The Financial Sector Charter Viewed from the Perspective of the Workers and the Poor
Sandton, 30 October 2003
Introduction
On behalf of the South African Communist Party (SACP) and the Financial Sector Campaign Coalition (FSCC), I express my gratitude for the opportunity to address this meeting of the Black Management Forum on the recently-released Financial Sector Charter.
Both the SACP and the FSCC appreciate the role that your organization has played in forthrightly and forcefully driving the post-apartheid transformation of the management echelon in our country. This included your very important role in the Black Economic Empowerment Commission Report which correctly sought to define black economic empowerment as a concept and objective which is beyond the concerns of a narrow and small elite but as an objective which is about sustainable, democratised and overall socio-economic empowerment of the overwhelming majority of our people.
The experience gained over the last three years from the SACP-led campaign to transform and diversify the financial sector in our country reaffirms that that there can be no meaningful empowerment in our country, unless we empower and create opportunities for sustainable livelihoods for the ordinary working and poor people of our country. When we launched this campaign we characterised the financial sector as being caught between international best practices and worst local practices – international best practices relevant to the west and worst local practices at the expense of essentially black people in our country. Even worse is the fact that, 9 years into the post-apartheid South Africa, only a small percentage of managers in the financial sector are black even though sections of this sector such as the banks and insurance companies have relied on significant deposits of black workers, churches, trade unions, stokvels, burial societies, etc., and on the skill of many black professionals.
Correctly, your interest today is on the Financial Sector Charter and how the SACP and the FSCC respond to this Charter. In addition, we also want to raise with you issues regarding the context against which black mangers and professionals have to evaluate and elaborate their own role in the broader challenge of transforming the financial sector and broader societal transformation in our country.
Background to the Financial Sector Charter
The tabling of the Financial Sector Charter is an important victory for the SACP and the Financial Sector Campaign Coalition, which (as implied already) for the last three years have campaigned ceaselessly for the transformation of the financial sector in our country, in line with the need to grow and develop our economy in order to meet the challenges of job creation, sustainable livelihoods and communities, and poverty eradication.
The Financial Sector Charter is a direct outcome of the struggles that have been waged by the workers and the poor, under the leadership of the SACP and the Financial Sector Campaign Coalition over the last three years. Without this pressure there would be no financial sector charter today. It is for this reason that we should use this occasion to go back to the original demands and issues that we raised when we marched in October 2000.
Original Demands on the Transformation and Diversification of the Financial Sector
A central demand in this memorandum was the urgent convening of a NEDLAC Summit on the financial sector as an inclusive stakeholder sectoral summit to map out a strategy to transform the financial sector by addressing the following issues:
The Charter marks a very significant paradigm shift on the part of established financial institutions. When we started our campaign they all said, in a deafening chorus, the poor are not bankable. But now they say they are committed to come up with concrete measures to begin to bank the poor.
NEDLAC Financial Sector Agreement
In summary, the key agreements reached at the NEDLAC Financial Sector Charter were:
Achievements of the Campaign thus far
Since the Campaign started in October 2000, the following has been achieved:
Response to the Financial Sector Charter
The Financial Sector Charter process has been an elite boardroom process which did not involve the FSCC, the NEDLAC Community Constituency, labour and the broader South African public. Further, things are not going to change without continued organised mass mobilisation and fundamental transformation of the financial sector. Clearly, already sections of private capital already see the Charter as an opportunity for narrow reforms which will only benefit a few whilst leaving the fundamental problems in the financial sector intact.
Having said this, as the SACP and the Financial Sector Campaign Coalition we welcome the publication of the Charter and some of its commitments to transform the financial sector. The Charter is the single most important concession that we were right when we said the financial sector in South Africa is not serving the interests of the overwhelming majority of our people. We particularly welcome the Charter's commitment to expand its services to cover at least up to 80% of those earning between R1 500 and R7 500 by the year 2008. This has been one of our major demands from the financial sector. This is the core of South Africa's black working class, which has previously been largely excluded from the banking services. We also welcome the commitment to extend other financial services and products (like life and other insurance products) to this sector of our society. However, we are still concerned that this measure still excludes those earning below R1 500, as well as vulnerable workers like domestic, farm, seasonal, casual workers as well as those receiving state social security grants (like the aged, children and the disabled). Those earning below R1 500 constitute and estimated 30% of South Africa's population, and represent the poorest of the poor. This is a matter we are going to take up with the financial sector as we move forward in implementing the NEDLAC agreements and the Charter itself.
We also welcome the commitment to spend about R75 billion on targeted investments towards the poor areas, on infrastructure and towards job creation, including about R20bn earmarked for low-cost housing. Though this amount is not adequate to eradicate poverty, but it can be used to start a serious momentum towards job creation and sustainable livelihoods for the benefit of the overwhelming majority of our people. Together with the labour movement, government and other stakeholders, we are earnestly going to engage around how this money is going to be spent such that it has maximum impact on growth and development of our country. It must not be money that runs away with consultants or be used in such a manner that it gets re-channeled back to the established financial institutions without benefiting the workers and the poor of our country.
We also welcome the commitment to providing access to financial services within 20 kilometres of all areas of our country. This is a very significant commitment that may take us a long way towards accessible financial services for our people. We will hold the financial sector to this, and we are willing to partner to ensure that this does indeed happen. Commitment to racial and gender representation in management of the sector is an important step towards the overall transformation of the financial sector. However we are not only interested in colour and gender for its own sake, but for purposes of transforming the sector and ensuring that blacks and women who come in are committed to the agenda of transformation in favour of the workers and the poor of our country. The targets set by the Charter for human resources development and employment equity far from adequate The FSCC and the BMF must work together in ensuring that these concerns are addressed and taken forward.
