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Financial Sector Transformation

Financial Sector Transformation. Progress Report by the Financial Sector Charter Council Community and Labour constituencies. Presentation overview. Backgound to financial sector transformation and the Financial Sector Charter Council Labour & Community mandates

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Financial Sector Transformation

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  1. Financial Sector Transformation Progress Report by the Financial Sector Charter Council Community and Labour constituencies Presentation to Standing Committee on Finance

  2. Presentation overview • Backgound to financial sector transformation and the Financial Sector Charter Council • Labour & Community mandates • Challenges in executing mandates • Committee assistance • Gazetting process

  3. Backgound to financial sector transformation • Transformation process started in 2000 with the SACP Red October campaign “Make the banks serve the people” • 2001 launch of Financial Sector Campaign Coalition (FSCC) – brought together national federations of community, women’s, youth, trade union organisations • FSCC joined National Economic Development and Labour Council (Nedlac) Community Constituency • Nedlac partners – Government, Labour, Community, Business • 2002 Nedlac Financial Sector Summit (FSS)

  4. Background (2) • Nedlac FSS Agreements, endorsed by all 4 constituencies • 13 FSS agreements, including: • Access to financial services • In 2003 the business constituency, supported by government, started drafting FSC to give effect to FSS agreements, as reflected in the Charter • Business, through financial sector representatives, negotiated Charter with Absip, financial sector professionals even though they do not belong to Nedlac • Labour & Community were excluded from the drafting of the Charter

  5. Labour & Community mandates • Mandates derive from FSS agreements • Both constituencies found original Charter fell short of FSS goals • Concentrated on black ownership of financial institutions • Labour & Community agreed to participate • Reserved right to review agreements reached prior to participation, including: • Finalising Charter, aligning with generic Codes of Good Practice • Charter constitution • Transformation targets • Performance measurements

  6. Mandates (2) • Business & Absip proposed Labour & Community participation in Charter Council: • Business and Absip - 7 members each • Government - 3 • Community and Labour – 1 each • 2004 Proposal rejected;Minister of Finance intervened; Council structure agreed as: • Business – 6 • Absip - 3 • Labour & Community – 4 each • Govt – 3 • Negotiating Financial Sector Code since 2008 • Following release of BBBEE Codes of Good Practice (CoGP) in December 2007 • Labour & Community view is that CoGP are universal minimum standards for sector transformation

  7. Challenges in executing mandates • Slow and contested process • Some trade associations are amenable to transformation, others resistant to multilateral consensus on change • Some members within a single trade association are more amenable to transformation than others • Alignment with CoGP has been difficult process

  8. Challenges (2) • 2009 Minister of Finance and Minister of Trade & Industry intervention - parties agreed to resolve impasse over alignment with CoGP on direct black ownership: • Consensus on aligning with CoGP on direct black ownership of 15% by 2017 • target can be achieved either by 15% direct black ownership or through Equity Equivalent for the 5% between 10-15%

  9. Challenges (3) • No consensus on alignment with CoGP on “once empowered, always empowered” • Four of the five constituencies – Community, Labour, Government and Absip - agreed on full alignment. • Trade Associations refused to align, wanting to retain the original Charter provisions on black ownership • This approach sees transformation as a once-off event, based on a single “deal”, • Community and Labour see transformation as an ongoing process to achieve genuine BBBEE that promotes in the words of the Charter preamble (1.2) “a transformed, vibrant and globally competitive financial financial sector that reflects the demographic of South africa, and contributes to the establishment of an equitable society…”

  10. Gazetting process • Phase 1 is gazetting of the draft Financial Sector Code for public comment in terms of s9.1 of the BBBEE Act by September 2010 • Phase 2 is gazetting for public comment in terms of s9.1 by November 2010 • Phase 3 is gazetting of Financial Sector Code in terms of s 9.5 of the BBBEE Act by March 2011

  11. Committee assistance • Community and Labour constituencies welcome assistance from the Committee, especially in the following areas: • Providing a regular opportunity to update the Committee on progress in achieving the gazetting milestones • Ensuring government departments route financial sector transformation initatives through the FSC Council so that performance can be effectively measured by the Council • Ensuring all levels of government procure financial sector goods and services using Charter procurement criteria and its performance measurement scorecard

  12. Thank you

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