Transformation at the top still confronts banking sector

The Banking Association South Africa (Basa) has revealed that the sector is falling short of some of its transformation goals, with only 36% black people in top senior managerial roles, against a target of 60%. However, overall black ownership surpassed its target. 

Its 2024 Transformation Report released on Wednesday shows that the same applies for senior management, which only has 51% black managers compared to a target of 60%.

The 20 banks that participated in the report account for 96.1% of the total assets of all banks in SA.

“Banks will have to be more deliberate in making those appointments at a top level and at senior management level. The pressure is certainly on for banks to make those changes,” Basa chair Mary Vilakazi said. 

As a result, Basa wants the government to complete a review of a charter created to address inequalities brought about by apartheid to ensure it gives an accurate gauge of the banks’ performance.

The association alleges that the scorecard doesn’t effectively measure outcomes of banks’ transformation and empowerment effort.

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This report was published a day after the Portfolio Committee on Trade, Industry and Competition, alongside the Standing Committee on Finance, held a joint meeting with banks and financial regulators requesting information on practices in the banking sector and the regulatory framework.

The South African Reserve Bank and its Prudential Authority, as well as the Financial Sector Conduct Authority (FSCA) and Basa all indicated that transformation is happening in the banking sector.

“It is important to know that there has been progress and if you look at the trend you can see that it is improving,” Vilakazi said. “What gives us comfort is the fact that the middle management ranks have transformed quite significantly.”

According to Basa’s report, 90% of junior managers in banks are black, against a target of 80%.

For middle management, there is 68% black representation against a target of 70%.

“If you look at the number of appointments that need to be made there is no reason why the sector should continue lagging going forward,” Vilakazi said. 

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Absa, a bank that has always had transformation challenges and has also been a revolving door, should be getting a new CEO this year. 

Last August it was announced that Absa Group CEO Arrie Rautenbach would take early retirement effective from 15 April 2025. Shortly after, Charles Russon was appointed as interim CEO, becoming the bank’s sixth CEO in six years.

Rautenbach’s appointment was criticised because it was regarded as yet another blow to transformation. 

The Public Investment Corporation, which is an Absa shareholder, released a statement at the time that called Rautenbach’s appointment “yet another missed opportunity for the Absa board to publicly demonstrate its commitment to purposefully transform the banking group and to advance diversity, inclusivity and racial and gender equity at the most senior levels of organisation”.

The transformation report also showed that overall black ownership amounted to 38%, surpassing a target of 25% in the amended Financial Sector Code (FSC), while black economic interest – the right to share company profits – is at 29% against a target of 25%.

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Banks’ contribution to the transformation of the economy is also beyond the FSC’s target of R130 billion from 2018 to 2023, Basa’s managing director Bongiwe Kunene said. 

“Basa has long acknowledged that the racial inequalities in wealth and ownership in South Africa have their roots in apartheid and has partnered with government to bolster inclusive economic growth and the transformation of the economy,” Kunene said. 

In parliament the banking sector also came under scrutiny for account closures. Kunene said banks comply with legal standards regarding account closures and they give reasonable prior notice before closing an account.

“Banks have the right to close accounts to prevent them from being used for criminal activities … Each account closure is handled on its own merits, and the law is complied with fully,” she said.

This article was republished from Moneyweb. Read the original here.