Transform and Diversify the Financial Sector With and For the Workers and
the Poor
By Blade Nzimande
Chairperson Financial Sector Campaign Forum
20 August 2002, CSIR Conference Centre, Pretoria
Transform and Diversify the Financial Sector With and For the Workers and
the Poor
Chairperson, Minister of Finance, COSATU General Secretary, delegates from the community sector, leaders from the business constituency, comrades and friends, as the Financial Sector Campaign Forum, we are proud and honoured to address this National Summit on the Financial Sector on behalf of the Community Constituency of NEDLAC.
The fact that we are holding this Summit, on the eve of the World Summit on Sustainable Development, shows the resolve of our people to ensure fundamental transformation and diversification of the financial sector in our country and that nothing will stand in our way to build an economy based on the people.
We are also proud that this Summit is a direct outcome of the Red October Campaign launched in October 2000. The Campaign has been embraced by all sections of South African society black and white people, poor people, workers, small businesses, women, churches, co-operatives, stokvels, trade unions, savings clubs, and so on. It is a campaign that has truly captured the imagination of our people and talks directly to the struggles against poverty and for sustainable livelihoods. We therefore thank the thousands of workers and the poor and their organisations which directly took part in this Campaign. As a result of your activities, within 20 months we now see tangible results through the holding of this Summit. What you have taught us is that together united and led by the workers and the poor we can change our society for a better future.
This campaign has highlighted the extent to which the existing financial system is manifestly failing either to contribute to promoting development orientated growth, or even to providing basic financial services to the majority of our people.
1. WHAT MOTIVATED THE CAMPAIGN?
The existing formal banking and financial system in our country emerged
under colonialism and apartheid to serve the needs of conglomerate capital
(with which it was closely connected) and secondarily to provide personal
banking services to higher income (mainly white) individuals. The majority
of working people and the poor were marginalised from this system, although
alternative institutions like stokvels developed among our people.
Regulation of the financial sector by government was largely prudential
regulation aimed at guaranteeing the integrity of an essentially apartheid
free market system and protecting investor funds.
Since 1994, we have witnessed numerous engagements between Government, communities and the banks seeking to draw the banks into making a contribution to urgently needed transformation in our country. These engagements have particularly focused on the provision of affordable finance to low cost housing, making loan capital available to SMMEs and community ventures, and providing affordable basic banking services to our people. Despite these efforts, we have witnessed and experienced the following:
With regard to the issues raised above, in October 2000, the Minister of Housing, Minister Sankie Mthembi-Mahanyele observed that:
Government is running out of patience with the bank's reluctance. In terms of the record of understanding signed several years ago between banks and government, banks agreed to deliver 50 000 loans a year to poor communities. Banks have not met this target and their lending patterns show that loans to lower income areas are declining.
We are convinced that neither market forces, nor appeals to the good will of the financial sector, will fundamentally alter this pattern. Rather, in our view, a major state-led project is needed to transform the financial architecture of the country in ways that will make the sector more supportive of development orientated growth. This NEDLAC Summit needs to lay the foundations for such a transformation.
In fact, we are of the view that a broad-based programme needs to be consolidated and cohere around building an economy which puts the needs and interests of the workers and the poor at its epicentre in order to advance fundamental transformation in our country.
This kind of economy should seek, in the first instance, to transform, grow and develop our economy in a manner which builds and strengthens the social and public sectors in our economy. Such an approach places the eradication of poverty at the centre of economic restructuring+ADs- strengthening the role of the state in directing major economic resources towards meeting the basic needs of our people+ADs- challenging the dominance of the free market in the allocation of resources+ADs- disciplining and directing private capital to invest in job creation, poverty eradication, infrastructure development and the meeting of basic needs+ADs- and much more importantly harnessing the energies of the workers and the poor towards economic transformation.
In our view, the key challenge facing South Africa is the development of a coherent economic policy to drive a developmental path aimed at job creation and the eradication of poverty based on the mobilisation, in the first place, of domestic capital resources (including public, parastatal, social and private domestic capital) around a coherent growth and development strategy.
