1 Financial Sector Campaign

Coalition (FSCC) presentation to the

Standing Committee on Finance Parliament of South Africa
March 14 2017

Delivered by Tebello Radebe

2 About who we are

The FSCC, currently made up of a cross section of some 50

organisations
these range from churches, trade unions, small business, cooperatives,
political, women, youth, the disabled, community based and non-
governmental organisations
with about 450 affiliates or subsidiaries, who in all, represent up to 10
million individual persons
while through one coalition member alone, we indirectly represent the
interests and aspirations of the overwhelming majority of the entire 55
million citizens of South Africa countrywide
3 Our candid view regarding the
sectors transformation to date
If, Chairperson, we all agree that total transformation means
change in form, appearance, nature, or character
then we want to state at the outset that we see very minimal change
in form from the sector,
while from the point of view of appearance we note there are some
cosmetic efforts aimed at effecting change
in the main the nature of the sector largely remains unchanged
while the character of the sector is still very much out of kilt
with the needs of the majority of the population of the country.
4 The critical role of the financial sector
in most economies globally
Ironically, at its birth, 6 years after the 1rst Nedlac Financial Sector
Summit, the Financial Sector Charter correctly conceded that In most
economies the financial sector plays a central role in enhancing growth
and development.
It further proceeded to commit the sector to make a significant
contribution towards economic growth, development, empowerment and
reduction of inequalities and poverty in our society

And to crown it all, the Charter spelled out a series of initiatives

envisaged to promote growth in the financial sector
5 Going to the root of why, in our view,
there has been minimal change
if we take into account the fact that the financial sector in SA was
indeed, not established nor geared to serve the entire population of the
country in the first place,
then the current snails pace of its transformation should not be very
surprising.
That, is if we agree that the sector was historically formed to serve the
growth of the mining sector in the main
as was South Africas energy sector too, all of which was aimed at
simply extracting minerals from the ground for export
while benefitting very few among the local population. That is still
largely the case today.
6 Other unhelpful definitions include

Definitions likesound business practice to be observed in BEE

transactions
such as BEE transactions taking place on a willing buyer and a willing
seller basis and so on.
the Charter nonchalantly goes on to state that sound business
practice means a bisiness practice which is conducive to the
establishment ,
such notions have effectively reduced many Charter based outcomes
to simply one party mainly doing another a favour while everything
remains as it was
7 Two of the most crippling sector
pitfalls
The ounce empowered always empowered mindset as well as the
glass ceiling and or limitations determined by government regulations
on equity holding, coupled with the most demanding Basel I, II and III
international regulations in banking, have also not assisted to ensure
that the racial profiles of the ownership of key sector entities get to be
meaningfully transformed.
Secondly, the inadvertent omission of government developmental
financial institutions (DFIs) in the Charter flew directly in the face of the
1rst Financial Sector Agreements. This on its own left out many key
components of the sector which by their nature should have contributed
immensely to transformation.
8 About the FSCC

The FSCC is currently made up of a cross section of some 50 entities

Inclusive of churches, trade unions, small business, cooperatives, political, women,
youth, the disabled, community based and non-governmental organisations
with about 450 affiliates or subsidiaries, who in all, represent up to 10 million
individual persons
via one member organization alone, we indirectly represent views of the
overwhelming majority of the entire 55 million citizens of SA countrywide.
together with the SACP and Cosatu, FSCC led the calls which brought abou the 1st
Nedlac Financial Sector Summit in 2002.
It is in this context that, Mr Chairperson The FSCC can rightly lay claim to being one
of the pre-eminent voices solely dedicated to the realization of the total
transformation of the financial sector in our country.
9 PASA outweighs the omission of DFIs
like IDC, PIC, Ithala, Postbank etc
The most glaring example of the unfortunate omission we refer to
around key DFIs is the Payment Association of South Africa (PASA)
which even if it was formed in 1996
it appears to be a body of gatekeepers who are only hell bent to at best,
to prevent or at least delay the entry of emergent and small players in
the banking sector and thereby maintain the highly monopolized
character of the sector.
We note that these glaring omissions may soon be addressed question
is how long will it take?
10 Notable limited gains to date

Among the few notable positives which have emerged within the current
transformation trajectory is the massive reversal of the numbers of the
unbanked among the economically active persons in the country as well
as the changes in the credit bureaus operations.
However, the expected promotion of a savings culture in the country has
not been accompanied by the growth in access to financial services.
Disturbingly, this growth has also been linked to the massive
indebtedness among the people, a massive uptake in funeral policies
surge and minimal appetite for short term risk cover.
So called consumer education appears to be, in the main, disguised
product marketing if not conducted at arms length from the funders.
11 Some of the outstanding
consequences of poor reporting
no clear account of how well or not the sector has done to achieve the
objectives of providing support for transformational infrastructure projects
that support economic development in underdeveloped areas and
contribute towards equitable access to economic resources. Such as
transport, telecommunications, water, waste water and solid waste, energy
or even social infrastructure such as health, education, and correctional
services facilities, municipal infrastructure and services.
In addition, over the period under review, bold announcements were made
by the sector with respect to their intentions to support low-income
housing for households with a stable income in excess of R1, 500 per
month and less than R7, 500 per month.
However, again given, the shortcomings of reporting mechanisms there
is no clear picture of what the actual outcomes are.
12 A few of the key challenges faced by the
sector then and still the same to this day

the presence of a few very large institutions. Many of the smaller and
low levels of black participation, especially of black women, in meaningful
ownership,
Few black people in control, management and high-level skilled positions in the
sector;
not credit to entrepreneurs, particularly black businesses;
national levels of savings and investment is inadequate to support sustained
economic growth and individual financial security;
there has been limited support for new black firms in the financial sector by
Government and the private sector; and
they need to find meaningful ways to support the Proudly South African
Campaign.
13 Towards the 2nd Nedlac Financial
Sector Summit for new solutions
Sadly Chairperson, and your esteemed committee these and other noble
intentions we espoused in the Charter, six years after the 1rst Financial
Sector Summit, nine years ago and they remain valid while very little
has been achieved
or will ever be achieved unless we begin to look at punitive measures
to ensure real transformation,
lest it takes us many more years to get to get there
14 The critical role of the sector in most
economies globally
Ironically, at its birth, 6 years after the 1rst Nedlac Financial Sector
Summit, the FS Charter correctly stated In most economies the
financial sector plays a central role in enhancing growth and
development.
It further proceeded to commit the sector to make a significant
contributions towards economic growth, development, empowerment
and reduction of inequalities and poverty in our society
And to crown it all, the Charter spelled out a series of initiatives
envisaged to promote growth in the financial sector
15
What went wrong ?
The Charter chose to anchor most of its noble intentions around Black
Economic Empowerment (BEE) - today, we can only describe this as a
major impediment that has literally and figuratively brought the entire
edifice down like a pack of cards.
Among some of the factors which have seriously undermined most noble
intentions of both the sector and or the charter can be linked to among
others, its basic starting blocks like some of the definitions in the Charter.
Eg the Charter defined direct ownership as inclusive of together with
control over all voting rights attaching to that equity interest
Now there is very little evidence of those rights being really exercised or
where that has happened it was ineffective in the main, therefor the
status quo remained largely as is.