More on the FSC

There has been a little bit of press on the draft FSC. It is only right that I talk a bit more about it. It's a little bit sparse and uses strong words like "fungibility" (paragraph 7.2.4.3) but then that's because only phase one has been published. It's not clear when phase 2 will be published. Phase 2 should cover up the holes in phase 1 and give us a definition of empowerment financing, enterprise development and access to financial services.

In a lot of respects it's a much better document than the DTI's codes. The wording is better, the thought-process flows properly and the maths seems to be solid. The thing that really impresses me is that it is victory of business over the left wing. The reason why the various drafts of the FSC were stalled in their tracks was the issue of equity. The Banking Association (amongst others) argued (correctly) that they could not extend the direct ownership beyond 15% and labour and community were insistent (emotionally) that it must be aligned with the COGP (if you want an overview of this conundrum, I wrote something about this here.) The Banking Association won this little tussle, and rightly so. Not only has direct ownership been set to a minimum of 15%, but this 15% can be made up of 10% direct ownership and 5% equity equivalents (which are different to those considered in the codes for multinationals – they are discussed in paragraph 7.2.4.1). In addition to this certain multinationals may be exempted from the ownership element (or any other element as the case may be), their score is then recalculated as a percentage of the new total (excluding the excluded amount). The issue of once-empowered, always empowered is not covered in this phase – this would be the section that many of the bigger financial institutions would be most interested in.

The draft is a combination of the existing FSC and the DTI's codes – sort of a conglomeration of each ones best bits. Leila wrote a decent overview of the document which I recommend you read. I'll add on what she wrote.

1. As with all charters, the FSC must be read with the DTI's codes and where the FSC is silent then the codes must be referred to. Everything contained in the FSC takes precedence over the codes.
2. Listed companies have to part with 15% of the valuation of the listed capital. All other companies have to be valued as a whole.
3. Not only do financial institutions have to score themselves on the FSC but they have to report additional information to the FSC on an annual basis. This is contained in section 10.3 and includes reporting on learnerships and career-pathing.
4. The procurement exclusions are quite similar to the original FSC – although they have tightened up a few things.

This is a good document and I think it's best summed up by Leila when she was speaking about the 40% rule under employment equity

With regards to the inclusion of the 40% sub-minimum for Employment Equity. It has been noted that this is a drafting error in the dti Codes, where the 40% sub-minimum should only have been applied to the BONUS points and not all the points. The Sector Code has been amended to reflect the dti's original intention and now the 40% sub-minimum will only apply with regards to the scoring of the bonus points and will not apply to the scoring of the individual points.

It's a better document than the codes and could be the shape that the re-drafted codes follow (that's if my sources are correct). We now eagerly await phase 2.