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Time to push for finance sector transformation

By OPINION Time of article published Jun 19, 2016

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SA’s asset management industry is worth trillions of rands; yet, only 4 percent of it is managed by black-owned firms, writes Victor Kgomoeswana.

Looking at the problems facing the South African economy, especially the lack of access to capital, one wonders what the leaders of the 1976 Soweto Student Uprising, Tsietsi Mashinini and company, would have done today.

I facilitated a business breakfast session in Mbabane as part of the annual celebration of legacy project Number 43, Trelawney Park (fondly termed KwaMagogo), which used to be the nerve centre for the operations of the ANC and its armed wing, Umkhonto we Sizwe, in Manzini in Swaziland during the Struggle.

I challenged the audience, almost 50 percent of them youth, to choose one challenge facing them today and fashion a solution for it, as if they were the leaders of the June 16, 1976, uprisings. Would they take to the streets, or negotiate, to solve it?

What became apparent was that the young people in the audience did not consider any of the problems they face today as worthy of that level of sacrifice. So I chose one for them: the asset management industry of South Africa is worth trillions of rands; yet, only 4 percent of it is managed by black-owned firms. The 4 percent means that only R4 out of R100 of assets under management - be it from pension funds or any other investment - gets allocated to black asset managers, such as Mazi Capital, an award-winning firm started by Malungelo Zilimbola.

Zilimbola once told me on my radio show that his firm almost only hires finance professionals from black universities, called bush colleges in apartheid South Africa.

These were the Universities of Limpopo, Fort Hare, Zululand, Durban-Westville and the Western Cape. They were later joined by Venda, Bophuthatswana and Transkei - from then independent Bantustans.

Mazi Capital currently outperforms the likes of Coronation Fund, Allan Gray, etc. These supposedly established asset management houses are not incompetent or inefficient; they just happened to be outperformed by the younger and more nimble Mazi.

This is proof that anyone, given a chance, can excel. Other black-owned investment firms, such 27Four, are out there blazing a trail in the industry previously and still owned by whites.

Somehow, all these competent black firms have to share 4 percent of funds under management in a country with a black government, 22 years after the first democratic elections and 40 years after the youth of South Africa laid down their lives for justice.

What are the enablers of this failure to transform?

Someone with decision-making powers continues to countenance the untransformed asset management industry, allowing white companies to dominate investment decisions in a country that is 90 percent black.

This means that to build a mall in Soweto, white-owned and managed companies have to be persuaded to deploy their funds - or rather the funds they manage on behalf of clients, even if this client is a government founded on the constitutional principle that all South Africans are equal before the law and should not be discriminated against on the basis of colour.

And yet, black asset management firms such as Mazi and 27Four remain marginalised, even after demonstrating that they are as good as can be.

Back to whether the young people of South Africa are prepared to lay down their lives for a good cause, it is hard to visualise black organisations in the mould of the Association of Black Securities and Investment Professionals (ABSIP) taking up petrol-bombs and stones to attack the establishment.

They are more wont to lobby for and advocate change. They have made some progress, for example, in getting the Financial Services Charter signed in 2003; and are now pushing for the transformation of the Johannesburg Stock Exchange (JSE), among others.

These changes, however, are evidently not telling enough if award-winning industry stars are still left out of the game. It might be unfair to expect ABSIP to be as radical as the youth of June 1976, but more than just the Charter process, boardroom discussions and celebrating black appointments in the financial services sector ought to be done.

Otherwise, we might just let the Economic Freedom Fighters march on the JSE for radical change; and economic freedom in our lifetime!

* Kgomoeswana is author of Africa is Open for Business and anchor of Power Hour which broadcasts from Monday to Thursday on Power FM. He writes a weekly column for The Sunday Independent - Twitter Handle: @VictorAfrica

** The views expressed here are not necessarily those of Independent Media.

The Sunday Independent

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