08 May 2018
Address by the Treasurer General of the ANC, Paul Mashatile, at the ABSIP Roundtable Discussion on the Black Bank, Sandton
President of ABSIP, Sibongiseni Mbatha
NEC Members of ABSIP
Members of the media
Allow me to express my gratitude for the opportunity to share some ideas with members of ABSIP on the political, social and economic challenges facing our country especially in escalating efforts for radical socio-economic transformation.
Our conversation this evening assumes even greater significance as it takes place takes place during the centenary of the birth of an international icon and father of our democratic dispensation, Cde President Nelson Mandela.
This centenary and that of Mama Albertina Sisulu – a veteran of our struggle – affords us an opportunity to confirm and demonstrate commitment to our people that we are still guided by their uprightness and commitment to the vision for our liberation that must translate to a better life for all our people.
The restoration of human dignity and the advancement of human rights feature prominently as founding values of both the Freedom Charter and our Constitution. Twenty four years after the advent of democracy, progress has been made in terms of restoring the dignity of our people and we have the right to vote for a government of our own choice and more and more people are having access to basic services.
Our commitment and dedication in this job derives from the desire to correct the historic injustice where apartheid architects made sure that black people were segregated and kept away from urban areas. It is this desire for the restoration of our people’s dignity that drives us every day to deliver even more.
As we reflect on the progress we have made thus far as a country, we must bear in mind that this progress notwithstanding, our country has become one of the most unequal society with the poor becoming more poorer and the rich becoming more richer. The gap between the rich and the poor is growing and this should concern all of us as this type of situation is unsustainable. Simply put, we are facing the persistent triple challenges of poverty, joblessness and inequality.
When I was approached to address this gathering, I was delighted to realise that the meeting plans to discuss the critical issues concerning the interventions that are required to radically and meaningfully transform our economy for the benefit of us all.
Ladies and gentlemen, it is twenty four years since the democratic breakthrough in our country. Significant progress in terms of restoring the dignity of our people and opening the political space notwithstanding, challenges still remain. Although our economy has grown post the democratic dispensation, we still battle to deal decisively with the triple challenges of unemployment, inequality and poverty.
Solutions to these challenges will require concerted effort by all stakeholders, aimed at delivering innovative solutions that will ensure a more equitable and sustainable future. Clearly, rhetoric will not take South Africa forward, what is required is specific pragmatic economic interventions aimed at de-racializing our economy while creating entrepreneurial and employment opportunities in order to surmount our challenges. Government in partnership with important stakeholders such as institutional investors can be in a position to accelerate transformation through encouraging meaningful shareholder activism to ensure transformed corporate SA and accelerate service delivery by creating an environment that would allow institutional investors such as pension funds to invest directly in economic and social infrastructure.
In essence, our view is that institutional investors can play a critical role in the advancement of meaningful economic transformation of the South African economy. It is a tragedy that the majority of black people are still marginally participating in the mainstream economy – a legacy of our apartheid past. Hence, economic transformation is critical if we are to create a more sustainable South Africa where inequalities are minimal and not racially based.
Whilst we emerged from our deeply divided past into a vibrant democratic state and to some extent have made progress towards addressing some of our challenges with more people today having access to basic services compared to 1994 – households with electricity connections increased to 85% and 91% of households have access to piped water today compared to 56% in 2002, it is however disconcerting that in the same period, South Africa has become one of the most unequal society. This is a trend we should all be concerned about since it is unsustainable for the poor to be poorer and the rich to continue to get richer.
We therefore need specific economic interventions to ensure a more inclusive growth aimed at ensuring all South Africans have equal access to economic opportunities. Hence our view is that worker capital – that is pension funds – can play a meaningful role in taking South Africa forward towards achieving a more just and equitable future.
We all need to implement a bold programme of meaningful transformation that must bring our people who have been hitherto on the periphery into the economic mainstream. Hence we call upon business to come to the party since government alone will not surmount the challenges that our country face.
We view the private sector as an important stakeholder that should play a meaningful role in the radical transformation of the South African economy and we are delighted that ABSIP is having keen interest in the current affairs of our country. As the ANC, we are calling for radical economic transformation anchored around active shareholder activism. Our view is that growing inequalities in our economy are unsustainable and that investors including the savings industry can play a major role in correcting the wrongs of the past.
Firstly, investors can play an active role in ensuring that their investments have a direct and positive impact on the South African economy – for example, government has opened up the space for the private sector to participate in the provision of socio-economic infrastructure. Government has packaged infrastructure projects to entice the private sector to invest in. This initiative is clearly in the spirit of building a better South Africa together and pension funds should seize the opportunities as presented.
Secondly, the savings sector as one of the significant players on the Johannesburg Stock Exchange (JSE) can play an active role in driving transformation of the South African economy. The savings industry accounts for about a significant portion of the trillions invested in companies listed on the JSE.
