Now that South Africa’s top four banks and COSATU have failed to resolve their tiff over increasing black direct ownership in banks, hopes of black masses have been dashed while banks continue generating profits.
Black (including coloureds and Indians) South Africans, who were salivating at the thought of benefiting from increasing direct black ownership in banks to 15 percent, may not hold meaningful ownership in banks in the short term.
It could also mean that the top four banks may not have to engage in restructuring all the BEE deals that have been struck in the sector in the past 10 years, saving them over R25 billion in costs.
A Johannesburg-based analyst, who did not want to be named because he did a lot of business with all the top four banks, said failing to resolve the tiff meant that banks would continue to do business as usual while blacks would remain minority shareholders in the banks for many years to come.
The banks and the union federation have been at loggerheads over ownership for more than five years. SACP and COSATU have been calling on the banks to increase their direct black ownership from 10 percent to 15 percent.
The banks are stubborn to do so, saying this would mean restructuring of their BEE deals, which will be a tedious process.
Cas Coovadia, CEO of the Banking Association of South Africa (BASA), said there has been no progress in the talks between the warring parties since the negotiations deadlock in 2008.
“This is not a big issue in my or the banks’ life anymore. We are now reporting against the generic codes,” Coovadia said, adding it was nonsensical to expect people from such diverse backgrounds to agree.
“The parties that were in talks came from totally different backgrounds, making reaching a logical conclusion a nightmare.” Negotiating parties consisted of communities, labour movement and the big four banks.
In 2008, the banking industry raised the stakes in its fight to do away with the demand to raise the direct black ownership target in the Financial Sector Charter (FSC) from 10 percent to 15 percent, saying the matter needed political intervention.
It was convinced that a political decision was urgently needed to gazette the charter without further delay. BASA’s call for political intervention brought to an end the haggling within the FSC council.
It was unlikely that the politicians would push a position that conflicts with the existing banking regulations as the strength and stability of the banking sector was key to SA’s case as an investment destination.
Treasury has clearly spelt out its objections against the demands for 15 percent direct black ownership.
DTI Minister Mandisi Mpahlwa had promised to push for the gazetting of the FSC during the first quarter of 2009 but this did not materialise.
BASA had been concerned that changing the direct black ownership target would have a negative impact on SA’s image because it amounted to shifting the goal posts.
There was also concern that a straight readjustment of the charter’s ownership element to match the BEE codes of good practice would set many financial institutions way behind the 2010 target.
Patrick Craven, the spokesperson of COSATU, told TransformSA, the whole ownership matter had been overtaken by events – which were the reason all parties were so quiet about it.
“But we want a publicly owned banking system in South Africa,” Craven said, adding the role banks played in society had to be taken into consideration.
Written by: Mzwandile Jacks – Editor of Transform SA