PIC must enforce transformation in finance sector – ANC

Secretary General of the African National Congress (ANC), Fikile Mbalula, has urged the Public Investment Corporation (PIC) to take a more active role in enforcing transformation within the financial services sector. 

The PIC invests funds on behalf of public-sector entities, including the Government Employees Pension Fund (GEPF) and the Unemployment Insurance Fund. 

The GEPF is the largest client of the Public Investment Corporation, accounting for almost 90% of its assets under management.

According to its latest annual report, it owns R2.3 trillion in assets, including 22% of MTN, 9% of Naspers, 15% of Standard Bank, and 18% of Sasol.

The GEPF has:

• R1.2 trillion worth of listed equity.
• R700 billion worth of domestic bills and bonds.
• R56 billion of unlisted equity.
• R154 billion in foreign collective investment schemes.

At a workshop for implementing a state-owned bank in KwaZulu Natal, Mbalula commented on the importance of transformation in the financial sector. 

He argued that transformation should be the primary target of legislation regarding the financial sector. 

“Employment equity targets need to be achieved in this sector at all levels”, as the ANC views it as a vital economic lever that must reflect the country’s demographics. 

Transformation must “go beyond the gender and race of ownership of financial institutions and include transformative and diverse allocation of capital”. 

According to Mbalula, capital must be allocated along race, gender, and geospatial lines. 

To this end, institutional investors are instrumental as they can influence decisions at the board level through normal corporate governance processes. 

“Thus, investors such as the PIC must take a more activist shareholder role in ensuring transformation”. 

They must be at the forefront of implementing the government’s employment equity legislation and the general transformation of the economy. 

Banks threatened over lack of transformation

The Department of Labour and Employment is threatening to bring Standard Bank, Absa, and FNB before the courts for non-compliance with employment equity legislation.

These banks have reportedly failed to ensure that their employee demographics reflect the demographics of South Africa. In particular, senior management at these banks remains untransformed.

The department conducted a study in the first quarter of 2023 of JSE-listed companies to determine whether they are compliant with employment equity legislation.

The study found that 99% of private sector employers are non-compliant, with the other 1% only compliant administratively and substantively.

Substantive compliance refers to an active willingness to ensure equal opportunities are given to designated groups.

The department has threatened to go to court to impose a penalty of R1.5 million or 2% of turnover, whichever is greater.

Fikiswa Mcanca-Bede, a chief director at the department, said that JSE-listed companies do not have an appetite to transform.

Mcanca-Bede told Business Times, “I do not think they see a need to transform. Either they do not have confidence in women or they do not have confidence in black people”.