As part of this integrated strategy we need a far-reaching restructuring and diversification of the financial sector with a particular focus on transforming existing banks, creating co-operative banking, strengthening public sector financial institutions, and mobilising worker's provident and pension funds, the creation of a credit regime orientated towards our developmental objectives, and the need to halt the massive dis-investment flow spearheaded by major corporations.
2. WHAT HAS BEEN ACHIEVED THUS FAR?
Since the financial sector campaign was launched, the financial sector has not substantially changed yet. Various banks have increased their bank charges particularly hitting hard at those who earn less than R3000 per month, pensioner and other recipients of state social security grants. The last three annual reports of the Independent Banking Adjudicator released his reaffirms consumer problems with banks and criticises banks for some of their practices. HIV/AIDS orphans have been evicted by financial institutions. Hundreds of cases of HIV/AIDS based discrimination in the entire financial sector are reported yearly. And the ongoing deep problems of skewed investment, redlining, racism, lack of popular ownership and control of the financial sector, lack of democratic investment decisions by pension and provident funds and many more fundamental problems continue unabated.
On the positive side, both the 2000 State of the Nation Address and the 2000 Budget speech important announcements were made on the financial sector including government plans to ensure that banks pay just taxes.
Since the Campaign was launched in October 2000, we have also seen the passing of the Homeloans and Mortgages Disclosure Act, 2001 forcing the banks to disclose their lending patterns on the homeloan front. We further welcome the publication of the Community Reinvestment Bill aimed at, amongst other things, outlawing redlining and forcing the banks to lend in low-cost housing. We would, however, like to see this bill being strengthened to ensure that redlining becomes completely illegal. In addition, sooner rather than later, legislation must cover credit and investment patterns of banks, insurance companies, pension and provident funds beyond just housing, to include lending to SMMEs, including co-operatives, prescribed assets, etc..
Despite delays in negotiations, the Financial Sector Campaign Forum is also pleased that there is substantial agreement on the following areas:
These agreements must be buttressed by a clear agreement on investment. We also welcome the commitment by the Life Officers Association to provide automatic HIV/AIDS cover.
We call on government to ensure that the restructuring of Postbank leads to a stronger and state-owned Postbank which, amongst other things, will be responsible for the payment of state social security grants.
3. THE WAY FORWARD
Having taken this substantial time to analyse and report, we now pose some issues for the way forward in order to ensure that this Summit is not a mere talkshop.
The first step is to agree to a timeframe and monitoring mechanism for the implementation of the Summit agreements. First and foremost this means dealing decisively with credit bureau regulation and the elimination of discrimination in the financial sector through the speedy and smooth enforcement of existing legislation and industry policy tools to address the lack of administrative justice racism (overt and covert)and all other forms of unfair discrimination. The levels of indebtedness of the workers and the poor are unacceptable. Therefore, we need swift, decisive and urgent action to deal with the micro-lending crisis.
One of the most crucial platforms through which we will deepen the campaign is that of mobilising the workers and the poor to take up the question of the management and investment of its own provident and pension funds. We want these funds to have returns, but we also want them to invest in areas that will create jobs and develop our communities. We want to ensure that workers have a meaningful say in and control over the management of these monies, both in the public and private sectors. As things stand now, workers have no say about how and where these monies are invested. This must come to an end.
Related to this is building co-operatives and co-operative banks in order to trigger the legislative process and to build the momentum of our people to effectively transform the financial sector. This must be energetically taken forward.
The question of ownership and the racial and gender profile of the financial sector is also going to be a major focus of the Financial Sector Campaign Forum in the coming period.
The outcomes of the Summit must also be taken forward to the Growth and Development Summit.
In conclusion, we thank government, labour and various communities for their positive responses and constructive engagements in preparing for this Summit. We also wish to thank the business constituency which, despite initial reluctance over a NEDLAC Summit and other disagreements, realised that there is no other route to economic growth and development but to engage meaningfully with the workers and the poor of our country.
Let us co-operatively and strongly move forward to a transformed and diversified financial sector