I remember reading the Financial Sector Charter for the first time and hating it. The definitions were all over the place and they conflicted completely with the various drafts of the codes. I then met people like Sakkie O'Neil and Marisa Buitendag who had incorporated more contemporary definitions into their implementation of the FSC. The reasons why the FSC has been so successful is because it was the first transformation charter (predates the first draft of the codes by a few years) and the adaptability of the people implementing it.
But this apparently is not good enough. The whole process has been put on hold because of a walk out (labour and community groups took their leave). It would seem that they have an issue with the direct ownership concept. I have blogged about this before so I'm not going to go into more detail
(you may wonder how I can work without power, my landlords have a generator that seems to be having a bad day today. On the subject of power - did you read what the Sunday Times said about it yesterday, apparently it costs Discovery R16,000 per hour to run their generators. No guessing where these and all other costs are going to be recouped).
Back to the FSC. The Sunday Times interviewed Lesetja Kganyago, director-general of the National Treasury, yesterday. And this is what he had to say.
Initially, the DTI did not agree that the financial sector was a special case (when it came to ownership), but it now accepts that there is good reason for the charter’s direct ownership limit.
Under the Banks Act, anyone buying more than 15% of a bank needs regulatory approval. The reason is simple: we need to be sure that shareholders can come to the rescue if the bank runs into difficulty.
Recalling the collapse of Saambou, when main shareholder Fedsure failed to come to the rescue, Kganyago said allowing a highly leveraged black shareholder to hold a 25% stake would introduce a risk of systemic stability that was “too ghastly to contemplate”.
When you say a bank has to be 25% owned directly by black groups, what happens when the bank runs into trouble and those shareholders rely on finance from the bank itself or other financial institutions? What would happen in the middle of this global credit crisis if something happened to one of our own banks and the bank asked shareholders to chip in — and you had highly leveraged shareholders accounting for 25% of your equity.
Why should the fiscus come to the rescue and the taxpayer pay? How irresponsible can you be?
It's almost Spinal Tap - the answer is none, none more irresponsible.
But the thing that Kganyago is most incredulous about is the same walk-outers were most concerned about access to financial services for low-income groups. They went so far as to suggest that the charter placed too much emphasis on ownership. But now
the labour and community interests have lost sight of the interests of labour and the community, they are saying ‘forget about all these access and development issues — it’s all about ownership of the banks now
Cosatu's solution is rolling mass action (as it always is - if we lose productivity because of a lack of power then we can double this by rolling mass action). It's Patrick Craven (hence the title) who told the FM
we are sticking to our guns. We have said the whole process must be made much more transparent, failing which we intend to launch a campaign of rolling mass action."
I can't figure out where the transparency thing comes from here, or how you can make it more transparent. To me it seems there are two opinions - dti's codes or the treasury. If that isn't transparent enough then rolling mass action should happen - we can only hope that there is enough electricity to print the T-shirts for the mass actioneers.
Postscript
The Times ran an article today about the necessity for the FSC to meet the Feb 9th deadline.
If the FSC council doesn’t reach an agreement by February 9, the whole industry will fall under broad-based black economic empowerment codes, which do not address some of the specific challenges facing the financial services industry.
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