The establishment of the Charter Council, which will receive annual progress report from each financial institution in our country, provides an opportunity and leverage to ensure that the objectives of the Charter are implemented. We however insist that representation of consumers, communities and labour must be firmly entrenched through the Charter Council process, and that the Council is adequately resourced to be able to perform its oversight functions. However the Council must not be a substitute for our prime institution of social dialogue - NEDLAC - at which we also expect this Charter to be tabled immediately. We also welcome the announcement that the Charter will be gazetted by the Minister of Finance in order that the Charter may be publicly debated.
We however note with concern that there are still a number of gaps in the Charter. We have already noted the continued exclusion of those South Africans earning less than R1 500 per month. The Life Offices Association had also tabled a proposal for an automatic mortgage insurance cover of up to R100 000, irrespective of HIV status. We will pursue this through the NEDLAC process as a matter of extreme urgency, as many AIDS orphans are still deprived of roofs over their heads as a result of an absence of an effective mortgage insurance cover.
We also would like to see the outlawing of all forms of discrimination in the financial sector, and the Charter is not as specific and detailed on some of the issues as we would have liked to see. For instance the discrimination against black women when applying for financial services, as well the question of redlining. It is for this reason that we call on government not to scrap the Community Reinvestment legislation, but to use as a complementary and very important mechanism to ensure that the very objectives of the Charter are met.
Most importantly, the Charter omits the democratisation and workers’ control of retirement funds and the Charter does not go far enough to put in place a basic floor and charter of consumer rights and remedies to address discrimination pro-actively, effectively and to inform consumers of their rights.
The Urgent Need for an Appropriate Policy and Legislative Framework for a Savings and Credit Co-operative Movement
A key and outstanding challenge in the entire process of the transformation of the financial sector is the creation of an appropriate and conducive policy and legislative environment to support the broadening of access to financial services for the workers and the poor. We need an urgent review of the regulatory regime for the financial sector to ensure that it is able to deliver better services the poor. Such a review must principally focus on this particular aspect of broadening access to the workers and the poor.
We are not only demanding that the financial sector serve our people, but we are also committed to promoting the culture of savings in our country. We are acutely aware that savings in South Africa a very low if we are to achieve some of our growth and development objectives. However, it is not only enough to promote the culture of savings, at the same time it is absolutely necessary that those savers have an effective say and control of how and where their savings are invested, in line with our growth and development objectives.
We emphatically reject the call by some that these savings should be used to promote a narrow elite as the basis for meaningful black economic empowerment. We cannot allow a situation similar to that of the Afrikaner working class whose savings were used to create the AVBOBs, the Sanlams and a wealthy Afrikaner capitalist class, which no longer did it become rich and established, it abandoned that Afrikaner working class, and used its savings for its own narrow capital accumulation.
Four issues come to mind immediately. Firstly, a conducive environment must be created such that workers have an effective say over their provident and pension funds. Secondly, the question of appropriate legislative and policy environment tailor made to build capacity for the Postbank to be able to provide a service to the workers and the poor. Thirdly, the whole issue of exemption from the Banks Act for savings and credit co-operative and other financial services co-operatives needs to be completely overhauled. What we need is tailor made legislation for these institutions to flourish and be able to play their appropriate roles. Fourthly, the question of the loan sharks requires urgent attention. The high indebtedness of South African working class to the loan sharks is a ticking time bomb. We must move to effectively control and regulate these loan sharks. Our aim as the SACP is to destroy loan sharks and be able to provide accessible and affordable micro-credit to the poor for purposes of productive and developmental purposes.
BMF must join the FSCC
For all these reasons, we call on the BMF to join the FSCC in order to ensure that the Charter is implemented and to struggle for the fundamental transformation of the financial sector in our country.
Black Managers and Professional in a Post-apartheid South Africa
As the SACP, we see black managers and professionals as children and friends of poor and working people. There is no reason for there to be a separation between black managers and professionals, and the fundamental interests of the overwhelming majority of our people.
From this standpoint, the challenge is that of developing a patriotic cadreship of serious, committed, transformative and progressive black managers in both the public and private sectors. We need managers who are guided by the ethic of service to the public whether they are in the public or private sector. We are concerned sufficient attention is not paid to public service and also to the development of committed public sector managers. As a result many managers in the public sector see themselves as capitalists-in-waiting, capitalist under-graduates rather than to focus on professional public sector management. This is crucial if we are to transform and change our country for the better.
Related to the above is the need to develop professional public sector management and public administration in a manner which goes beyond the dominant mantra of applying business principles to the public sector. Your own experiences as black managers should inform you that it is time that we also engage critically with the notions of a public sector modeled along the lines of private business administration - outsourcing, retrenchments instead of job creation, and the value of service to the public in order to overcome poverty and underdevelopment. There are very specific needs in this regard. Many of you here have IT and other skills that the savings and credit co-operatives can benefit from.
Their future lies with working together with the working class rather being co-opted
With these few words, we call on the BMF to play a progressive role in the transformation of the financial sector and in building a cadreship of progressive black managers.
Thank you
Blade Nzimande
General Secretary of the SACP
Chairperson of the Financial Sector Campaign Coalition