Gamechanger in the offing

Parties who were at loggerheads in the Codesa negotiations ultimately produced the SA constitution. Analogous to a little Codesa, marked by intense lobbying this way and that, the cross-section of participants representing competitive players in the finance industry eventually reached unanimity on the Financial Sector Code. The achievements are comparable because the FSC lays the groundwork for transformation distinctively within the capacity of financial institutions to effect.

Grim economic circumstances – of near-zero growth, ratings downgrades and the Steinhoff blow to investment markets – are far from ideal for systemic reform. But equally they compel a realism that facilitates it. Backs are to the wall and predicament is the mother of consensus.

A starter is the broad acceptance, at last, in calculating the economic interest of black people in SA corporates. Ownership, particularly through retirement funds, is central. Past surveys, notably for the JSE, have ascertained that the number of black individuals has come to exceed the number of white ones. It is a quantifiable measure of transformation progress.

These figures cannot be questioned, the more so since they’re pretty much confirmed by the survey subsequently commissioned by national treasury. It telescopes the focus into appropriate structures for exercising rights of ownership, as for example through investment mandates and proxy voting, which has much more practical merit in nailing down empowerment than constant haggling over macro numbers.

On the micro numbers within the financial sector itself, research undertaken by investment manager 27four is invaluable. Whereas the company’s earlier surveys might have induced scepticism, for allegedly flawed counting and special pleading, its most recent is greeted for the authority born of objectivity. Previously getting up the noses of established firms held to be lacking blackness, in terms of ownership and executive seniority, this survey has benefited from co-operation with them through researchers at the Association of Savings & Investment SA (Asisa).

A beneficial spin-off is that 27four managing director Fatima Vawda, outspoken from the platform of the Association of Black Securities & Investment Professionals, has joined the main board of Asisa. An articulate agitator if ever there was one, she goes inside the tent to argue her cause for accelerated transformation at the top of the bigger guys and a larger slice of the pie for the smaller. Now, with her on the main Asisa board — also with Absip credentials — is Mazi Capital chief investment officer Malungelo Zilimbola.

Pertinent in this context is the 27four finding that, of the total R4,6trillion pool of assets managed by the private sector, less than a tenth is allocated to asset managers that are black-owned (“black” as defined by the department of trade & industry empowerment codes). This fuels the argument against perpetuation of the savings and investment industry’s power concentrations.

“The situation is SA is dire,” Vawda emphasises. “To achieve good outcomes in redressing inequalities and progressing transformation, we cannot have us-versus-them approaches. We must pull together in delivering from unified positions.”

She’s impressed by Asisa’s committee structures, but believes that memberships predominantly consisting of the most senior executives in the largest life offices and asset managers don’t properly appreciate the difficulties of smaller independents in gaining access to markets: “My intention is to help integrate younger black firms into the mainstream and to bridge the gaps that exist.”

In her experience, top executives don’t even know how lower tiers in their organisations are resisting interactions and denying shelf space to highly capable people. Aspirants for allocations also have to battle against trusted brands and the pricing advantages of critical mass, both of which take time and opportunity to develop.

Additionally, among the dominant institutions there’s often a vertical integration of value chains from actuarial consultancy to fund management, from risk benefits to member advice. Packages make it difficult for the independents to compete on any one service, she contends.

Expect provocations aplenty from Vawda. Expect also that she’ll be a frontrunner for employment equity and stakeholder activism, from sleepy pursuit to lively monitoring. Power is in the hands of asset owners, she insists. This moves the wheel full circle, back to retirement funds and their service providers, now under pain of the FSC’s year-end review.

It’s been said that the avoidance of a troublesome woman is the beginning of wisdom. In this instance, where government looks quizzically at the industry, it’s the opposite.