BMF highlights issues affecting transformation in finance

14717056_1388470261178239_3899835702950520949_nThe Black Management Forum (the BMF) which is at the forefront of transformation in Corporate South Africa tabled its recommendations on Transformation of the Financial Services Sector before the Standing Committee on Finance in Parliament on Wednesday, 22 March 2017. Part of the submission highlighted some of the key and structural issues hindering transformation in the sector, namely:

  1. Financial Services Sector Codes:

Though the B-BBEE Act does provide for Sector Codes, the BMF is opposed to the Sector Codes as a matter of principle. Our considered view is that sector codes are minimalist and seek to legitimise the apartheid order in a democracy. If the sector codes are to be agreeable, they must by definition meet or exceed the minimum requirements of the B-BBEE Generic Codes of Good Practice.

  1. Once Empowered, Always Empowered Principle:

The BMF is opposed to the notion of ‘Once Empowered, Always Empowered.’ We view this principle as unethical, bereft of commercial innovation and out of kilter with the spirit of fundamental transformation. We urge the Standing Committee to reject ‘Once Empowered, Always Empowered’.

  1. Empowerment Financing:

The BMF objects to empowerment finance as part of the measured elements in the FSC. The provision of banking, financial services and lending money is in the normal course of business for financial institutions. This measure is at odds with the permissible “deviation” grounds as contained in the Statement 003.

  1. Ownership:

Equity is fundamental to the establishment and control of a commercial enterprise. Equity confers rights to investors that no other element does, amongst others the right to determine the board composition, to approve remuneration policy and by extension the strategy which the enterprise shall pursue. We equally object to an argument that direct ownership introduces systemic risk whenever black people are to own a direct significant stake in a bank or any financial institution.

  1. Market Concentration:

The BMF notes with extreme concern the oligopolistic market structure prevalent throughout different economic sectors of our economy. This phenomenon is predominate in the financial services sector. This market structure creates a fertile ground for all undesirable market conduct such as collusion as we have recently seen with the banks but even more importantly it has a tendency of excluding new entrants in the market and in our case black new entrants. To create an inclusive economic growth we need to consider structural deconcentration policies including compelling the dominant players to unbundle and thus open up the market for black new entrants.

The Black Management Forum went on to further express their concern regarding the state of the Financial Services Sector during their meeting with the Finance Minister Pravin Gordhan on Friday 24 March 2017, where it was agreed upon that follow-up engagements will be held with the National Treasury in this regard.

The Black Management Forum stands for the development and empowerment of managerial leadership primarily amongst black people within organisations and the creation of managerial structures and processes, which reflect the demographics, and values of the wider society.

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