Treasury should clarify financial sector claims
It is baffling where the Treasury obtained its data on transformation in the financial services sector which, according to last week’s Budget Review, has been regressing.
The review stated the Treasury would be talking to the Financial Sector Charter Council about certain matters including employment equity, financial inclusion, ownership and procurement, where it has identified issues.
For example, there were fewer black faces in top management in 2015 than in 2013, with asset managers being an egregious manifestation of this. It also identified challenges in black direct ownership of banks and the promotion of smaller black-owned businesses.
Consider Nedbank, which reported its results for the year to December on Tuesday. Of its four core units, two are led by black people, Ciko Thomas and Mfundo Nkuhlu. Its chief financial officer, Raisibe Morathi, is black. Both Morathi and Nkuhlu serve on the bank’s board.
It has financed small businesses to the tune of R26bn in the 2016 financial year and paid out R3.6bn for affordable housing. And it has empowered 500,000 broad-based empowerment shareholders, who received R8.2bn in cash when the bank’s empowerment schemes matured in 2015.
As Nedbank CEO Mike Brown says: “This is what banks do, not that ‘Twitter talk’,” referring to the Competition Commission’s announcement that it had referred 18 banking entities to the Competition Tribunal for colluding in the foreign exchange market and the social media backlash that followed.
The Association for Savings and Investments SA, representing asset managers, says it has met or exceeded some of the transformation goals set for the industry in the Financial Services Sector Code.
The Treasury should reveal the source of its data. That may turn out to be embarrassing. If not, however, it would add weight to its call for radical transformation at the big banks.
Special dividends could be on the cards for Sasol shareholders, though only once all its other objectives have been met. This may provide a crumb of comfort for shareholders who saw their interim dividends dwindle.
Sasol distributes 36% of headline earnings, which were hit by some one-off items in the six months to December.
Chief financial officer Paul Victor says management’s priority is to maintain balance sheet strength and the investment-grade credit rating. The minimum distribution will remain 36% of headline earnings. After that, if there is money to spare, it will be used to strengthen the balance sheet, invest in growth and raise the dividend ratio to 45%. Beyond that, Sasol will consider special dividends and share buybacks.
The policy is clear, but it is by no means certain there will be excess cash in the near future.
The oil price has lifted and Sasol’s operations are performing well, but rand strength weighs on returns since most of its revenue is earned in dollars. The Lake Charles Chemical Project is within schedule and budget, but it slipped off track in 2016 and could do so again.
The results from drilling in the production-sharing agreement area in Mozambique are promising, but there’s a risk the Mozambicans may want greater concessions, as tends to happen in poor countries with limited private-sector activity.