Financial Sector Charter on Black Economic Empowerment
|Binomial Name: ||Government of the Republic of South Africa|
|Date: ||The Charter was adopted under section 12 of the Broad Based Black Economic Empowerment Act 2003 on 9 February 2007.|
|Date To: ||31 December 2014|
|Sub Category:||Policy/Strategy (South Africa)|
|State/Country:||Republic of South Africa|
|Subject Matter:|| | Economic Development | Employment and Training|
|Summary Information: |
|The Financial Sector Charter on Black Economic Empowerment (‘the Charter') was developed by the Department of Trade and Industry and participants from the financial sector. The Charter will operate from 1 January 2004 until 31 December 2014.
Signatories to the Charter include: the Association of Black Securities and Investment Professionals, Association of Collective Investments, Banking Council of South Africa, Bond Exchange of South Africa, Foreign Bankers Association of SA, Investment Managers Association of SA, Institute of Retirement Funds, JSE Securities Exchange South Africa, Life Offices' Association of South Africa, South African Reinsurance Offices' Association and the South African Insurers Association.
The Charter provides a basis for transforming the South African financial sector to incorporate the principles of Black Economic Empowerment ('BEE'). BEE is one of the range of measures being used to counteract the economic effects of apartheid in South Africa.
|Detailed Information: |
The Charter is to operate from 1 January 2004 (although it was adopted on 9 February 2007) until 31 December 2014 and applies to the entire financial sector. However, the Charter will apply in a qualified manner in relation to certain types of institutions. For example, financial institutions with fewer than 50 staff members will be exempt from the human resource development provisions unless they choose to be bound (The Charter, 4.6.1).
The Charter was adopted under section 12 of the Broad Based Black Economic Empowerment Act 2003 on 9 February 2007, which renders it a statement of intent but does not create legally binding obligations.
The aim of the Charter is to address the challenges facing BEE in the finance sector in order to 'make a significant contribution towards economic growth, development, empowerment and reduction of inequities and poverty in [South African] society' (The Charter, 3.2). The Charter recognises that central to the success of BEE is growth and stability in the finance sector (The Charter, 3.3). This includes:
change in the racial composition of ownership and management structures, including improved representation of black women, persons living with disabilities and youth in ownership and management of financial institutions;
appropriate and effective access to financial services for a greater proportion of the population;
accountability, including principles of good corporate governance;
the enhanced participation of black firms and black entrepreneurs; and
inclusive organisational cultures.
Provisions in the Charter include strategies and targets which endeavour to further the aims of BEE in the areas of:
human resource development;
access to financial services;
ownership and control;
corporate social investment; and,
Implementation and the Scorecard
The Charter is to be monitored and implemented by a Charter Council ('the Charter Council'). The Charter Council will conduct reviews of the targets and consider whether targets and strategies need to be varied in the event of any material change of circumstances. The Charter Council will prepare an annual review and engage with Government, institutions, the BEE Advisory Council and other agencies to promote the implementation of the Charter.
Financial institutions will report annually to the Charter Council on their progress and publish an annual BEE report which includes the audited scorecard.
A scorecard will be used as a means of evaluating BEE progress in the financial sector. Institutions will be given a rating each year in accordance with their scorecard. Importantly, the scorecard will be utilised by the Government and the private sector in the adjudication of contracts awarded to financial institutions.
The scorecard includes indicator targets and scores under each BEE element. Targets include:
a minimum 20-25% black people in senior management (including 4% women);
a minimum 30% black people in middle management (including 10% women);
a minimum 40-50% black people in junior management (including 15% women);
1.5% per annum payroll expenditure on skills development of black employees;
33% black people as a percentage of the board of directors (including 10% women);
a minimum 24% black people as a percentage of executive management (including 4% black women).
|The Financial Sector Charter Council produced its second Annual Report on Transformation in 2007 ('the Report'), evaluating the performance of the financial sector in 2006. The Report outlined a 'mixed bag' of successes and disappointments (The Report, 9). For example, in employment equity, neither black senior managers (18.72%) nor black junior managers (42.85%) made the required targets. However, black women senior managers exceeded targets with 5.17%, as did black women junior managers (24.12%) (The Report, 12).
In addition, the Report cited inadequate progress in the areas of access to financial services, ownership and control targets. The Report made various recommendations, including:
better advocacy of the Charter to secure universal participation;
improved reporting processes;
attention to human resources development, access to financial services and control targets.