SA’s Big Four banks have come un­der the spot­light amid stri­dent calls for a greater black pres­ence in the fi­nance sec­tor

CityPress - - Business - LARRY CLAASEN busi­ness@city­

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.

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