‘BEE targets not being met’

Commitments made by firms far too low, officials tell hearing on financial sector

THE financial services sector is regressing on BEE targets‚ leading officials told parliament yesterday. National Empowerment Fund chief executive Philisiwe Mthethwa said financial commitments contained in a draft code for black economic empowerment were far too low.

Broad Based Black Economic Empowerment Commission head Zodwa Ntuli agreed with Mthethwa, pointing out deficiencies in the draft financial sector code‚ particularly on ownership.

Both made presentations at public hearings held by parliament’s finance and trade and industry committees on the transformation of the financial services sector.

Mthethwa said a fundamental deficiency of the draft financial services code was its lower 10% target for direct ownership‚ which compared unfavourably with the minimum 25% target in the generic black economic empowerment codes.

The draft financial sector code allowed companies to use indirect ownership to meet the minimum 25% ownership target.

“The R122-billion target for empowerment financing is based on the 2002 baseline and has not been reviewed, nor has it been adjusted for inflationary increases‚ population and economic growth,” Mthethwa said.

“Furthermore, the amount has not been adjusted to cater for the growth in assets held by the respective participants.”

In terms of the draft code‚ banks and long-term insurers commit R48-billion and R27-billion respectively for targeted investments and R32-billion and R15-billion respectively for the black industrialist programme.

“These [commitments] are too low in a sector that had assets of R4.8-trillion in September,” Mthethwa said.

She said the market capitalisation of the top 17 financial sector companies listed on the Johannesburg Securities Exchange was R1.6-trillion.

Black economic ownership achieved to date by these companies was R98-billion (6%).

Mthethwa recommended that the government’s preferential procurement be used to accelerate transformation and greater use be made of development finance institutions to fund black entrepreneurs who were regarded as risky by the formal financial services sector. She also proposed the creation of a black-owned bank.

Ntuli also criticised the draft code‚ saying it did not set timelines for the achievements of the targets which were “very low“.

She argued that the draft financial sector code in its present form did not advance radical economic transformation.

If these deficiencies were not addressed‚ the generic codes of good practice should apply.

She said the pace of transformation in the financial services sector was too slow and had regressed in some instances.

Development finance was not increasing in line with the need to grow the economy. – BDlive