Original publish date – Mon, 26 Oct 2009 09:32:20 +0000, Keith

An article in the Business Report discusses how Charles Pillai has slammed the lack of transformation in the financial services sector.

He is of course correct in saying that “while certain opportunities in the financial services sector might have been created for political elites through black economic empowerment (BEE) transactions, not much had changed for the ordinary citizens.”

He lays the blame squarely at the hands of the industry and states “the financial services industry remained largely in the hands of white males, and he was disappointed by this state of affairs.”

Agaion he is correct in his observation but where he is completely wrong and should take much of the blame itself is in ONLY blaming the industry.

Let’s give a bit of background first: The measurement of B-BBEE compliance is via the B-BBEE codes of good practice. There is no other objective form of measurement. The codes cover all areas of interest and would include his criticism of the state of affairs.

Now the financial sector has been very slow in adopting the B-BBEE codes, whch is quite possibly the reason for the lack of transformation. They have spoken for years about the “Financial Sector Charter” (FSC), and tried to use that as a substitute for the B-BBEE codes of good practice. The FCS has never been gazetted and to all intents and purposes does not exist other than as a discussion document.

Some financial institutions have chosen to follow the codes, e.g Nedbank, while Standard Bank and ABSA have never published a valid B-BBEE  scorecard (Correction, ABSA has a scorecard based on the codes of good practice – level 4). At no stage has the Financial Services Board (FSB) ever publicly condemned them or any other financial services provider, refused to renew their licenses, or even publicly asked them to produce the correct scorecard. In effect the financial industy has been declared exempt from B-BBEE by the FSB.

Now the reason why Charles Pillai is as much to blame. As the ombud for the industry he should have demanded that the FSB follow the law (section  10 of the B-BBEE act) makes it obligatory to take into account the BEE status of all organisations to which they may award a license). They have never done so. I repeat here that the ONLY measurement of the BEE status is a scorecard prpared in terms of the B-BBEE Codes of Good Practice.  Whatever other methods the FSB ever used may be admirable, but not sufficient.

In terms of the law, the only way that the FSB could ensure that they did not act contrary to the constitution is to accecpt that all financial services companies have indeed a BEE status of zero. This would of course satisfy the requirements of the act.  However section 10 of the B-BBEE act says that in addition they must “as far as is reasonably possible apply any relevant code of good practice in determinign qualification criteriafor the issuing of license, concessions or other authorisations in terms of any law”.

It is obvious that the FSB does not bother to do this, especially with the banks. It is further obvious that Charles Pillai also did not bother. I understand that he has never criticised or condemned nor fined any financial services company for never submitting thie BEE status. Worse, neither he nor the FSB have displayed their own BEE status publicly.

Charles Pillai, rightfully criticises the industry – what has he ever done in any of his rulings or discussions with the FSB to rectify the situation?