The black economic empowerment (BEE) drive in financial services has proceeded far more smoothly than in any other sector, and this week’s encounter between industry representatives and the government is expected to be a good-natured affair.
The Department of Trade and Industry (DTI) is to meet with industry this Thursday to discuss the financial services empowerment charter for the first time.
The bosberaad will follow seven months of discussions between the industry’s 11 associations that have already led to no less than 14 drafts for a charter governing BEE.
Mxolisi Buthelezi, director of black economic empowerment at the DTI, told the Mail & Guardian that the drafts showed a clear departure from other charters. What was particularly striking was the role of the financial services industry in driving the charter process — in stark contrast to that of the mining industry.
The mining charter’s initial leaked format spread fears of forced compliance similar to the land-grabbing exercise in Zimbabwe, causing panic-selling of mining shares by foreign investors that all but wiped out the resources index.
A number of industry sources said the financial services charter would be voluntary — unless the government insisted on the contrary at next week’s pow-wow. This, however, seems unlikely, given Buthelezi’s praise for the sector’s good faith in driving its own charter.
Also helping official perceptions is the fact that the Association of Black Securities and Investment Professionals (Absip) played a leading role in getting the charter discussions started.
There is agreement among industry players that the charter marks a new beginning by emphasising the need for a “scorecard” approach to empowerment goals.
This incorporates other empowerment categories such as access to financial services, empowerment in management, procurement, targeted investments, social responsibility, investment and employment equity.
This does not entirely exclude some form of ownership targeting, with a proposal of 8% being mooted in some circles. According to the London Financial Times last weekend, black ownership targets were understood to have been set at about 10% by 2008.
The Banking Council’s general manager (transformation), Cas Coovadia, was adamant this week that target-setting had not been an obstacle in the discussions. Nor did he expect conflict on the issue at next week’s summit.
Some industry members who have been party to the charter discussions were reluctant to speak openly in the light of an “agreement” barring publicity until the charter was finalised. No one seemed perturbed by any target-setting exercise. Colin Reddy, BusinessMap’s empowerment director, agreed that the level of the empowerment debate had matured to one that addressed issues beyond targeting.
This, however, does not mean that everybody has moved away from the concept.
The National African Federated Chambers of Commerce (Nafcoc) is a case in point. Sipho Mseleku, Nafcoc’s CEO, said this week it was preferable that targeting in all sectors went beyond the 26% over 10 years envisaged by the mining charter.
He added the caveat that “empowerment is about expanding the field — not about taking away from some [people]”. The commercial institutions’ perceived failure to “bank the unbanked” has also been moved down on the agenda. However, Buthelezi noted that it would be preferable for the charter also to take cognisance of this aspect.
Also setting financial services apart from other sectors are recent empowerment asset-management deals.
According to research undertaken by multi-fund manager Investment Solutions, which boasts a 30% BEE shareholding, these deals represent a total of more than R1-billion since November 2001. Asset managers include Future Growth, Investment Solutions, Quaystone, Abvest, Investec SA and Stanlib.
The financial services industry’s dynamic nature was also reflected by a huge amount of corporate activity in terms of mergers and acquisitions, with R568-billion worth of assets involved since 1999.
The final draft of the financial charter reflects consensus reached between major industry players including the Banking Council, Life Offices’ Association, Association of Unit Trusts, Association of Black Securities and Investment Professionals, and the Fund Managers Association.
Once the government has given its stamp of approval Minister of Trade and Industry Alec Erwin will issue a code of good practice for the sector.
The only other sectors that have embarked on BEE charters are the information communication tech-nology and electronics (ICT-E) sector and the construction industry.
The ICT-E charter parameters given by the DTI are illuminating. They stipulate that the charter will address issues such as mechanisms to achieve BEE targets, including skills development and preferential procurement.
Overarching all charter-related initiatives is the proposed Bill on BEE, expected by the end of the year. This will include elements of various submissions to Parliament’s trade and industry committee last week.