SA Financial Sector transformation in the spotlight

It has been a year since President Cyril Ramaphosa signed the Employment Equity Amendment Act into law which has empowered Thulas Nxesi, the Minister of Employment and Labour to update thresholds for employment equity for each of the country’s national economic sectors.  The minister republished these five-year targets on 1 February 2024, giving 90 days for interested parties to make submissions by 2 May 2024.

The broad aim of the amendment is enhanced focus on moving towards improved demographic representation in top and senior management, as well as in professionally qualified and skilled levels. The targets will apply to all South African companies with 50 or more employees.

The proposed BEE targets for Financial Services businesses include that 46% of top management is comprised of employees from the three newly defined designated groups with a split of 26% males and 20% female.  At senior management level the target is a total of 48% from designated groups with an equal gender split of 24%.  In the professionally qualified band, the proposed target is 64% of employees from designated groups, of which 30% must be male and 34% female.  At the skilled and technical level, 88.2% of employees must be representative of the designated groups; 47.4% male and 40.8% female. Across the board, the goal is to have 2% of the national workforce represented by people with disabilities, and in this regard, there is no gender split.

Phryne Williams, founder of Capital Assignments, an executive search firm that focuses exclusively on the Financial Services industry says, “Alongside the recent MoU signed between the Financial Sector Conduct Authority (FSCA) and the Broad-Based Black Economic Empowerment Commission (B-BBEE Commission), the sector is coming under increasing pressure in its commitments to diversity, equity, and inclusion (DEI).  While the numbers may be tweaked following submissions, the proposed targets are a fair indication of the alignment that banks, insurers, asset managers and others will need to focus on when it comes to hiring, retention and succession planning over the next five years.

We expect these regulatory forces to shape recruitment processes and motivate more strategic approaches to attracting talent in a market encumbered by skills shortages. In the intensified search for top-level BEE talent, retained executive search will come to fore, and progressive tools such as market and talent mapping will support firms in connecting and building relationships with key next generation talent.

We must keep in mind that while new regulations bring demands, there are distinct advantages for companies improving their BEE scorecards. Greater diversity at management level set in a constructive, inclusive culture has been shown to improve decision-making, boost innovation and financial performance. In essence, the BEE targets can be viewed as drivers of DEI that will help South African financial services companies become future fit in a fast-changing world.”

The new working relationship between FSCA and the B-BBEE Commission, announced 5 March 2024, aims to address concerns around the submissions of B-BEE compliance reports by the financial sector and the gaps that exist in the collection of the industry’s B-BEE data.  Both parties have highlighted the critical roles that the financial sector in particular plays in economic development and empowerment, enterprise development and poverty reduction.  In addition, the finalisation of Conduct of Financial Institutions (COFI) Bill is pending, and this will bestow greater powers on the FSCA when it comes to transformation.

Williams concludes, “We can’t lose sight that of the fact that our financial sector has made important gains when it comes to DEI.  A 2022 Deloitte’s Global Report on advancing gender praised South Africa’s financial service industry for its progress in working towards gender parity, especially in next generation and senior leadership roles.  The latest Alexforbes 2023 Manager Watch Survey of Retirement Funds Investment Managers noted a dramatic increase in the number of strategies driven by BEE mandates.  It’s going to be critical over the next five years to escalate successes like these. As new regulations come into force, there needs to be a sharper focus on executive search and other more strategic approaches to identifying, engaging with, retaining and developing key financial services talent, especially those fit for top and senior management levels.”