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Banking sector continues to progress transformation target, report shows

26th July 2022

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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Banks continued to meet many of the empowerment and transformation targets set out in the Financial Sector Code (FSC), despite the severe economic contraction of 6.4% experienced in 2020, which reduced opportunities for job creation and inclusive economic growth.

This is according to industry organisation the Banking Association of South Africa’s ‘Transformation in Banking Report 2022’. 

The report points out that, until the South African economy recovers from the years of State capture, maladministration, political uncertainty and a lack of urgent economic reforms, sustainable black economic empowerment (BEE) will be hampered.

However, it notes that banks remain committed to meeting and exceeding the transformation targets set out in the FSC.

According to the report, in 2020, ownership of banks was slightly above target with black people holding 28.4% of voting rights in banks, against a target of 25%.

However, black economic interest was at 23.6% against a target of 25%.

Black ownership of banks is likely to continue to drift down as bank BEE deals have vested and black investors are now free to sell their shares and benefit from their profit, the report posits.

The report indicates that, while black management control of banks fell short of targets at all levels, the percentage of black managers and directors in banks had increased at all levels, every year for the past three years and this is expected to continue owing to the strong pipeline of black managers at all levels.

Banks spent R4.7-billion on skills development for black employees.

The report notes that banks procured 82% of their goods and services – worth R137-billion – from BEE-compliant businesses, against a target of 80%.

Moreover, banks provided R271-billion in empowerment financing, including R34.5-billion to small black-owned businesses.

The report outlines that banks provided access to transaction points to 88% of South Africans in low-income households, against a target of 85%; and provided 20-million products that contribute to financial inclusion, against a target of 15-million.

“The findings of the ‘Transformation in Banking Report 2022’, show in hard numbers, that the narrative that banks are falling far short of their FSC targets is based on an incorrect interpretation of the numbers as guided by the FSC.

“This can distort facts and discredit the contribution of banks to the transformation of the financial services sector and economic empowerment in South Africa,” the association emphasises.

It points out that the faster implementation of announced economic reforms will create more opportunities for transformation and empowerment in the economy, which will be supported by the banking industry.

It adds that banks will continue to work with government and business to fast-track inclusive economic growth.

“This report also demonstrates how banks and other financial institutions have been central to transformation in the energy sector by financing [projects under] the Renewable Energy Independent Power Producer Procurement Programme.

“With the right conditions in place and an enabling regulatory framework, banks can play a similar transformative role in other sectors of the economy, which will achieve much beyond the targets set out in the FSC,” the association says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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