The black economic empowerment charter for financial services, likely to be released next week, has already stirred up a hornet’s nest for being “elitist”.
The charter, an effort to deepen black management and ownership of the R800-billion sector and to bank the unbanked poor, is likely to go down as one of the key economic policy moments of the past decade. It will mark the (rather tentative and gradual) opening of the “commanding heights of the economy” to ordinary people.
But this week “the people” complained about the “secretive” negotiations that have governed the charter talks.
A South African Communist Party-led financial sector coalition lambasted the charter talks and the fact that the document would not be finally negotiated at the National Economic Development and Labour Council (Nedlac), despite initial pledges by banking and insurance industry officials that it would be.
Many of the left’s pet issues, including access to finance, targeted investment and a broad definition of black economic empowerment, have won pole position in the charter. But the slim-line, closed-door talks have upset organisations more used to the mass-based consensus-seeking methods of labour politics.
“This process must come out into the open,” said SACP general secretary Blade Nzimande. Representing the African National Congress at the coalition’s meeting this week Phillip Dexter, the former executive director of Nedlac, said, “that secretive process has to stop to allow others to become involved, or the charter will be fundamentally flawed”.
The financial sector campaign coalition is SACP-led but also includes HIV/Aids organisations, trade unions, the churches (including the South African Council of Churches) and the Black Sash. Its two-year campaign against the banks and insurers has been one spark for the charter.
“The charter should be based on consultation with all the Nedlac constituencies. However, the financial sector has proceeded with drafting the financial services charter outside of Nedlac. Other key concerns are that the charter process is not open to public scrutiny and the charter itself will not be enforceable, as it will be voluntary,” said the coalition, which aims to become a social movement lobbying for access to banking services and for an end to perceived discrimination in insurance.
The charter negotiations have largely involved established and emerging (black) industry players. The key lobby for change has been led by the Association of Black Security and Investment Professionals (Absip), a group of young bankers, asset managers and stockbrokers, many from activist backgrounds.
The government has been represented at the finance indaba by the Presidency’s Alan Hirsch and by National Treasury Deputy Director General Lesetja Kganyago. But in keeping with the black economic empowerment strategy released earlier this year, the government has adopted a more hands-off role than it did during the mining charter process.
The mining charter’s premature leak last year wiped R50-billion from resource stocks, one reason the finance sector talks have been kept so tightly under wraps.
In keeping with the recommendations of the Broad-based Black Economic Empowerment Act, the charter is fashioned around a scorecard by which the sector — banking, insurance and other smaller industries — will be measured in an annual audit.
Like the legislative scorecard it gives the highest weighting to skills development, to ensure that empowerment is broad-based.
Setting targets for black and female junior, middle and senior managers was among the thorniest areas of negotiation. Black managers comprise less than 15% of the total in the sector, says Absip.
The financial services sector charter differs from the mining and other industry charters in a fundamental way: its remit extends beyond the industry into the macroeconomy. The charter, therefore, scores banks on their ability to extend services to the unbanked and on their financing of corporate black empowerment deals. However, sources say access to finance for the poor carries greater weight than facilitating deal-making.
This weighting may assuage the SACP’s discomfort, as will the much lower scores given to ownership and control. The left often argues that the empowerment project is benefiting only a black elite empowerment. Said Nzimande: “Our bottom line is that it must set concrete targets for access to banking. Our primary focus is not on ownership.”
In addition, the industry has agreed on “targeted investment” as a significant scoring measure. This is likely to be defined as investment in infrastructure and development. “Until now, the sector has not made a meaningful impact on transformation, though it is vital for our economy,” said Absip president Modise Motloba.
At July’s Growth and Development Summit the asset management industry agreed to target 5% of investible income to infrastructure and other forms of development investment over the medium-term. Now the negotiators have weighted this commitment.