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Cape Town - Negotiations over a new empowerment charter for the financial services sector have reached stalemate over the so-called once empowered, always empowered principle.
According to Financial Sector Charter Council (FSCC) chairperson Nkosana Mashiya, banks and other trade organisations in the sector are fighting to keep the clause. This would mean that if a black shareholder willingly sells out of an empowerment partnership, the company in question would continue to be regarded as empowered in perpetuity.
The isssue has been debated for the last two years in an attempt to finalise and gazette a specific empowerment charter for the sector. Labour and communities represented on the FSCC are dead set against the principle, but it looks increasingly as if banks are negotiating from a stronger position.
In an interview with Fin24.com, Mashiya said that if the sticking point was not resolved by the 2011 deadline, the charter would not be gazetted as planned.
This means that companies in the financial sector would then fall under general black economic empowerment (BEE) codes for empowerment targets.
These codes would, in effect, be a lot less onerous for banks as they say nothing about targets like broadening access to banking, BEE financing or targeted investment in small businesses or infrastructure.
In other words, there is little incentive for banks to budge on the once empowered, always empowered issue.
"If banks stick to the general codes they will have to be measured against a higher ownership target (15% as opposed to 10%), but they would probably opt to loose the 5% and gain it elsewhere like employment," said Mashiya.
He added that communities and development in general would take a huge knock should the Financial Sector Charter with all its detailed and specific targets not be agreed to.
"I am sure if you went to communities they would rather have a house and car financed by the bank than shares in the bank," said Mashiya.
"That is where real transformation and empowerment is made possible, not so much by codes that limit what the sector is supposed to do to things like employment and share targets," said Mashiya.
- Fin24.com