The Financial Sector Charter Council invited the media to attend their 2006 Annual Report on Transformation in Johannesburg on Monday, 8 October 2007. The report is a collation of the progress made toward transformation goals in a number of categories and across different sectors in the financial services industry.

The fact that we are deep into the third quarter of 2007 indicates the difficulty in gathering and collating the information contained in the report. Signatories to the Financial Sector Charter include the Association of Collective Investments (ACI), the Banking Association of SA (BASA), the International Bankers Association (IBA), the Investment Managers Association of SA (IMASA), the Institute of Retirement Funds (IRF), the Life Offices’ Association (LOA), the JSE and the South African Insurance Association (SAIA).

Second report on Financial Sector Charter

The 2006 report is only the second annual report since the financial services industry committed to the transformation goals as set out in the Financial Sector Charter. Both financial sector members and the Charter Council view the 2005 and 2006 as formative years toward the goal of achieving the charter objectives. They acknowledge, however, that “the pace, intensity and accuracy of transformation needs to be speeded up in the remaining years” to 2014.

Progress is measured across seven distinct functional business areas. These include access to financial services, human resources development, procurement, empowerment financing, ownership, control and corporate social investment. For the most part, it appears signatories to the Financial Sector Charter are making progress toward the agreed transformation targets.

The report highlights a number of shortcomings too. Work is required to ensure adequate employment equity representation in the black senior management and black junior management categories. Adequate access to financial services for all is another area which requires special attention.

Disappointing progress in skills development

Six out of the seven industries “underperformed against the target of spending 1.5% of total basic payroll on training for black staff.” The annual report revealed that while total payroll expenditure increased by 29.33% in the year, the expenditure on black staff training decreased by R349 million.

In similar fashion, all the reporting industries fell woefully short of meeting their learnership targets. The total of 3, 463 black matriculants who found employment under this programmer is only half the 8, 792 agreed in terms of the charter.

These numbers are particularly worrying given the much publicised skills shortage in South Africa. One would have expected most of the companies involved in this sector to be highly motivated to develop skills internally, and acquire additional skills. Apparently the true extent of these skills shortages are not being adequately felt at the coal face as yet. The financial services industry will have to meet transformation targets to ensure its survival. In our view the two most important categories in the agreement are skills development and access to financial services. They are the only ‘commonsense’ business objectives scattered among a sea of race-based quotas and measurements.

Miles to travel before 2014 deadline

Another aspect which will concern participants to the charter is the difficulty the FSC Council is having in measuring intended outcomes. While it is noble to stipulate access to collective investment schemes or short-term insurance as objectives of the charter, these objectives seem rather pointless without some form of framework to measure outcomes. This will be the topic of a number of workshops in coming months.

Enoch Godongwana, Principal Officer of the FSC Council says that “The Financial Sector Charter [intends] to achieve transformation in the financial sector in an orderly and concerted fashion. The first two years of measuring progress should be seen as critical building blocks to achieving this strategic objective, namely, to have a fully transformed sector by 2014.” Godongwana made it clear that future annual reports would benefit from more precise and intensive cooperation from signatories to the charter. He also expected the overall progress to accelerate in coming years.

The executive summary to the report highlights three areas that require attention in the 2007 annual report. These include a focus on areas where the gap to achieving target is very wide, the better definition of quantitative measures and unqualified commitments, and the improvement of internal processes and capacities at the FSC Council to assist respondents in the reporting process.

It is clear that the signatories to the Financial Sector Charter have a long way to go to ensure they meet their objectives by 2014. We trust they will address the requirements in sensible bite-size chunks, rather than delaying the real effort to a year or two before deadline.

Article provided by: FAnews