation scorecards must be measured against socio-economic challenges”.
President of the Black Business Chamber (BBC), Sizwe Ngqame, said he fully agreed with the FSTC findings.
He said white minorities in the current system were benefiting more than before.
“The commanding heights of the economy that were nationalised before are now getting to private hands like in Eskom, SAA and many others.
“The National Treasury is the driver of privatisation in the country’s state-owned enterprises.”
Ngqame said the state of the economy had led to black people and the less privileged becoming poorer with no intervention at all from the state.
“The treasury is participating in the programmes that leave black people to be unemployed and is undermining the programmes of black economic empowerment and affirmative action hence the high rate of unemployment, lack of skills and education thereof among black people.
“The financial sector was required to make quantum leaps in transformation to drive inclusive economic growth and not perpetuate deep inequality, and as noted in the FSTC report it must “hasten the pace of transformation before it is too late,” Ngqame said.