Business Day 2004/09/21

Power-sharing lines drawn for finance charter


Chief Reporter

FINANCE Minister Trevor Manuel has finally broken the deadlock over which parties will hold power in the all- important council which will oversee compliance with the financial services sector charter.

Parties to the charter, including banks, black business, labour unions and community groups, have locked horns over the past four months over the power-sharing arrangement of the council, delaying the formation of the council and the implementation of the charter.

The major significance of yesterday's deal is that it draws in the charter's biggest critic; the Financial Sector Coalition Campaign led by the general secretary of the South African Communist Party Blade Nzimande. The coalition had threatened mass action against the charter saying labour and community were being excluded from the charter talks on outstanding targets.

The council will be the governing body overseeing the implementation of the finance charter, and its tasks include verifying charter points for empowerment deals, as well as assessing the empowerment progress of banks and finance companies.

After a gruelling meeting yesterday, Manuel announced a deal had been struck providing for the 21 seats on this council to be shared between all parties.

Of these seats, four will go to government, four to labour, four to community groups, six to the industry, and three to the black business body, the Association for Black Securities and Investment Professionals (Absip).

This represents a major compromise as the charter signed by all parties last year said "there would be equality between industry association representatives and all others". The industry, being the banks, life assurers, short-term insurers, retirement funds and asset managers initially believed this to mean they should get half the seats on the council.

"This is not an arrangement that suits everybody, but the fact that we have been able to agree on the composition of the council is itself a breakthrough," Manuel said yesterday.

Banking Council representative Derek Muller said the deal was "not an ideal model", but a "workable model".

Equally, Absip president Kennedy Bungane said: "We all took a lot of pain in reaching this agreement."

Yesterday, Nzimande welcomed the arrangement as it would allow his organisation a platform "to raise concerns about the final targets in the charter. There are targets we are not happy with , and we will be raising them."

Manuel's intervention means the

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council will hold its first meeting in the second week of October. It will meet four times a year thereafter.

But there are key pieces of the charter puzzle still missing.

For one, the power sharing arrangements of the council may now be final, but there is no agreement yet on what will happen when council members cannot reach consensus on an issue.

Manuel said a conflict resolution mechanism needed to be found urgently "as we would need early clarity on what happens in the event of a deadlock".

Also, there is no finality on outstanding charter targets, which will determine how much money banks and other companies will channel to empowerment financing.

The charter last year named a preliminary figure of R75bn to be spent on finance for empowerment deals and certain targeted investments, such as low-income housing and small enterprise development.

Now, it appears this figure has been raised to just less than R100bn in secret talks around the targets but the targets have not been finalised.

These targets were meant to be finalised by the end of June this year. But now, four months later, there is still no clarity on this empowerment financing money.

Sep 21 2004 07:24:51:000AM Rob Rose Business Day 1st Edition