23 February 2018
STATE OF THE FINANCIAL TRANSFORMATION ADDRESS BY SIBONGISENI MBATHA, PRESIDENT OF THE ASSOCIATION OF BLACK SECURITIES AND INVESTMENT PROFESSIONALS (ABSIP)
I welcome you to the inaugural State of Financial Sector Transformation Address of the Association of Black Securities and Investment Professionals (ABSIP), a lead activist for black professionals and black businesses in the financial services sector.
We welcome the Honourable Malusi Gigaba’s recognition during his budget speech, that transformation of the financial services sector is critical. He was clear that the allocation of capital greatly influences patterns of ownership and production in the economy.
I am proud to say that ABSIP is playing a fundamental role in transforming this sector and in ensuring that our country has a strong financial regulatory and legislative environment.
As the National Executive Committee, we do this work as a calling, standing on the shoulders of giants that led before us. We are delighted that some of them could join us tonight. They have not abandoned the calling.
Deputy Minister, our country is alive with potential. Our sector is a key catalyst to unlock the confined potential for economic growth, as well as economic and social development.
Our nation has made significant social progress over the past 23 years since the advent of democracy. Millions of people have been lifted out of the poverty trap, and access to essential services like water, electricity and sanitation has been broadened.
Now is the time to build on these successes to reduce inequality further, create much needed jobs and ensure stronger, sustainable and more inclusive growth for all.
But economic growth has been too slow. More measures are needed to overcome infrastructure bottlenecks, strengthen the business environment, improve labour markets and ensure future spending needs can be financed.
As ABSIP, we understand that a transparent, fair and efficient public financial management system is an important pre-condition for sustainable development and poverty reduction.
Given the current slowdown in the global markets and its effect on emerging economies such as South Africa, it has become more important to ensure proper fiscal management, a space in which ABSIP plays a role.
Unfortunately, even though progress has been made over the past few years, greater transformation in the financial services sector must still be meaningfully achieved.
Transformation of the financial services sector is an important tool to reduce societal inequalities, and advance to normality.
It is indeed not normal that after 23 years of a democratic South Africa, we remain trapped in the following statistics:
These are just few examples of how slow transformation has been since the advent of democracy.
SUBMISSIONS TO PARLIAMENT
That is why one of our major achievements last year was participating in hearings of the Standing Committee on Finance, the Portfolio Committee on Trade and Industry and the Select Committee on Finance.
In the hearings, we made the following recommendations, among others:
We supported the Financial Intelligence Centre Amendment Bill, which has since been signed into law;
We supported the then Financial Sector Regulation Bill, also known as the “Twin Peaks”, and it has since been signed into law. We expect this legislation to promote and enhance the safety and soundness of regulated financial institutions, to prevent plunder and pillage, while also promoting prosperity of customers;
In the hearings, conducted jointly by the Standing Committee on Finance and the Portfolio Committee on Trade and Industry, on the state of transformation in our sector, we recommended, among others, that there must be compulsory disclosure by all participants in financial sub-sectors, to determine the state of the market structure and whether transformation is meaningfully occurring;
We are somewhat pleased by some of the findings and recommendations of Parliament, relating to how our sector must be transformed. For example:
The Parliament committees supported the DTI proposal that by 2019, state assets must be managed by asset management entities that are at least 51% black-owned and/or have Level 4 B-BBEE status.
In our response to the committees’ recommendation, we have counter-proposed that the applicable B-BBEE status must be a Level 2 at the minimum. In our view, management of assets by transformed asset managers will help accelerate downstream transformation into the stockbroking sub-sector.
The committees recommended that an audit of specialist professions in the financial sector, such as actuaries, auditors, accountants, lawyers, hedge fund managers, asset managers, brokers, analysts and others, be conducted with the aim of putting measures in place, through the Financial Sector Charter code, to encourage transformation and mentorship. We support this recommendation.
The committees noted that given the very high levels of monopoly and market concentration in the South African economy, together with the racialized patterns of the economic and other disparities in the country, there needs to be a review of the nature of ownership in the banking sector.
It was further recommended that the financial sector be compelled to provide the necessary information to the Financial Sector Charter Council, the B-BBEE Commission and any other relevant state structure, as may be required from time to time.
The need to resource and capacitate the FSC Council, and if necessary restructure it, to play its important role in the transformation of the financial sector, was also highlighted.
Support for smaller and other black businesses, including through procurement and enterprise and supplier development was mooted as a key focus going forward.
The financial sector could do more to support enterprise development, especially SMEs and black industrialists.
Last, but not least, the committees urged NEDLAC to pay special attention to the Skills Development element of the FSC and ensure that it prioritises blacks, particularly Africans and women, and aligns with the Generic Codes.
Through submissions it makes, ABSIP has been at the forefront of getting all Financial Sector Bills currently being considered to explicitly set out the need for the Bills to encourage and cater for Black-owned and Black Women-owned entrants in various legislation. This may include exemptions for onerous requirements until the business grows to scale and can compete with the incumbents.
In the recently gazetted FSC codes, we were influential in conceptualising the R100bn Black Business Growth Fund, which, once established, will support Black-owned and Black-managed businesses, including women owned and managed businesses. We are finalising guidance notes at FSC Council level, to give effect to availability of this bespoke funding.
To respond to the challenges and recommendations I have highlighted above, and to make further advances towards a better transformed sector, we have reorganised ABSIP to focus on five strategic pillars, namely YOUTH, WOMEN, ADVOCACY, THOUGHT-LEADERSHIP, and FINANCIAL SUSTAINABILITY.
These strategic pillars support our vision, which we have named Vision 2025.
We are making progress, albeit slow, to arrive at the vision of a transformed, fully inclusive and ethically run financial sector.
For progress to be faster, we need the support and cooperation of all stakeholders in order to build a better sector for all.
Importantly, we need your participation as an ABSIP member.
We are establishing subcommittees of the National Executive as well as sub-sector focused Think Tanks, in order to solicit your views and perspectives. I therefore encourage you to avail yourselves for this calling.
With the buzz words nowadays being “Thuma Mina – Send Me”. You may already consider yourself ‘sent’ by ABSIP. Ngakhokhe thumeka!
Various resolutions taken at our conferences await you to lend a hand. Thumeka!
This is a clarion call to unite and liberate black professionals and black businesses from the shackles of sustained underdevelopment.
It is a call to carry black professionals and black businesses and advance into a fully transformed, fully inclusive and ethically run financial sector, for society will not be normal until this catalytic sector of ours is transformed.
As ABSIP we will not turn back on our belief that the financial services sector should be radically transformed to become a vibrant, and globally competitive industry that reflects the demographics of South Africa, and contributes to the establishment of an equitable society, by providing accessible services to black people and directing investment into targeted economic sectors.
The DM of Finance and Patron will share with us some perspectives on transformation, but importantly he will share perspectives on the national budget.
DG and panel will also analyse the budget.
I wish you well in the programme ahead.
– Sibongiseni Mbatha, President