BEE goes round in circles

2010-07-17 07:49

More black people may be in line to be part owners of South African

financial service institutions after the industry agreed to increase its

ownership target to 15% from 10%.

To bridge the gap, the institutions may get their existing partners

to increase their ownership or look for new investors.

This is the only silver lining in the cloud that has been hanging

above the implementation of the Financial Services Charter (FSC), which has

delayed for the past two years because of a dispute over ownership


The feud between financial services firms and a South African

Communist Party (SACP)-led coalition grouping is now over how to measure

empowerment should black investors decide to sell their shares.

The firms want to be able to continue to benefit from the ownership

points even if their partners sell.

They wants the “once-empowered, always-empowered” principle to be

applied to future black economic empowerment (BEE) deals.The Financial Sector

Coalition Campaign (FSCC) is opposed to this.

The principle provides that even if black investors sell their

shares in a white-owned company, the company does not lose its BEE status.

“All the issues that are related to aligning the charter with the

BEE codes have been resolved, but the only outstanding issue is the

‘once-empowered, always-empowered’ principle. We have referred the matter to the

departments of trade and industry and the National Treasury,” said a source who

requested anonymity.

The delay means that the implementation and monitoring of the ­FSC

remains in limbo. The FSC is South Africa’s most important transformation

blueprint. This is because apart from it governing empowerment within the

sector, it also sets guidelines on how much the industry should fund other

sectors in their quest to transform.

Cas Coovadia, managing director of the Banking Association of South

Africa (Basa), the banking sector mouthpiece, confirmed that the ­negotiations

collapsed due to disagreement over the principle.

“There is disagreement over the ‘once-empowered, always-empowered’

principle,” Coovadia said.

Leon Campher, chief executive of the Association for Savings and

­Investment SA (Asisa), declined to comment on the dispute.

The conversion or gazetting of the charter has been in limbo for

the past two years after the FSCC – a constituency of 50 civil society

organisations led by the SACP and trade union federation Cosatu – and the

financial services companies failed to see eye to eye over the acceptable level

direct ownership. The FSCC wanted the charter to comply with the code’s black

direct ownership target of 15% while Basa and Asisa, which represents life

insurers and asset managers, stood their ground on the charter being gazetted

with an ownership target of 10% – a level agreed upon when the charter was first

adopted in 2003.

However, it appears that the decision by the government to appoint

Modise Motloba, former president of the Association of Black Securities and

Investment Professionals, as a facilitator secured the uneasy truce. But that

peace has since been shattered by the furore over the “once-empowered,

always-empowered” principle.

Tough discussions on the principle have also emerged in the mining

­sector, which has the daunting task of transferring 26% of its equity into

black hands by 2014.

The discussions capture the complexity of empowerment. On the one

hand, there is a need to achieve transformation. On the other, black people need

to be able to realise the value of their investment by selling.

The BEE codes were introduced in 2008 by the trade and industry

ministry as a blueprint policy for ­future empowerment deals.

All empowerment charters are ­required to align their

transformation targets with those set out in the BEE codes before they are

gazetted by the government.

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