BANK CEOS IN PARLIAMENT FACE TRANSFORMATION SCRUTINY
SA’s Big Four banks have come under the spotlight amid strident calls for a greater black presence in the finance sector
The painfully slow transformation of the finance sector has seen outrage go from a simmer to a boil in the past few months. Given this growing indignation, a public hearing was held this week by Parliament’s standing committee on finance and the portfolio committee on trade and industry. It was attended by CEOs of the country’s four major banks – FirstRand’s Johan Burger, Absa’s Maria Ramos, Standard Bank’s Sim Tshabalala and Nedbank’s Mike Brown.
Usually, when it comes to making presentations to Parliament, major companies send bureaucrats to make their case. Not this time. Three of the CEOs each made a 15minute presentation, with Brown observing proceedings.
For companies with a combined value in assets of about R5 trillion, it may seem like an odd use of executive time to have their CEOs make brief presentations and sit around for a large part of the day.
But the banks are coming under increasing pressure to show they are committed to the transformation of the sector as well as the country.
The financial sector charter was set up in 2003 to provide a framework for change, but it has fallen short when measured against the goals of transforming the ownership of banks and bringing black people into top leadership positions.
Although much progress has been made in bringing young black graduates into banking, key decision-making roles are still largely in the hands of white males.
According to a presentation by the Financial Sector Charter Council, about 28% of black people are in top management jobs. This is way below the target of 60%.
The lack of transformation regarding ownership has also drawn criticism.
While the banks have closed empowerment deals, their partners sold their holdings once the loans taken to pay for these shares had been paid off.
Even so, managing director of Banking Association of SA Cas Coovadia said black people held 23% of the banks’ shares – surpassing the 22% held by white people.
He added that foreign institutions held the largest share at 49%.
Economic Freedom Fighters MP Floyd Shivambu disputed this, noting that when he asked the three CEOs who had given presentations what percentage of their shares were in black hands, all gave single-digit figures.
Standard Bank’s Tshabalala, however, made the point that there were no easy choices when it came to transferring ownership.
Every rand raised by the bank to fund an empowerment partner, he said, was a rand that could have been used to fund businesses that could advance South Africa’s development goals.
“There is not an inexhaustible amount of capital out there,” added Tshabalala.
Ismail Momoniat, Treasury’s deputy director-general, underlined this argument. The banks have hundreds of billions of assets under their control, but these assets are their customers’ deposits and funds from foreign institutions.
“Financial firms are merely the custodians of other people’s money,” he said.
This did not stop calls for more stringent transformation targets to be introduced.
George Sebulela, secretary-general of The Black Business Council, advocated for an empowerment threshold of 51% for the granting of new insurance licences and the setting up of a financial sector commission to monitor the performance of the sector. The moves to put in place such changes are already afoot. Madoda Vilakazi, executive director of Nedlac – the consensus-seeking body comprising government, business, labour and civil society – said the body planned to host a financial services summit by July.
Vilakazi hoped the summit would lead to more stringent goals and time frames, as well as to a commitment to having regular high-level meetings to drive transformation.
He also wanted to see firms pay a price for not meeting their transformation commitments.
“We have to have some kind of consequence for nondelivery. At this point in time, nothing is done to them by government if they do not comply,” he said.
Pressure to transform is not the only thing hanging over the financial sector – and the banks in particular – as the bank CEOs also have to deal with a more contentious political environment.
The ANC Youth League has led protests at Absa, demanding that the bank pay back R2.25 billion to the fiscus for an apartheid-era bailout, and several banks have come under pressure from government to reopen the accounts of the politically connected Gupta family.
The banking sector has come under further scrutiny following last month’s revelation by the Competition Commission of collusion on fixing prices in currency trading by 17 banks, among them Standard Bank, Investec and Absa.
Having the CEOs of the four big banks in the same room may have been unusual, but given the increasingly hostile political climate in which they find themselves, further gatherings like this are likely to become more frequent.