South African Banks Adopt a Fresh Approach in Assessing Apartheid-Reparative Programs

A banking lobby group from South Africa is urging the government to finalize a review of a charter designed to tackle inequalities that emerged from apartheid to ensure it accurately reflects the performance of financial institutions.

The review of the Financial Sector Code was initiated by the government in 2018, but, according to the Banking Association of South Africa, the essential evaluations monitoring investments for transformation and increased involvement of the Black majority remain incomplete.

“The current scorecard fails to effectively quantify the outcomes of banks’ transformation and empowerment initiatives,” stated Mary Vilakazi, BASA’s chairperson and CEO of FirstRand, which is the largest bank in Africa by market value.

It is essential to measure both inputs and outcomes to ensure that the initiatives “are truly impactful,” she added.

In South Africa, companies are required to implement Black-empowerment strategies to align with government efforts aimed at rectifying financial disparities rooted in the apartheid legacy.

Lawmakers in parliament’s financial committee expressed concerns on Tuesday that the pace of transformation is sluggish and that changes have been more superficial than meaningful.

They pointed out that metrics related to Black ownership, enterprise development, supplier growth, and access to finance for historically marginalized groups consistently fall short of established targets.

Nonetheless, BASA argues that banks are exceeding the prescribed goals, as noted in its 2024 transformation report released on Wednesday.

As of 2023, ownership of banks by Black individuals reached 38%, with Black economic interest — the entitlement to profit sharing — at 29%. The target for both metrics is set at 25%.

Additionally, 90% of junior managers in banks are Black, surpassing the target of 80%, and they account for 68% of middle management positions.

However, there is a shortfall in senior manager roles, where only 51% are Black, and they represent just 36% of top senior management, compared to a target of 60%.

“Although the numbers for senior and top senior managers are significantly below target, the robust pipeline of junior and mid-level Black managers indicates that the representation at senior management levels will soon align with the country’s demographics,” BASA noted, adding that 48% of bank directors are Black, with a target of 50%.

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