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Johannesburg – Transformation of the South African economy starts with the financial sector, said ANC Treasurer General Zweli Mkhize.
He was speaking at the South African Institute for Black Property Practitioners’ (SAIBPP) Annual Property Indaba and Convention, on Thursday. Mkhize highlighted the importance of transformation in addressing poverty, inequality and unemployment.
He explained that participation in the economy should be broadened to ensure that whatever growth is achieved is inclusive.
“We have identified, that key among the areas that need to be at the forefront of the debate of radical economic transformation is the financial services sector,” said Mkhize.
Speaking to journalists following his address, Mkhize explained that the financial services sector is the custodian of all the country’s assets. This sector determines the pattern of investments, ownership, control and management. The financial services sector has the funding needed to support the small business sector and entrepreneurs.
It demonstrates concentrated ownership. “Ten percent of players control 80% of the entire portfolio. If we want South Africa to grow, we need to open up that space,” he said.
The banking sector in particular has five players that control the industry. In the auditing sector, there are four top firms, controlling R6bn of the R9bn worth of audit work. “Good for them, but we are building a country and a democracy. For the country to be stable, that means that everybody needs to have space to operate,” said Mkhize.
In the asset management industry, of the 90 players only 32 are black-owned and of these players, they control 4.4% of the R7trn worth industry.
Mkhize said it is worth asking what must be done to transform the various aspects or sectors of the economy. All sectors must consider what needs to be done to be more inclusive.
Role of the SARB
When asked what the South African Reserve Bank’s (SARB) role is in effecting transformation, particularly in the financial sector, Mkhize said that its role becomes more relevant when it issues licences and supervises institutions. Working with other financial service authorities, it could be in a position to give guidance in this regard.
AUDIO: Mkhize on SARB’s role in effecting transformation
Mkhize said that government should create policy instruments and a regulatory framework to encourage people to participate in transforming the economy.
Mike Brown, Nedbank CEO who was speaking at the Nedgroup Investment Summit this week said that banks are vital for transformation and inclusive growth. Banks are well-funded and well-resourced large corporates - this means, alongside leadership, they play a major role not only in industry matters but in the broader economy.
If banks do not step in these roles they need to fulfill in society, they will lose their social licence to operate, he warned. “Banks have to be seen to be operating in the area of SMEs (small and medium enterprises) and in the area of infrastructure and in the area of financial inclusion.”
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