Address to the Portfolio Committee on Finance

17 September 2004, National Assembly

Dr Blade Nzimande, On behalf of the Community Constituency, Nedlac regarding progress on the implementation of the 2002 August Financial Sector Summit Agreements and Financial Sector Charter

Chairperson,
Honourable Members
Guests

Thank you for the invitation to address and make this submission to your committee on behalf of the Community Constituency of Nedlac. I am the chairperson of the Financial Sector Campaign Coalition, one of the six sectors registered in the Community Constituency.

Since I left parliament in 1999, I do not often get the opportunity to sit in these committee rooms and chambers and engage with former colleagues and comrades. I really appreciate this opportunity to reconnect around a matter that is of fundamental importance to the millions of South Africans, especially the workers and the poor.

I had hoped that addressing the committee on the second anniversary of the Nedlac Financial Sector Summit Agreements (signed on 20 August 2002), this would be an occasion for celebration; a marking of the progress we had made in implementing the much needed changes envisaged in the package of Summit agreements.

Sadly, that is not the case.

I am saddened at the report I must make on behalf of the community constituency. And at the same time the community constituency is angry that, fully two years after the historic signing of the Summit declaration, there is very little to be proud of in reporting implementation of the Summit agreements.

And, along with millions of South Africans, we are angry that the financial sector has consistently thwarted efforts to implement the Summit agreements in an open, inclusive and transparent manner as required by the Summit itself, which all the parties committed to.

As the FSCC and the community constituency, we have put considerable effort and energy into ensuring that the implementation of these agreements are discussed by all the Parties involved. When this campaign started, led by SACP, its rallying cry was: "Make the banks serve the people!"

That simple slogan articulated the feeling of millions of South Africans whose interests had never been served by the banks, the insurance companies or other financial institutions. It expressed the frustrations of those for whom the "net blankes" signs of our apartheid past had been replaced with the invisible, but no less exclusionary signs of SA financial institutions during the first decade of democracy – signs that said in no uncertain terms "Net rykes"; "No workers, no poor".

Members will be familiar with the recent report on competition in banking commissioned by the National Treasury and the Reserve Bank. That report, though still not made public, showed that SA banks operate a complex monopoly to keep charges high and serve only an elite minority.

The report came as no surprise to the FSCC or the rest of the community constituency at Nedlac. It was a clear vindication of our campaign calling on banks to serve the people. As we celebrate 10 yrs of democracy, this constituency, the majority of South Africans, cannot report much, if any, progress in extending services to improve their lives.

What has happened since 2002?

The Community Constituency thought we had made progress in 2002 with the signing of the Nedlac Financial Sector Summit agreements. To remind honourable members the Summit signed 13 Agreements. These were signed as a package not as isolated agreements, aimed at fundamentally transforming the financial sector to serve millions of South Africans, particularly the millions of black workers and the poor.

To remind honourable members, the stated goals of the Summit were:

• To provide sustainable and affordable banking services, contractual savings schemes and credit for small and micro enterprise and poor households
• To support higher levels of savings and investment overall
• To expand developmental investments that create jobs, raise living standards and strengthen the economy
• To encourage broader and more representative ownership, control and employment within the financial sector

Specific agreements included the following:

• Universal access to banking and other financial services. Contrary to the expectedly biased editorial of Business Day of 16 September, 2004, a call for universal access was made by us way back in 2000, and we cannot oppose this, except that this has, again, been discussed behind closed doors without the involvement of community and labour constituencies. During our campaign we had for instance called for the scrapping of all bank charges for recipients of state social grants and lowering of charges for workers and the poor as a whole so that they are affordable. We do not know how far will this universal bank account to address these concerns.
• Development of alternative institutions to serve poor communities
• Regulation of micro-lending and credit bureaux, and a general regulation of the sector to orient it towards serving the interests of the poor
• An end to discrimination against those of our people who are HIV positive.

What has government done?

We wish to note with satisfaction that since this agreement government has embarked on significant measures towards fulfilling its side of the bargain.

These include the following:

• The preparation and tabling of legislation on reviewing credit law, including regulation of credit bureaux and new legislation on co-operatives, including co-operative banks. We however urge government to speed up this legislation
• The tabling of the new Housing Plan expanding access to housing for all our people earning up to R7 500 a month
• Commitment to strengthen and reorient state-owned enterprises, including Development Finance Institutions, to drive a programme on job creation and poverty eradication

The Financial Industry

The response of the financial industry so far has been extremely disappointing!