It is worrying that in most debates aimed at the transformation of our economy – from nationalization of key sectors of the economy to excessive executive pay – the voice that ought to be influential is absent. It is our hope business will join the conversation on what ought to be done to accelerate transformation, reduce inequality and create a more just and prosperous South Africa. Surely, it should be unacceptable to all of us for corporate SA to not reflect the demographics of the republic – how many companies today are led by black CEOs and Chairpersons and the financial services sector is not an exception?
Twenty four years after the advent of democracy, it is shameful that the financial services sector is still untransformed and remains the preserve of the minority who are white. It is common cause that the financial services space is dominated mainly by a white minority that is reluctant to allow new, black entrants to play in. Due to the lack or slow pace of meaningful transformation, black entrepreneurs, have hitherto, not played effectively in the financial services space. This situation is complicated by barriers of entry being so stringent that black people have not been able to break thorough, notwithstanding the fact that our country having been a democracy for 24 years. This state of affairs is unacceptable hence decisive and bold steps have to be taken to ensure that black players play a meaningful role in this space.
If we are to seriously talk transformation, this is one area we should encourage and unapologetically support black players to occupy. Since most of the financial institutions are reluctant to finance black entrants, the African National Congress- led government needs to step in and ensure that more and more of black entrepreneurs are funded to play meaningfully in the mainstream of our economy.
For instance , our government is implementing a new vision of building mega cities. These are big, integrated human settlements that ensures that economic and other opportunities are close to where people live and social amenities like schools, clinics and recreational parks are within walking distances.
Ladies and gentlemen, government is making strides in leading transformation and this is reflected by, amongst other efforts, the number of women that occupy leadership positions in government and other public sector institutions that continue to grow. It is disheartening that progress in the private sector has been worryingly slow. We need to reflect on this including the levels of transformation within your immediate sector if we are to genuinely deal decisively with the current racially based inequalities in our economy.
As both the ANC and Government, we are determined to engage in conversations that will contribute towards finding innovative ways of transforming our economy with the aim of ensuring that the triple challenges of poverty, joblessness and inequality are surmounted.
As the ANC we have taken a view to drive and promote economic transformation and this effort reached a crescendo at our last conference in NASREC. Our approach is informed by the said reality that:
“It is estimated that retirement funds own at least 30% of the companies listed on the JSE. In fact, retirement funds represent the largest category of ownership on the stock exchange. If transformation is to be taken forward in a significant way, this group of shareholders will need to become active and utilise their strength to accelerate transformation of the JSE. Given this context and the call for radical economic transformation as envisaged through nationalisation from other quarters, it should not be far- fetched to state that, through retirement funds, “The people already share in the Country’s Wealth”. The only challenge is that they are not directing the means of production by actively engaging and being represented at governance levels of companies.”
Analysis of ownership of the Top 100 companies listed on the JSE reflect the following categories of shareholders through various investment vehicles/platforms:
• Black South Africans hold at least 23% (38% if international holding are excluded) of Top 100 mostly through their retirement savings. Pension funds represent the single largest category of savings for South African Workers, Black or White;
• White South Africans hold about 22%;
• Foreign investors hold about 39%: significant increase from 2011
• Rise negatively impacts direct black ownership
• The balance of 16% still to be attributed
Given the current low return enviroment in global markets, this has accelerated foreign interest in Africa as the growth market.
Within Africa, South Africa boasts the most liquid stock exchange, as such it is not surprising that foreing investors (which consists mostly of foreign pension funds and soveriegn wealth funds) have increased their shareholding in companies geared for the Africa growth story.
Although this introduces systematic risk to the South African economy in that sudden reversal of this trend could lead to a recessesion, it has been a way for South Africa to fund its current account deficits. As such this has become a policy conundrum for SA Inc. This will be a discussion for another day.
We have therefore resolved that there is a need to engage with institutional capital in ways that will encourage them to drive the economic transformation agenda, as an important and strategic stakeholder.
As such companies listed on the JSE, the JSE itself, and Institutional investors represented by institutions such as ASISA and BATSETA are critical elements of this conversation.
Given this context, it is apparent that the financial services sector has not been helpful in transforming our economy with countless cases of black entrepreneurs and industrialists struggling to access funding. No country can survive if the majority is perpetually excluded especially from the economic mainstream. Hence this sad state of affairs calls for decisive action to ensure that black business flourish.
Hence the call for a State and even Black Bank as a concerted effort and decisive intervention to bring radical and meaningful transformation. As we stand there is no reason to not establish a financial institution that will better service black entrepreneurs. Hence every effort must be made to support black entrepreneurs who have both the appetite and financial muscle to establish a black bank. Already there is African Bank and there is VBS. Their shortcomings notwithstanding, these financial institutions afford us a foundation to build on.
Our conversation tonight should of necessity reflect on how these guinea pigs, if you may, have blazed a trail in opening opportunities for black people to “bank themselves”. We should not attempt to reinvent the wheel. Rather, let us learn from the lessons of their existence and raise the bar in holding a strong, viable black bank as our conversation contributes in no small measure to our forward march of transforming our economy in order to achieve our goal of creating a better life for all of us.
I wish you an insightful conversation and hope to continue this important engagement with yourselves going forward.
I thank you!