Deputy Finance minister David Masondo says that the South Africa’s financial and asset management sector will see a transformation push through the introduction of the draft Conduct of Financial Institutions Bill.
Speaking in a BusinessDay webinar, Masondo said that changes included in the bill will make transformation an explicit function of the Financial Sector Conduct Authority (FSCA).
Masondo said it will also be a requirement for financial institutions, such as banks, to have transformation plans that demonstrate their compliance with existing Black Economic Empowerment (BEE) legislation.
The FSCA will also be given authority to enforce compliance, he said. The FSCA will be empowered to enforce and regulate:
- Product Design;
- Internal Procedures.
The FSCA has regulatory power over any financial institutions that are licensed in terms of a financial sector law, including banks, insurers, retirement funds and administrators, and market infrastructures.
“From the side of the state, what motivates us, what informs what we’re doing is a constitutional imperative for transformation,” he said. “The equality clause in the constitution requires the state to undertake measures to transform South Africa in all facets of our society. We are also motivated by inclusive growth.”
The changing nature of BEE
Masondo’s comments come after Business group Sakeliga noted a shift in how BEE regulations have functioned in South Africa.
In earlier phases, BEE was generally focused on the procurement relationship between the state and providers of products of services to it, said Piet le Roux, Sakeliga chief executive.
“Lately, in codes such as the legal sector code, BEE regulation jettisons the requirement of the state as a transacting party.
“The new approach is to regulate for BEE requirements regardless of state involvement, which poses serious implications for freedom to trade and freedom to procure professional services,” Le Roux said.
Le Roux pointed to the proposed Property Practitioners Act and a draft code for the legal sector as legislative developments with a similar application of BEE.
The shift in thinking around BEE is being driven by the Employment Equity Amendment Bill, which aims to accelerate the rate of transformation in South Africa.
The bill, which is currently before parliament, will empower the minister of Labour to regulate the setting of sector-specific employment equity targets across most of South Africa’s major industries.
Under the proposed legislation, the minister will first publish a notice in the gazette identifying national economic sectors which will be impacted.
After consulting the individual sectors, and on the advice of the Commission for Employment Equity (CEE), the minister may set numerical employment equity targets for any sector or part of a sector by notice in a gazette.
The department said that the notice may set different numerical targets for different occupational levels, sub-sectors or regions.
The bill stipulates that a draft of any notice that the minister proposes must be published in the gazette and interested parties must be permitted at least 30 days to comment.
Some of the factors which the minister will consider when setting sector targets include:
- The qualification, skills and experience required to be employed in a particular occupational level;
- The rate of turn-over and natural attrition in a sector;
- Recruitment and promotional trends within a sector.