Empowerment financing slumps, but is still above target — banking sector report

Empowerment financing dropped 19.5% in 2019, according to a new report on transformation in the banking sector.

The report, commissioned by the Banking Association South Africa (Basa), shows that empowerment financing — the provision of finance for, or investment in, broad-based black economic empowerment (B-BBEE) transactions and companies — is the lowest it has been since 2016.

According to the report, empowerment financing dropped by R50-billion between 2018 and 2019 to R203.7-billion.

There were declines in the financing of all categories, except black agricultural financing, the report notes. The bulk of agricultural financing goes to large companies, it said, but the allocations to smaller companies jumped significantly in both 2018 and 2019

The biggest decline was in exposure to B-BBEE deals, which at R107-billion is 35% lower than it was in 2018.

The exposure of banks to black-owned small and medium enterprises dropped sharply in 2019, moving from R29.3- million in 2018 to R21.2-million. This could be due to the dire economic conditions, according to the report. 

Though there has been a fall in empowerment financing by the main commercial banks, it remains well above the Financial Sector Code (FSC) target, the Basa report notes. 

The report also notes that the big drop from 2018 was inevitable, because new empowerment financing targets introduced in 2019 meant that only new transactions concluded on or after 1 January 2018 qualified for recognition. 

The banking industry’s expenditure on socioeconomic development, which includes spending on organisations that predominantly benefit black people, also fell in 2019. According to the report, this decline (from R673-million in 2018 to R621-million in 2019) was largely due to allocation changes by a large bank and several small banks, which brought the expenditure amount below the 2017 level.

“Economic distress limits banks’ profit growth, which curbs the amount allocated to socio- economic development support, which is based on net profit after tax. The financial services industry paid 36% of all corporate tax (R122-billion) in 2019.”

The Basa report also said that black ownership measures declined in the last four years. This is as black shareholders realised value by selling shares and diversifying their investments away from banks. But these measures also remained above FSC targets.

According to the report, although black voting rights remained static at 28% in 2019, there were gains on this front for black women. Black women voting rights increased to 12.6% from 11.4% — the highest level since 2016.

We make it make sense

If this story helped you navigate your world, subscribe to the M&G today for just R30 for the first three months

Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.”

Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

Related stories


Already a subscriber? Sign in here


Latest stories

Put the Veuve on ice – the Bold Women Award...

Now in its 50th year, the Veuve Clicquot Bold Women Award is launching in South Africa for the first time.

Massmart will not be profitable as long as it keeps...

Walmart bought Massmart in 2011 and over the past 10 years the share price of the group has decreased by 80%.

Cartoon: Are we back in the 20th century?

Carlos Amato asks if there's one last way we can regress as a species

The problem with Stalingrad is the cost, not the law

The tragedy is that few of us could afford to brief fine lawyers to fight all the way to the highest courts, but we are all paying for what is playing out on stage

press releases

Loading latest Press Releases…