HUMAN RESOURCE DEVELOPMENT
Human resource development seeks to redress past inequalities in the work place that resulted from discriminatory practices and laws that had negative implications for economic efficiency, competitiveness and productivity. To develop a broad-based and diverse pool of skills, financial institutions commit to: creating a non-racial, non-sexist environment and enhance cultural diversity and gender sensitivity; investing in human resource and future leadership development aimed at increasing the participation of black people in skilled, strategic and operational leadership.
In addition to the obligations of the financial sector in terms of Employment Equity and Skills Development legislation, the financial services sector established a number of transformation targets based on percentage ratios. Financial institutions have devoted 1.5% of their payroll per annum to train black employees. These skill development programmes promote black skills in line with skills audits undertaken by financial institutions, the sub-sectors or by the respective SETAs. The Learnership Programmes that result from the skill audits will be used to employ and train up to 4.5% of each financial institution’s total staff in the form of black matriculants or the National Qualification Framework (NQF) Level Four equivalent.
Each financial institution is committed to develop and report on: career paths and the provision of support to black people at all levels; the implementation of appropriate mentorship programmes; targeted recruitment to expand the base of potential recruits; cultural diversity and gender sensitivity programmes that promote a vibrant and diverse institutional culture; and where possible, in conjunction with institutions of higher learning, introduce training programmes in line with the NQF requirements and establish undergraduate and post graduate diplomas and degrees in financial services.
Financial institutions will implement a targeted procurement strategy to reach 70% by 2014 of total procurement from BEE accredited companies. The break down includes two thirds of procurement expenditure flowing to BEE accredited companies as the primary vendor and one third channelled to BEE accredited companies via the primary vendor, which is not a BEE accredited company.
Financial institutions will provide: support to black Small and Medium Enterprises (SME) through programmes designed to assist in tendering processes and creating reserved or preferred areas for black SMEs only; early payment for services provided by SME’s; existing suppliers with help to address BEE and become BEE accredited; reports on all spend that falls within the definition of BEE accredited; and, meaningful ways of supporting the Proudly South African Campaign.
The FSC defines Enterprise Development as fostering new, and developing existing, BEE accredited companies through improving the levels of assistance provided to BEE accredited companies/suppliers in the financial sector and other sectors of the economy. This is done through skills transfer, secondment of staff, infrastructure support, and providing financial, technical and administrative support and assistance for the establishment and growth of BEE accredited companies/suppliers as broking agencies and/or enterprises through which the sector sells its products and services. In addition, where appropriate, financial institutions will refer business opportunities to, and procure from, black owned financial institutions.
Enterprise development is bundled in with procurement and as such Enterprise Development has no separate target.
ACCESS TO FINANCIAL SERVICES
The Financial Sector Charter acknowledges that access to first-order retail financial services is fundamental to BEE and to the development of the South African economy. First-order transaction products and services are defined as basic and secure means of accessing and transferring cash for day-to-day purposes; savings products and services for accumulating funds over time such as savings accounts, contractual savings products, collective investments and community-based savings schemes; credit for low-income housing, financing agricultural development, or establishing, financing or expanding a black SME; and insurance products and services for mitigation of risks such as life insurance, funeral insurance, burial society, household insurance and health insurance.
Effective access to financial services is defined in terms of availability and proximity of a sufficiently wide range of first-order financial products and services. Access to financial services seeks to provide affordable and sustainable access to banks, ATMs and other origination points within 20 km of all individuals who fall into the All Media Product Survey (AMPS) categories of LSM 1-5. In addition, accessibility seeks to dispense appropriate and affordably priced products and services in a non-discriminatory way by structuring and describing financial products and services in a simple and easy to understand manner.
The FSC makes provision for BEE empowerment financing that is geared toward mobilising proper resources and promoting the productive and sustainable participation of black companies and black people. To achieve this all parties are committed to working in partnership with the Government and DTI to provide resources for empowerment financing. This includes identifying the total amount of empowerment financing broken down into four targeted investment components, namely, low-income housing, black SME, transformational infrastructure and agriculture; appropriate risk mitigating measures and risk sharing arrangements; the period over which the empowerment financing will be done; the institutional framework and financing models for the mobilisation of the various resources; and, the extent to which and how past empowerment financing transactions will be taken into account.
In addition to targeted investment, the Financial Sector Charter aims to provide BEE transactional financing for acquisition, by Black people, of direct ownership in an existing or new entity, other than SMEs, in any sector of the economy; and joint ventures with, debt financing of, other form of credit extension to, or equity investments in BEE companies. Facilities that represent financing risk, but that do not involve a flow of funds to BEE entities, such as guarantees, are not counted as BEE transaction financing.
EQUITY OWNERSHIP AND CONTROL
Equity ownership and control is based on the concept of “once empowered, always empowered”, which is a central pillar of the Financial Sector Charter. The FSC aims to transfer a minimum of 25% at holding company level to black ownership, of which at least 10% must be direct ownership by black people and the remaining 15% through indirect ownership. Direct ownership in the financial institution may be achieved through BEE transaction financing; broad-based ownership; disposal of any assets, operations, businesses or subsidiaries by the financial institution as a going concern to black people; direct shareholding or ownership with control, commensurate with the level of ownership concerned, at subsidiary or divisional level; or joint venture or partnership arrangements. These ownership targets apply to foreign banking groups with South African branches but they will be given a wider range of transaction options to achieve their targets.
Control centres on the authority and power to manage assets, the determination of policies and the direction of business operations. The FSC requires that financial institutions cede control by targeting 33% for black directors, this includes 11% black women directors. In addition to equity control, the Financial Sector Charter targets, based on a formula, a minimum of 25% black executive management and 4% black women executives.
CORPORATE SOCIAL INVESTMENT
The FSC requires each financial institution to direct 0.5% per annum of post-tax operating profits to corporate social investment (CSI) projects aimed primarily at black groups, communities and individuals. CSI projects such as education, training, youth or other target group development, environment, job creation, arts and culture, health, sport and others should have a strong developmental approach and contribute towards transformation.
The scorecard forms an integral part of the FSC and provides an objective and broad-based set of indicators for measuring implementation and success of the FSC by financial institutions. The scorecard will be used by the financial institutions for self-assessment, Charter Council to evaluate the implementation of BEE, and, government and private sector for awarding contracts.
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Please note that is only as a brief summary of the main provision of the Code and should not be relied upon as a legal document. There are many other provisions and exemptions under the Code. For more detailed information and the full Code please download the Code of Banking Practice.
Financial Sector Charter