Business

‘Substantial work to be done’ on transformation in financial sector

2016-11-12 10:59

Major companies in the banking and financial services sector have acknowledged that there is much to do to transform the sector. 

This follows comments by Tryphosa Ramano, outgoing Association of Black Securities and Investment Professionals (Absip) president, who said this week that South Africa’s black population continued to suffer from poverty and unemployment as well as a lack of economic progress on the transformation front. 

One third of the local population was excluded from the economy and 60% of black youth were unemployed, Ramano said at Absip’s annual conference held in Johannesburg. 

At the same time, the local financial services sectors showed little sign of transformation with just 4% of local investment funds managed by black firms and just 1.4% of JSE commissions received by black JSE broker firms, said Ramano, who is also chief financial officer of cement maker PPC and deputy chairperson of SAA. 

The JSE didn’t respond to a query about whether it was true that 1.4% of commissions were received by black JSE broker firms. 

Rob Dower, Allan Gray chief operating officer, said that South Africa’s economy was not nearly representative enough and financial services businesses were not an exception. 

Understated 

Dower said the figure of 4% quoted was understated because it included own-managed assets by significant funds like the Public Investment Corporation, which are mostly managed by transformed internal teams, and excluded assets from some material black-owned firms who do not declare their assets. 

“The portion of independently managed assets managed by black investment management firms is still small but is about 16%,” he added. 

City Press contacted 16 major local financial services and banking companies as well as the JSE to get their response to Ramano’s comments on transformation as well as other speakers on the same topic at the Absip event. 

Comment was sought from the five largest banks, three of the biggest short-term insurers, including Mutual & Federal – who said they wouldn’t be able to comment by the time City Press went to press – two of the top asset managers and the five most significant life insurance companies. 

Absa, Allan Gray, FirstRand, the JSE, Nedbank, Sanlam and MMI Holdings responded to the request for comment by the end of Friday. 

‘Substantial work to be done’ 

Esme Arendse, Nedbank spokesperson, said that: “We agree with all the sentiments that there is still substantial work to be done. We are very aware of the magnitude and complexity of these structural inequalities that exist in our society and we are absolutely committed to being part of the solution. 

“Having said that we must not ignore the progress that has been made since the inception of the BEE codes ... Management control and employment equity are still a challenge for the sector, particularly with respect to senior management and black women representation,” Arendse added. 

“We still face challenges achieving skills development targets as black senior management. This is exacerbated by low attrition rates and headcount growth ... The draft amended financial services charter puts an emphasis on the appointment of Africans in management positions, as the demographic that has remained marginally underrepresented in the sector and the allocation of skills spend on black people according to the occupational levels, in order to ensure that the appropriate pipeline is created for when management positions become available,” she said. 

An Absa spokesperson said: “Absa aims to build a fully representative, fully diverse and inclusive organisation that is reflective of our broader society, and offer equal opportunities regardless of race, gender, sexual orientation or disability. 

“Sixty eight percent of our employees in South Africa are black people, and over the past year black senior management representation has increased to 38% and progress is being made at both middle management (54%) and junior management (74%) black representation. Employment Equity nevertheless remains an ongoing focus,” the Absa spokesperson added. 

Linda Mthenjane, MMI Holdings group executive human capital and transformation, said: “We recognise that there are challenges that remain and MMI is committed to addressing these with the aim of contributing positively to the economic transformation of South Africa.” 

Allay Gray’s Dower said: “The biggest investment management mandates are given by pension fund trustees, who are mostly black and mostly elected by members of their pension funds, who are also mostly black ... I can understand why people feel there may be bias, but I don’t think there is a racial bias against independent black-owned managers, more a bias in favour of corporate, better-known, established managers.” 

Sam Moss, FirstRand spokesperson, said that the group took transformation “very seriously”. 

“There has been concerted effort from across all the businesses to drive transformation,” she added. 

“The group has played a role in developing talented black asset managers. For example, RMB Prime Services has seeded several managers including Sentio Capital Management, Mazi Capital Management, Bataung Capital Advisors and Independent Alternatives,” Moss said. 

A Sanlam spokesperson said: “Transformation is one of the five key pillars of Sanlam’s business strategy and it is one of the cornerstones of the company’s approach to sustainable development.” 

Women representation 

Ramano said Absip had been pushing for 30% representation for women across the financial sector. As part of that push, Absip had been advocating for gender diversity to be included in the JSE listing requirements, Ramano added. 

Allan Gray’s Dower said that Absip’s gender target was a good idea. 

“About half of our employees are women. About half of our middle managers are women. Twenty five percent of top and senior management and 22% of the Allan Gray board are women. We have made some progress and are committed to gender transformation,” he added. 

“Diversity at all levels is key for us. In the long run we have to be representative of the communities we serve in order to win and keep loyal clients.” 

Ramano said that the JSE has introduced the requirement for gender diversity disclosure for companies listed on the exchange. 

Racial diversity disclosure 

As part of its proposed amendments to its listing requirements, the JSE is planning to include racial diversity disclosure. 

Enoch Godongwana, the ANC’s head of economic transformation, told the Absip conference that “something is needed by this sector”. 

“This sector is refusing to transform,” he added. 

From the time when the financial sector charter was published in 2004 until 2008 there was a big move on equity empowerment. 

However, since 2008 there has been slow progress on the empowerment front in financial services sector, Godongwana said. 

“We need a serious conversation. The sector is going to be targeted if it doesn’t jack up,” he added. 

“Transform this sector before it is too late,” he added. 

Joel Netshitenzhe, Mapungubwe Institute for Strategic Reflection executive director, said there was a trend in South Africa for black professionals to mimic the lifestyles of the while elite. 

South Africa was characterised by racial capitalism and marginalisation. 

“Social tinder will catch fire if we do not do something about it,” Netshitenzhe said. 

“We need a more comprehensive approach to economic transformation. We need a keener focus on reducing inequality,” he added. 

Funeka Montjane, Standard Bank personal and business banking South Africa chief executive, said that 90% of South Africa’s income was earned by 10% of the population. 

A worrying issue was that in a country of more than 50 million people there were only 6.5 million taxpayers. 

Montjane emphasised the need for entrepreneurship as in the US, with a population of more than 300 million, there were 26 million business but only 970 of those business employed more than 10 000 people. 

Women entrepreneurs were also a very small group, she added. 

White males 

“Money in this country is still stuck in rooms with mainly white males. Excellence is also seen as white and male,” she added. 

“Economic transformation is stalling. There is a lack of political will in certain sections,” Montjane said. 

Ajay Lalu, BlackLite managing director, said that when it came to transformation the country was going backwards. 

“We are very clearly regressing in particular at top management levels. Recent appointments of chief executives of large listed companies such as MTN, FNB and Tiger Brands are a leading indicator that appropriate succession planning is not important but satisfying the market is more important,” Lalu added. 

“We need a deliberate intervention here to correct the imbalances of the past,” he said.

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December 8 2019