Financial sector making great strides in transformation

The latest results of the Banking Industry’s transformation performance were released by The Banking Association today, 25 November 2009, showing the sector is well ahead of its broad based black economic empowerment scorecard targets in a majority of areas as judged against the Financial Sector Charter (FSC) scorecard for 2008.

According to managing director of the Banking Association of South Africa, Cas Coovadia, “great progress has been made in transforming the financial sector; however there remains much work to be done to truly change the landscape of the sector sustainably.”

Human resource growth was the most notable in the area of black junior managers in the financial sector, growing to 53.57 percent from a target of 40 percent, while black middle managers and black senior managers growth was slower at 39.6 percent and 25.79 percent yet, still grew past their Charter transformation targets of30 percent and 20 percent respectively.

There was also growth in black skills development spending increasing to R 537,049,473 across the sector while procurement from black companies grew to 55.29 percent, ahead of its set target of 50 percent.

According to the set bench mark of 1.5 percent from the FSC scorecard, the banks exceeded expectations by spending 1.71 percent of their turnover on the training of black staff; however this success did not extend to learnerships which appear to consistently underperform due to the inconsistent funding from the department of labour. The number of learnerships is standing at 1.46 percent of staff as opposed to a set target of 12.5 percent.

Loan origination shows the domestic banking industry has advanced R45.7 billion in low income housing loans during the first five years of Charter implementation (2003), which is in excess of the set target of R 42 billion. Agriculture shows the financial sector lent R1.8 billion in agriculture loans to resource poor black farmers in excess of the set R1.5 billion targets. Black SME’s enjoyed an advancement of R12.8 billion in loans in excess of a set Charter target of five billion rands.

R7.9 billion rand was spent on transformational infrastructure, which, according to Charter definitions is for infrastructure that improves the lives of black people. The sector has also been successful in broadening access to financial services for the population. This included 77 percent of LSM’s 1 to 5 having access to transaction points within 10 km of their domiciles, full service points for 75 percent of LSM’s 1 to 5 within 15 km of their homes and savings products being made available to a massive 98 percent of LSM’s 1 to 5 across the board. However, access to services, though growing well, is still below the set target of 80 percent for access to both transaction points and full service points.

At a more senior level, looking at transformation in boards of directors the Charter saw a growth to 45.08 percent for black directors and a 14.47 percent representation for black female directors. This is ahead of set Charter targets for both of 40.92 percent and 12.06 percent respectively.

Coovadia concluded by saying that it is encouraging that the Financial Sector Charter (FSC) elements are being increasingly institutionalised into the business of banks and extended loans are performing reasonably well. He said growth developments in the human resource and procurement space were good for both the business and reputation of SA banks.

The FSC Council was an attempt to include, in a structured manner, stakeholders not directly involved in the financial sector. There have been both positive and negative lessons from this experience. The positive lesson is that the entire financial sector is able to work together and make significant strides in broad-based transformation on a voluntary basis. The negative lesson is that the inclusion of a broad spectrum of interests, with very different agendas, actually inhibits progress.

Coovadia believes stakeholders with a direct stake in the sector should engage with government directly, on the way forward including maintaining and enhancing the process of transformation in the sector and also encouraging innovation in developing financial products to broaden access to finance for all.