Background
Following a meeting of the Ministers of Finance and Trade & Industry and the Financial Sector Charter (FSC) Council Board on 30 July 2010, it was agreed to gazette the Financial Sector Charter as a three phase process.
Phase 1:
Phase 1 specifically excluded Access to Financial Services, Empowerment Financing, Enterprise Development and some aspects of the measurement of Black Ownership (primarily the concept of “Once Empowered Always Empowered”).
Agreement has been reached on a Phase 1 Draft Financial Sector Code document and this was submitted to National Treasury on 18 October 2010 and gazetted for public comment under section 9(1) of the DTI Generic Codes on 10 December 2010.
The period for public comment ended on 26 February 2011 and the Department of Trade and Industry (DTI) is currently collating and considering the comments received.
Phase 2:
Phase 2 aims to achieve consensus on all remaining issues after which a final version of the Draft Financial Sector Code will be published for public comment.
The major matters to be discussed and agreed during this phase comprise:
Access to financial products (incorporating Consumer Education)
Empowerment financing and enterprise development
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Ownership – the issue of “Once empowered always empowered”
Establishment of revised levels for Designated Investments to be applied to Empowerment financing
Targets
After consideration of public comments, the Minister of Trade and Industry will be asked to gazette the Draft Financial Sector Code under Section 9(1) of the CoGP as a binding Code on the Financial Sector.
Phase 3:
It is currently anticipated that gazetting of the final FSC code will take place during the second half of 2011, assuming that agreement on the current areas of discussion under Phase 2 can be achieved.
Current position
Access to financial services
The South African Insurance Association (SAIA) has developed a position paper on the subjects of Access to Financial Services and Consumer Education which will form part of its submission to the Financial Sector Charter Council Gazetting Committee.
The paper seeks to assess progress made during the implementation of the Financial Sector Charter to date and incorporates the recommendations arising from the Eighty20 research report and the input of SAIA members. The position paper was circulated to SAIA members for comment.
The National Treasury Position Paper on Microinsurance has still not been made available for public comment. The recommendations of the Microinsurance Position Paper will be considered in developing the final SAIA recommendations on Access to Financial Services for the Financial Sector once the document is made available.
Enterprise development and Empowerment Financing
The original Financial Sector Charter included Enterprise Development as part of Procurement with Empowerment Financing as a separate section of the Charter.
In order to achieve its Empowerment Financing targets, the short-term insurance industry was largely dependent on the banking and investment sectors originating investment structures into which the short-term insurance companies could invest.
In the revised Code it recommended that Enterprise Development and Empowerment Financing be combined and that the short-term Insurance industry be given the choice of meeting its target requirements in this section through a combination Enterprise Development and / or Empowerment Financing.
The research report of Naledi (National Labour and Economic Development Institute) re-emphasised the dependence of the short-term insurance sector on the banking sector in attaining its current Empowerment Financing targets.
Discussion continues in this regard.
Ownership – “Once Empowered Always Empowered”
The Ownership concept of “Once Empowered Always Empowered” formed a cornerstone of the original Financial Sector Charter. The Banking Association wished to retain this concept in the Code while the Labour and Community constituencies originally required this provision to be omitted from the Code. There has been further discussion on the areas of disagreement and consensus reached in several areas. Discussion continues on those areas where agreement has yet to be reached. Copyright © 1999-2010 19
Designated investments
The level of Designated Investments applied to each participant subject to the Financial Sector Code requires to be updated and research in this regard has commenced and should be completed shortly as part of the Phase 2 process.
Targets
Revised targets will be established for each section of the Code as part of the phase 2 discussions.
Research for Phase 2
The two appointed research companies, Eighty20 (Access to financial products) and the National Labour and Economic Development Institute (Naledi – Targeted Investments) have issued their reports and initial recommendations and these have been taken into account in discussions held in the Gazetting Committee of the Financial Sector Charter Council.
Further information : Gary Benton – gbenton@telkomsa.net
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