ROBUST transformation of South Africa’s financial services sector is a critical component of the country’s economic make-over as the banking sector is a key intermediary and conduit of capital across key sectors and players, Dondo Mogajane, the chairperson of the Government Employees Pension Fund (GEPF) said yesterday.
The GEPF has just officially launched a new Transformation Policy that seeks to create a framework for future GEPF investments by to stimulate and achieve socio-economic transformation, leverage the vast investment power of the GEPF to encourage the growth of black owned financial service providers and to invest in asset classes aimed at delivering positive financial social service outcomes.
The new policy is also aimed at nudging up investments that are take environmental, social, and corporate governance (ESG) into account in line with South Africa’s long-term environmental sustainability goals.
But it is transformation of the financial services sector that is especially key at a time previously disadvantaged South African groups and businesses are in need of capital support.
“Transformation in the financial sector is a critical factor in the broader economic transformation of the country. Financial services serve as key intermediaries and providers of capital between and to other business and consumers,” Mogajane told Business Report by email yesterday.
Improved interaction between financial services and the business entities they serve, added the chairperson of the government workers pension fund, “will substantially drive the transformation objectives” capital holders such as pension funds.
Moreover, it was important to hold players in the financial sector accountable to the highest standards of corporate governance and to encourage them “to pursue transformation” objectives”.
Presently, total assets managed by asset management firms that meet transformation thresholds account for only a fraction of the trillion-rand savings industry in South Africa, added the GEPF.
The Banking Association of South Africa, however, argues that the sector is not resistant to transformation, highlighting that there is tough competition at the top of the financial services industry. This intense competition could be precluding newer and previously economically disadvantaged players, say analysts.
There is therefore a greater need for more B-BBEE asset managers, as well as private equity fund managers, fixed-income asset managers, audit firms, actuaries, and other relevant emerging financial institutions within the South African Economy.
Such financial institutions would play a key role in the economic transformation of South Africa through promoting financial inclusion by developing services that are accessible and affordable to all; providing financing to sectors that are identified as key drivers of economic transformation and investing in skills development as well as supporting small and medium-sized enterprises through targeted investment.
In June this year, the Financial Sector Conduct Authority said The Conduct of Financial Institutions Bill, to be tabled in Parliament by the National Treasury this year, proposes to strengthen its powers in relation to financial sector transformation.
This includes “making the promotion of financial sector transformation an explicit function of the FSCA” as well as requiring all licensed financial institutions “to have a transformation plan in place and empowering the FSCA to take reasonable regulatory action against financial institutions that do not uphold transformation” commitments.
BUSINESS REPORT