Funding increase likely for black business

After nearly 11 months of negotiations, targets in the financial sector code have been agreed to between the government, black professionals, business and labour.

But they still have a final hurdle to pass before Trade and Industry Minister Rob Davies signs the code into effect.

MPs are due to vote on the report on Tuesday next week and Davies will consider their recommendations when gazetting the new code.

Black business stands to benefit from a much higher base than calculated in draft revisions to the code, which was being updated from the current version gazetted in 2012 to bring it in line with amendments to the Broad-based Black Economic Empowerment Act.

Parliament’s standing committee on finance found the empowerment financing targets in the draft revisions were too low and needed to be adjusted. This means more than R122bn in funding should be available to black business each year.

The committee is expected to recommend that the code adjust the empowerment financing targets to allow for “inflationary increases, growth in assets, population expansion and economic growth since the 2002 targets”. The code began life as an agreement at Nedlac’s Financial Sector Summit in 2002.

“We were referring to that in comparison to the 2012 figures,” said committee chairman Yunus Carrim. “Of course, through the review of the [financial services sector code] process that will begin soon and the Financial Sector Summit, these figures will be negotiated further, and will have to change over time.”

The recommendation was included in a report on transformation in the financial services sector, drawn up after parliamentary hearings on the matter earlier in 2017.

The R122bn target — comprising R80bn for banks and R42bn for long-term insurance companies — first came to light during negotiations to revise the code. This consists of R75bn for transformational infrastructure, agricultural financing and affordable housing; and R47bn for a black business growth fund.

The standing committee on finance report recommends these numbers be increased.

The Banking Association SA could not comment in time.

The Association for Savings & Investment SA (Asisa), which represents long-term insurers, is confident that it can meet higher targets.

“The existing targets were based on a smaller industry asset base. Given the growth in assets since 2002, we are indeed confident that Asisa members will be able to meet these revised obligations,” said Asisa’s Trevor Chandler.