Absip sees need for transformation in domestic stockbroking industry
BLACK participation in South Africa’s stockbroking industry was less than 2percent and much more needed to be done to bring about transformation in the industry, the Association of Black Securities and Investment Professionals (Absip) president Sibongiseni Mbatha said yesterday.
Black stockbroking firms made up 1.5percent of the industry in 2015 and this had only increased to 1.8percent this year, Mbatha told an Absip stockbroking summit in Cape Town. The stockbroking industry remained largely untransformed after more than 20 years since the country became a democracy.
Despite the emergence of black stockbroking firms and a growing number of qualified people, the face of the industry remained largely white and male, he said.
A report titled Transformation in the Stockbroking Industry: A White Paper Primer showed that black brokers’ market activity was surprisingly low as a percentage of domestic capital markets activity, and that over the past five years market trading activity and performance had increased, while black broker allocation decreased, Mbatha said.
The report also showed that the presence of black individuals in the research sector remained disproportionately low, the number of practising black stockbrokers remained very limited and the number of black brokerage firms had declined in the past 10 years.
Mbatha said some of the challenges still facing black broking firms included a lack of legislative support because broad-based black economic empowerment legislation remained voluntary. Black brokers lacked the support of enabling legislation and regulations to drive transformation in the industry.
He said the playing field was uneven: black brokers were compared with banks as well as global players and were required to compete on an equal footing, despite not having had the opportunity to build matching resources and support systems.
Support was infrequent and the institution’s support for black brokers over the years had been intermittent, shortterm and inconsistent, making it difficult for these companies to plan with any predictability, he said.
Joanmariae Fubbs, the chairperson of the Portfolio Committee on Trade and Industry, said in a keynote address at the summit that it was important for everyone in the stockbroking industry to recognise their role in transforming the sector.
Fubbs said consumer education about buying shares was insufficient. She said another issue South Africa needed to guard against was monopoly capital. “There is no good monopoly capital, black or white. The reality is that now it is white monopoly capital. We are opposed to monopoly capital, it is not healthy.”
She said Absip could play a critical role around the issue of transformation.
“Yes there is change, but the pace of change is at a snail’s pace, especially in the financial sector,” she said.
Ajay Lalu, the managing director of Blacklite Consulting, said the government had to step in to enforce transformation in the stockbroking industry and financial services sector as a whole.
“The problem is when you put your pension fund with a fund like Momentum, they want the best price for trading in equity. “Black brokers do not have the global network or trading platforms and volumes that companies like Deutsche Bank have that allow them to offer lower prices per trade.
“We should be saying that 30percent of all trades of the JSE should go to black stockbroking companies as a start.
“It is an indictment that 23 years into our democracy, only 2 percent of all trades on the JSE are done by black stockbrokers. The government needs to regulate the existing stockbroking firms and promote local 100percent black-owned and black women-owned firms,” he said. The JSE in May last year launched an initiative whereby emerging black-owned stockbroking firms were set to receive a boost with the JSE’s latest initiative, enterprise development.
The programme involved the JSE paying cash disbursements equal to 33percent of the quarterly equity trading and membership fees of a black brokerage to provide financial assistance and support to the sustainable growth of the business. The JSE was not able to comment at the time of going to press. – Additional reporting by Dineo Faku
Absip president Sibongiseni Mbatha says the playing field was uneven as black brokers were compared with banks as well as global players and were required to compete on equal footing.
The JSE launched an initiative last year whereby emerging black-owned stock broking firms were set to receive a boost.