Solidarity opposed to transformation requirements at the expense of the financial sector  

14 March 2024

Solidarity is concerned about the way in which race directives can harm South Africa’s financial sector. The Financial Sector Conduct Authority (FSCA) recently reached an agreement with the Department of Trade, Industry and Competition’s B-BBEE commission about the required transformation levels for businesses in the financial services sector. 

If the Conduct of Financial Institutions Bill (CoFI) is passed into law, this agreement could have consequences for the FSCA licenses of businesses that do not meet transformation requirements. It has specific implications for a wide range of financial service providers such as investment companies, insurers, brokers, asset managers and pension funds. 

According to Riaan Visser, head of the Solidarity Financial Network, an FSCA license is essential for all financial entities to be able to provide services in South Africa. “Solidarity is opposed to the unfair disadvantaging of businesses and employees due to unlawful race targets,” Visser said. Yet, the FSCA concerns itself with racial issues rather than with what it is supposed to do – to regulate financial services. 
The FSCA mentioned in a recent statement that it intends to regulate the implementation of transformation more rigorously in order to emphasise its commitment to transformation. 

In the agreement it is also mentioned that institutions that do not submit a transformation plan run the risk of their application being considered incomplete. “However, the FSCA’s duty is considered to be to support institutions and to establish justifiable rules as the authority has committed itself to this,” Visser said. Solidarity is, however, not convinced that the rigorous application of racial rules is in the best interests of the financial sector.

Furthermore, Solidarity takes note of the recent confirmation by the Minister of Finance, Enoch Godongwana in his 2024 Budget Speech that B-BBEE directives are harmful to the economy. The Solidarity Financial Network says that it is the FSCA’s duty to build the industry rather than to break it down even more through the government’s insane race targets. If the FSCA withholds licences due to the CoFI Bill, businesses might have to close and many will be left jobless. 

Issued by Riaan Visser, Head: Solidarity Financial Network, 14 March 2024