Management control in the financial services sector remains largely unchanged, while black ownership has improved, according to the 2023 Sanlam Transformation Gauge.
The report, which studied the B-BBEE scorecards of 1,076 companies in the financial services sector, including banks, insurance companies and asset managers, found management control had remained flat at 61% in 2023, marking little progress since the study was launched in 2021. Ownership increased to 91%, from 81% in 2022 and 88% in 2021.
Presenting the report last week at an event at Arena Holdings in Parktown, Lerato Ratsoma, MD of Empowerdex, said listed financial services companies “could do better”.
“The listed companies would have to come to the party to show us that with all of the resources that are available to them, compared with the smaller financial services companies, what else are they doing to reach those particular targets? And taking into account that the 89% (achieved by listed companies) and 92% (by unlisted companies) for black ownership is capped at 25% ownership.”
She added that “it is a concern that management control and skills development have been stagnant over a number of years”.
“We are hoping to see an upward spike in any of those numbers.”
Listed companies achieved 74% of their targets in terms of skills development compared to 77% at unlisted companies. Both listed and unlisted companies exceeded targets for social development at 119% and 120% respectively.
When it comes to black ownership, skills development, enterprise and supplier development and socioeconomic development, unlisted financial services companies outperformed their listed peers.
In terms of enterprise development, Ratsaoma said, the scorecards are based on the actual targets of financial services companies.
“It does not necessarily mean it is the best we can do, especially taking into account the types of needs that we have from black-owned entities that are looking for funding to be able to do more and to also influence other industries.”
The Banking Association of South Africa executive Thabo Tlaba-Mokoena said in the report that banking and the mining sector are prone to scrutiny because of their contributions to the economy and the number of people in their employ, with more than 100,000 people working in banks.
“Banks are important because they are fundamental to financing the real economy,” he said, adding that scrutiny of the financial services sector had intensified ahead of next year's general elections amid populist claims and demands made on the sector.
He said the banking sector struggled to meet management-control targets set out in the FSC, but despite this the sector has generally managed to achieve high levels of B-BBEE contribution certification.
He said transforming management control cannot be addressed at the required pace in a slowing economy, where the pool of relevant skills is limited because of poaching and even emigration.
“Even if you love South Africa, it becomes very tempting when someone offers you a well-paid job elsewhere with the promise of less crime and better opportunities for the family — and as a consequence management control remains a challenge right across the economy,” Tlaba-Mokoena said.
However, Mamkeli Jim, dealmaker for leveraged finance at RMB, said the focus should be on creating generational wealth, not necessarily black management.
Business Times reported in May that the department of employment & labour threatened to take South Africa's biggest banks — Standard, FNB and Absa — to court for failure to comply with employment equity laws.
However, in June Absa shareholders approved a R10bn empowerment transaction that will place 7% of the bank in black hands and ensure its black ownership exceeds the 25% threshold set out in the Financial Sector Charter (FSC). Old Mutual also announced a R2.8bn empowerment deal known as Bula Tsela a year ago.
In the report, Lesedi Kelatwang, founder of derivatives and equity market company Kela Securities, said that despite transformation being a key goal for the sector since the early 1990s, little progress had been made.
He said there are only 12 black-owned stockbroking firms out of 41 and many were struggling despite lower cost structures.
Kelatwang said calling BEE “black” economic empowerment is flawed as it unnecessarily racialised the need to address economic inequalities.
“This is particularly true when dealing with offshore potential investors. As soon as they hear ‘black’ they immediately view it as reverse racism. Even though B-BBEE is a sound economic policy, the difference is that foreign countries call it 'diversity' or 'affirmative action' and their focus is, in addition to women, empowering minorities, whereas we have the sizeable task of empowering the majority.”
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