20 years into the South African democracy, the time is ripe for a serious engagement between all relevant stakeholders, such as asset owners; retirement fund representatives; asset consultants and investment managers to have honest and constructive discussions on the various factors which have impacted the slow pace of transformation in the South African investment industry and more importantly what mitigating solutions must be put in place to accelerate this pace for the next phase of the democracy. This is the key message from the Association of Black Securities and Investment Professionals (ABSIP) who hosted the first Investment Management Summit on 2 April 2014 in Johannesburg.
For the 19 years of Association of Black Securities and Investment Professionals (ABSIP) existence, we have observed the trend that most pension fund assets still go through the majority large white firms who are untransformed, leaving very little allocation to the small black owned firms who then struggle to grow and sustain their firms. This does very little to boost transformation in the industry but rather creates a sometimes anti-competitive market place.‘It's very important to understand that Transformation is not a choice but a sense of duty for every business. It's a DNA of doing business. This will make businesses grow as society prospers’, says Tryphosa Ramano, President ofABSIP.
However, as Absip we are not about pointing fingers but rather about highlighting these issues so that the industry can have frank and honest conversation without singling out individuals who may otherwise feel intimidated to do so in other platforms due to fears of being over looked for asset allocations. This is the difference with our engagement platform, Absip is about building bridges and overcoming challenges which have been created by the legacy of our past adds Ramano.
According to the latest 27four BEE economics Annual Survey released September 2013, less than 10%of assets under management out of the total of approximately R5 trillion, in the South African investment management industry, are managed by majority black-owned firms.
Moreover, within the large managers who own just above 90% of approximately R5 trillion are not transformed in the sense that they are not representative of the demographics of the country. Eskom pension fund research has shown that in the big firms 75% of the portfolio managers in the asset management industry are white of which 88% of these are male. Additionally, 61% of the analysts are white and 70% of these are male.This clear example of the lack of transformation within the industry.
Addressing the summit, Deputy Minister of Finance Nhlanhla Nene said the financial sector provides tools which can deliver transformation but also itself requires transformation. The sector is both the instrument to correct broader societal imbalances but may also contribute and, at times, exacerbate those very imbalances. Transformation in this sector therefore is a complex process that requires taking a broad view.
The complexity arises because previously disadvantaged people within the financial sector are both victims of inequality while simultaneously participating in a sector that deepens and entrances equality. This may occur through the systematic exclusion of certain groups, for example by designing investment or insurance products that require full time employment, Nene comments.
The industry does have great leaders and drivers in Government, State Owned Enterprises and labour aligned retirement funds, who have been the most supportive at pushing the transformation agenda.
It is clear that self-regulation is not working but a more prescriptive and direct policy is necessary with punitive consequences for lack of compliance. The current state of affairs is the current 10% allocation to black managers under the incubation programme is not working (it even does not have rules). Therefore a review of the incubation programme is necessary.
We also must caution that Citizenship is not only the responsibility of Government, State Owned and Labour aligned retirement funds but also incumbent on corporate retirement funds, life assurers and the investment industry such as the collective scheme industry. What then, do the retirement funds have to say about the less than 10% of the assets under majority black-owned investment management firms? What plausible excuse could we have for this dangerously slow pace of transformation in the asset management space? asked Ramano.
It cannot be the belief that there are no competent majority black-owned firms or that there are not competent professionals to be CIO's, or that there is no forum to discuss how transformation can be advanced, because ABSIP is one of the opportunities available and actively involved in lobbying for the transformation of the entire financial services sector.
Transformation can only be effective and impactful when driven from the top, and as an organization we are hopeful for the future we have seen significant appointments recently to top positions such as Thabo Dloti as the new head of Liberty Holdings, Phakamani Hadebe as the new head of Barclays Africa Investment Banking and Seelan Gobalsamy as new CEO of Stanlib. In the investment industry the most critical position is that of the Chief Investment Officer (CIO), we therefore call upon the industry to follow in the trail of their banking counterparts and make significant transformative appointments in the CIO positions in aid of transformation’, Ramano concludes.
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