Masondo heeds black asset managers calls ’
• Pressure builds for bigger slice of retirement fund sector • Compulsory BEE scorecard close
Black asset managers, who oversee just 9% of assets under management in SA, are becoming increasingly strident in their calls for a greater slice of the country ’ s savings pool. What’s more, they have a powerful ally in their corner in the form of the National Treasury.
Deputy finance minister David Masondo said in a keynote speech on December 3 that the government is working with the Financial Sector Conduct Authority (FSCA) to ensure that the country’s 100 biggest retirement funds bolster their transformation efforts.
Masondo said one of the tools in the government’s arsenal would be to ensure that retirement funds apply the financial sector BEE scorecard to all service providers, including asset managers.
“Black asset managers still account for less than 10% of the overall market after 20 years of knocking on the doors of asset consultants,” says Zukile Nchukane, head of business development at Mianzo Asset Management, one of a handful of black-owned Cape Town-based asset managers. “To some extent it ’ s a function of size and distribution network but asset consultants do tend to favour the more established players, who have first-mover advantage.”
Olano Makhubela, acting commissioner of the FSCA, told Business Day that the Financial Sector Transformation Council, a non-profit company gazetted under the broad-based BEE (BBBEE) Act, is close to finalising a new BEE scorecard specific to the retirement funds sector.
It will include targets for retirement funds’ procurement of services from black asset managers.
“Once the scorecard is finalised and gazetted, all retirement funds will for the first time be subjected to a BEE scorecard under the Financial Sector Code,” said Makhubela.
“Compliance will be compulsory rather than voluntary, as is currently the case.”
As part of its proactive engagements with the country’s top 100 retirement funds the FSCA will conduct on-site inspections to ensure that
institutions are promoting BBBEE service providers in line with regulations.
Makhubela pointed out that the Financial Sector Regulation Act, under which the FSCA was established, includes the promotion of transformation of the financial sector as a specific goal. The first draft of the Conduct of Financial Institutions Bill published in December 2018 also included transformation as one of its objectives.
The first draft proposed that a financial institution be required to design, publish and implement a transformation policy that satisfies the requirements of the BBBEE Act as well as the Financial Sector Code, said Makhubela.
The revised draft of the bill published in September 2020 takes further steps to strengthen transformation.
The bill’s “requirements for a transformation plan, rather than a policy, are retained and have been reworded to require the plan to more closely align to the achievement of tangible targets informed by the targets in the Financial Sector Code”, said Makhubela.
“The revised draft also allows for the FSCA to issue directives in relation to transformation plans and clarifies that the FSCA may use its supervisory and enforcement powers to ensure that a financial institution’s governance frameworks – including in relation to transformation – are adequate and adhered to.”
This comes after the Supreme Court of Appeal ruled on November 2 that the Preferential Procurement Regulations of 2017 are invalid, though the government has said this has no effect on the BBBEE Act.
Anthony Govender, CEO of ASI Financial Services, said this ruling was likely to be challenged and argues that the government must take a leadership role in transformation to tackle the “systemic problems” in the financial sector.
“Black asset managers have primarily gained value through the PIC [Public Investment Corporation] and government-led initiatives,” he said. “The private sector has been very reluctant to part with assets to empower black asset managers.”
Govender said ASI had helped lobby the government to ensure that SA’s financial sector, which he likened to an “oligopoly ”, was more representative of the country’s savers.
As evidence he cited the example of the Mineworkers Provident Fund, the Government Employees Pension Fund and the Eskom Pension and Provident Fund, which he says largely comprise previously disadvantaged individuals and contribute in excess of R2-trillion to SA’s savings pool.
“We ’ re simply saying that we cannot allow the current situation of economic apartheid to continue in SA,” said Govender.
“We have to change the very construct of the financial services industry … to address the systemic problems in the sector and enable participation that is more representative of SA’s demographics.”