26 May 2004
The Financial Sector Campaign Coalition (FSCC) has been at the forefront of championing transformation in the financial sector in South Africa. The Coalition started its campaign to “make the banks serve the people” in 2000 and initiated the process within NEDLAC that culminated in the Financial Sector Summit in August 2002.
This briefing arises out of the FSCC’s review of the Financial Sector Summit and Growth and Development Summit Agreements, our assessment of the Financial Sector Charter and our views on recent developments in NEDLAC.
Financial Sector Summit agreements
The 13 agreements reached at the NEDLAC Financial Sector Summit in 2002 emphasised that transformation of the financial sector to serve South Africa’s growth and development goals would require the agreements to be implemented as a package in an inclusive, consultative and co-operative manner. The FSCC is concerned that the agreements are being implemented in a slow and piecemeal manner that undermines their impact, especially on the workers and the poor.
Financial Sector Charter
When the Charter was launched in October 2003, the FSCC welcomed it as marking a break with the past even though it was drafted in what we called at the time an elite boardroom process. In the seven months since the Charter was launched, we have been disappointed that its signatories have failed to engage with the Nedlac Community and Labour constituencies to finalise its contents or agree details of its governing structure.
Our view is that the Charter does not adequately address a number of issues identified in the Summit agreements. The Charter:
If these and other issues are not to be dealt with voluntarily by the industry, they must be urgently addressed through other forums, including NEDLAC.
We are concerned that failure to involve the NEDLAC Labour and Community interests in finalising the Charter could delay or even derail it. We call on the Charter signatories to immediately invite these constituencies to join Business and Government in finalising the Charter, including deliberations on the composition of the Charter Council. No other organisation, including those that drafted the Charter on behalf of black business interests, has a mandate to represent the interests of the workers and the poor. We will speak for ourselves.
Our position is that we will serve on the Charter Council if we reach agreement on its composition. We are prepared to play our role by ensuring that the views and aspirations of the majority of South Africans are articulated in the Council. At the same time, we reserve our rights to review all decisions taken by the signatories to the Charter during the period we have been excluded from influencing the Charter.
We will continue to engage with the social partners in NEDLAC to measure the Charter against the NEDLAC Summit agreements. We will also continue to engage our colleagues in organised labour on the important issue of pensions and retirement fund management and investment.
Alternative financial institutions
We are encouraged by the commitment in the President’s State of the Nation address to supporting the role of co-operatives in meeting the growth and development goals in our country. This commitment must extend to financial co-operatives. We call on government to expedite the passing of new laws on co-operative banks and financial co-operatives so that alternative financial institutions can be established to serve the needs of workers and the poor.
For our part, the FSCC is supporting the hosting of a national conference on co-operative banking before the end of this year and we are actively promoting the establishment of savings and credit leagues through our affiliates.
Credit bureaus and micro lending
The FSCC is disturbed that the regulation of credit bureaus has been unilaterally delayed by officials in the Department of Trade and Industry. Despite social partners reaching agreement in NEDLAC, the DTI has decided to delay the regulations until they can be incorporated into its proposed new Consumer Credit law in 2005. This decision is absolutely unacceptable to us. Credit bureaus are a burden to our people; they stifle access to credit for development and prevent people from getting jobs. We call on the new Minister of Trade and Industry to gazette credit bureau regulations without any further delays. Our people can’t wait another day, let alone another year.
We are also concerned by other developments in the DTI. The department has invited some of our member organisations, but not the FSCC itself, to a closed meeting to examine the draft Consumer Credit Bill. We have to ask: where is the policy on which this draft legislation is based? We have had previous experiences of DTI putting the legislative cart before the policy horse and experience shows us this leads to unsatisfactory laws and ineffective regulation. This is the case with the present Usury Act exemption and the Micro Finance Regulatory Council.
This exemption gives rise to a situation in which, according to the DTI’s own research, the richest South Africans pay on average 20% interest for credit per annum, while the poorest pay on average 175%! The state of indebtedness of our people is at crisis point. Only last week the Constitutional Court dealt with the plight of Karoo residents who lost their houses for miserable debts of as little as R198 for buying food on credit.
The interest rates set by the Reserve Bank are academic to most of our people – most can only dream of paying the official rates set by Governor Tito Mboweni. For the most part, our people are paying 360% per annum or more in interest on small loans. The ‘mashonisas’, who fleece workers and poor people, are outside the regulatory net. For too long we have allowed policies in financial services, and micro lending in particular, which favour the rich and rob the poor. This exploitation must stop.
Again, we call on Minister Mpahlwa to intervene. We want a comprehensive consumer credit policy to be debated in NEDLAC and agreed by all social partners before any further consideration is given to the details of fine-tuning draft legislation. The position of all FSCC members is clear: no legislation without policy; no policy without consultation.
Hearing the voice of the people
The FSCC wishes to raise the issue of hearing the voice of the people in the important national debate on transformation of the financial sector. The question of resources for communities and their organisations to enable them to participate effectively in this debate has not been addressed in any meaningful way.
We are concerned that even the few resources that might be available to the people and their representative organisations are diverted to the industry or its regulators. A case in point is the Finmark Trust, funded by the British government with a budget of R75 million for its project “making financial markets work for the poor”.
Finmark Trust was set up by the Banking Council with funds from the UK Department for International Development. Although it now claims to be independent, is controlled by financial sector professionals. We are concerned that it is unrepresentative and that the manner in which it operates is not transparent. Our attempts to engage the Trust on its structure and decision-making processes around the use of foreign government funds have been shunned. We have been invited by the Trust to apply for grants. We have declined this offer. We cannot apply to the Finmark Trust unless it is transformed and meets the minimum requirements of openness, transparency and accountability that characterise our new South African democracy.
We call on government and the relevant SETAs to make resources available to ensure that the voice of the people is not stifled – it must inform the transformation of the financial sector so that it serves the needs of all our people and contributes to growth and development.
FSCC programme of action
In the coming months, the FSCC will mobilise its affiliates to make sure that the people’s voice is not only heard but is heeded in the forums that make decisions which affect their lives and livelihoods. The FSCC’s programme of action is to host public hearings in the nine provincial legislatures and the national parliament by the end of September this year.
People will have the opportunity to give testimony about their experiences with banks, insurance companies, funeral companies, micro lenders, mashonisas and others. This is the voice of the majority of South Africans, the workers and the poor, that is not often heard in the forums, meetings and committees that take decisions which affect the lives and the futures of tens of millions of our people. Individuals, communities and organisations will be able to present ideas on how we can change the financial sector so that it better serves the needs of all our people. Through the public hearings, their voices will be heard from all the corners of our land and in our national parliament.
ISSUED BY
Blade Nzimande FSCC chairperson
CONTACT
Collette Caine
FSCC Coordinator
CELL - 082 927 1063
Email - ccaine@telkomsa.net
OR
Mazibuko K. Jara (surname Jara)
Cell - 083 651 0271
Email - mazibuko@sacp.org.za