Compulsory transformation targets mooted

The targets in the financial sector charter should be made compulsory and possibly incorporated into regulations‚ a draft report on transformation of the financial services sector has recommended.

The report is being considered by Parliament’s finance and trade and industry committees‚ and will be distributed to all stakeholders who made submissions during public hearings for their input.

The recommendations at this stage are tentative and subject to possible review.

The conclusions of the hearings will feed into the financial sector summit planned by the National Economic Development and Labour Council (Nedlac) for next year.

"Corporates must achieve the targets in the financial sector charter and must be penalised if they fail to do so‚" says the draft report‚ which was discussed by MPs on Wednesday.

Achieving the targets could be made a condition for licensing financial institutions.

"The available data indicates that there has been a regression in transformation in the financial sector especially in ownership‚ management control and skills development‚" the draft report noted.

"The committees agree with National Treasury’s proposal that there should be higher targets‚ especially on ownership‚ management control‚ procurement‚ skills development and financial inclusion."

Monopoly in the banking sector needed to be addressed and ways found to increase the level of direct black ownership of major banks.

The report recommends less stringent requirements for new market entrants‚ although it points out that the interests of depositors must be protected.

Majority‚ black and particularly African ownership‚ with adequate ownership by women‚ should be a condition for the issuance of new bank and insurance licences.

The draft report supported a proposal by the Department of Trade and Industry that by 2019 state assets must be managed by asset managers that are at least 51% black-owned and/or have level four broad-based black economic empowerment (BBBEE) status.

The draft report emphasises the need for greater and more effective transformation of the financial services sector‚ but also stresses that "transformation does not mean a reckless populism that will ultimately undermine the interests of the poor and disadvantaged".

Transformation should serve to reduce inequality and not increase it.

The committees acknowledged that the recommendations could not be implemented overnight and would have to be phased in during a process that had immediate‚ medium-term and long-term goals.