South African Asset Managers Navigate Greylisting and Load Shedding: BEE.conomics Survey Reveals Challenges and Triumphs

The 15th edition of the BEE.conomics Transformation in South African Asset Management Survey offers an insightful view of the asset management landscape in South Africa.

The lack of differentiation in investment offerings, accentuated by an economy grappling with stagnation, declining savings rates, and diminished global competitiveness, has cultivated a Darwinian environment. The declining economic complexity of South Africa further complicates the challenge of attracting and retaining top talent.

On the brighter side, as of 30 June 2023, 68 asset managers qualified for the survey, overseeing a combined R2.2 trillion. This is a striking comparison to 10 years prior, when only 26 Black-identified asset managers managed R253 billion. While the majority of asset managers in South Africa reflect the nation's broader demographics, a significant underperformance persists at the top management levels. Our research suggests that, given the current economic growth rate, achieving racial equality in top management positions within the financial sector could take an estimated 170 years.

Our findings also highlight that the increased offshore limits for compulsory savings have triggered a rise in the externalisation of domestic savings. This trend has raised concerns regarding its effect on the domestic asset management industry and its associated infrastructure, including administrators, platforms, stockbrokers, and banks. This leads to the pivotal question: Why choose internationally based asset managers when local options exist? We expect this topic to gain prominence in sector discussions.

Asset owners are also progressively questioning the value delivered by the asset management industry and its ability to deliver both financial returns and positive societal or environmental impacts, especially considering South Africa's socio-economic challenges. A sub-sector addressing these concerns is the private markets sector. Black private markets funds now collectively manage R44 billion across 45 funds.

A positive development is the increase in awareness and action by asset allocators to address the underrepresentation of women in the sector, encouraging greater gender diversity by creating more opportunities for women in asset management.

This research also investigates the implications of the Employment Equity Amendment Act, 2022, on the financial sector and explores whether the new Two-Pot retirement system will achieve financial inclusion.

“While the past two decades focused on nurturing start-up and emerging asset managers, the upcoming decade should centre on consolidating and scaling Black-owned asset management firms, including how the sector can play a more meaningful role in South Africa's rebuild,” says Fatima Vawda, CEO of 27four.

The comprehensive survey is accessible online at 27four.com/surveys. A live announcement of the results will be streamed online on 28 September at 14:00. This digital event will be co-hosted with the retirement fund industry body, Batseta.