After the signing of the agreement the financial industry requested that they be given a chance to go and draft a financial sector charter to give effect to these agreements. The drafting of the Charter was done behind closed doors by business alone, informing government only about progress, but to the total exclusion of the other two partners – community and labour, which were part of the Summit Agreement. We expressed concern about this, but when the Charter was published we decided not to be obstructive, despite having been excluded, and we welcomed it as a step forward.

We noted some positive things in the Charter, including:

• Commitment to investing up to R75 billion (possibly more) in low-cost housing, infrastructure development, black SMEs and agriculture and funding BEE transactions
• Commitment to bank the unbanked and a general break with past mentality that the poor are unbankable

But the Charter has got severe shortcomings, eg

• It is a voluntary charter and non-prescriptive. The industry is now wanting Community Reinvestment legislation to be shelved whilst we are not clear about their commitments to low-cost housing
• Does not cater for some of the agreements reached at NEDLAC, including eliminating all forms of discrimination including on HIV, nothing on supporting the informal economy, including the very burial societies and stokvels that banks depend on, as well as support for financial co-operatives, just to mention a few

But developments since adoption of the Charter in October 2003 are even more disturbing.

Since the signing of the Agreement in 2002 the financial industry has concluded BEE equity transactions of about R15n in deals without a cent spent on anything that addresses the interests of the workers and the poor as contained in the Agreement and Charter! Not a cent for low-cost housing, not a cent for SMMEs, not a cent to support financial co-operatives and burial societies! These deals clearly benefit a tiny minority of an elite.

It is clear that the industry’s priority is with enriching a few, and we call upon this Committee and Parliament to take a very serious look into this.

We have two further concerns in this regard:

• The NEDLAC Agreement is not being implemented as a package, but in a one-sided, fragmented and elitist manner
• Flowing out of the above, is this R15bn in transaction deals going to be subtracted from the R75bn in the Charter or is it outside. If it is regarded as part of the Charter commitments, then it means already R15bn has been blown on elite deals, and only R60bn is left to address housing and financial access for the poor. Also we do not know how much more is to be spent on such transaction bills as there seems to be a scramble and further negotiations by major banking and financial houses to find empowerment partners

In addition, the industry continues to meet behind closed doors to decide how much of this R75bn is to be allocated into what. This is a matter of serious concern to us, because we have a number of proposals regarding the spending and allocation (targets) of this R75bn or whatever the final amount will be. Just to give a few examples:

• We would like the poor to get the bulk of this money – for low-cost housing, SMEs, affirmative action and human resources development including for financial and other co-operatives
• We also would like to suggest that the banks must match what the government is doing for those of our people earning up to R7500-00 pm, including the development of a completely new model to finance low-cost housing. For example bonds, based on compound interest, for up to 20 years is a completely unaffordable and inappropriate model for low income earners. We would like to table this for serious discussion and investigation

In addition the financial sector are avoiding discussion with social partners, with the universal bank account being a classic example of this. Instead they seem to want to engage government separately and reach some understanding to the total exclusion of community and labour constituencies.

On the way forward

One of the key obstacles to taking forward the Charter process is the composition of the Charter Council. In terms of the Charter it is supposed to be 50% industry representatives and 50% others (government, labour and community). However there is now a ridiculous suggestion that the Council be more than 80% industry representatives, departing from its very Charter commitments. We want the Charter Council to be constituted along the lines of the NEDLAC model.

We are calling for the finalisation of the composition of the Charter Council as a matter of urgency, so that we finalise targets in an inclusive rather than secretive and exclusive manner

We also want a package for the poor to be immediately agreed upon. We have head big deals for a few, we now want a people’s deal on HIV/AIDS, low cost housing, universal access, investment in infrastructure, support for SMEs and finanical co-operatives

We urge this Committee and Parliament as a whole to reflect on all these matters and support truly broad based black economic empowerment and a package for the poor. We also hope that honourable members will understand why we are going back to the streets with rolling mass action to call for the implementation of the whole package of Summit Agreements, and a people’s deal, an end to elite boardroom processes and finalisation of the composition of the Charter Council.

From here we will be holding demonstrations in front of the banks in the Cape Town City Centre.

I thank you

Blade Nzimande
Chairperson - Financial Sector Campaign Coalition
On behalf of the NEDLAC Community Constituency