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Our Central Committee (CC) meeting held over the last weekend expressed itself comprehensively on the offensive statement by the Banking Council of South Africa (BASA) to try and concoct an elitist escape to some of its commitments to the Financial Sector Charter Council. The Banking Association of South Africa announced last week that it would longer engage with the Community and Labour members of the Financial Sector Charter Council. Instead it opportunistically and foolishly stated that it would now only engage with government, and working together with the Association of Black Securities and Investment Professionals (Absip) as the only true representatives of what it refers to as 'black interests'.

Basa Managing Director Cas Coovadia held a media conference to say the banks would in future not engage with organised Labour and Community groups in relation to the Charter dispute over black ownership of financial institutions, but would engage only with Government and the Association of Black Securities and Investment Professionals (Absip) "because this body is among the organisations which have black interests". What a cheek!

Who are the banks trying to convince by claiming Absip represents "black interests" but organised Labour and Community groups do not? As has become increasingly clear during the financial sector campaign over the years, the banks are not willing partners in transformation, they are obstacles to it. In fact, banks are tyring to use their powerful position in capitalist South Africa to further entrench their powerful positions at the direct expense of the workers and the poor of our country. Last week's BASA statement is an expression of the most arrogant, if not outrageous, of attitudes towards the overwhelming majority of the people of this country.

In a joint statement issued by Cosatu and the Financial Sector Campaign Coalition (FSCC) (representing a total of about 50 community and related organisations) we called on both Government and Absip to publicly dissociate themselves from these attempts by Basa to undermine the Financial Sector Charter and, instead, urged them to resist attempts by the banks to subvert government and black professionals to their elitist cause.

Background

The background to the latest move by Basa is the Charter dispute, which has been going on for the past 20 months, over alignment with the BEE Codes of Good Practice. In 2008, Charter participants deadlocked over the refusal by the banks to align with the generic Codes as the basic minimum universal standards for transformation across all sectors of the economy. Media attention has focussed only on non-alignment with the direct (narrow) black ownership of financial institutions, which the Charter pegs at 10% and the Codes put at 15%, but there are several other areas in which the banks have not yet agreed to align. Negotiations were in limbo for much of this period as Charter participants waited for direction from government.

Following the election earlier this year, the new Ministers of Trade and Industry and of Finance convened a meeting of all Charter participants. Constituencies agreed to consider and quantify an equity equivalent to resolve the ownership dispute. Equity equivalent involves performance in other areas with an equal Rand value to non-performance in the area of equity ownership.

Charter parties agreed to report back to the ministers with proposals. Negotiations have taken far longer than anticipated, but have now resulted in a calculation of the 5% equity equivalent at R16,8 billion. Initially, agreement was reached on splitting this amount between financing for co-operatives, financial access by the workers and poor, financial assistance to resource-poor black farmers and low-income housing. However, banks subsequently tabled two "non-negotiable" demands:
• BEE Transaction Financing must be included in the equity equivalent split -by 2008 banks have already financed over R100bn in BEE deal financing, more than double the target, whilst refusing to finance low-cost housing and other related infrastructural programmes
• The Charter's "once empowered, always empowered" clause must be retained.
The Charter Council must reach consensus on proposals to the Minister for deviations from the Codes. So far, the banks have been unable to come up with a convincing motivation for retaining "once empowered" that other Charter participants can support.

The "once empowered" provision enables banks to do only a single once-off BEE deal in order to score full black ownership Charter points in perpetuity. Even if black owners exit from a BEE deal and sell their shares back to whites or to the bank itself, the BEE score can remain the same, as if they still retained the same shares for black owners, subject to Charter Council approval. This would mean a 100% white-owned bank could claim forever to be black-owned. But banks refuse to give up "once empowered" for the Codes' provision that black ownership points can be retained for a period, subject to certain conditions.

In the case of Standard Bank, it continues to claim 10% black ownership for its BEE deal with Saki Macozoma's Safika and Cyril Ramaphosa's Shanduka, even though this shareholding has reduced to less than 7%. Absa claims its full 10% black ownership score despite its BEE deal with Tokyo Sexwale's Batho Bonke consortium, unwinding. Only 3 % of the Batho Bonke shareholding was unencumbered but Absa continues to claim 10% black ownership recognition.

Ironically, if banks pull out of the Charter, in future they will have to comply with the Codes, so they will forfeit "once empowered, always empowered" anyway. So what is really behind the banks refusal to engage with Community and Labour and, in effect, pulling out of the Charter?

Banks have made it clear throughout the life of the Charter that they do not want to be in any structure that they do not have exclusive control over so that they manage this for their own profit-maximising interests. Banks refuse to be held to account in any forum which can measure genuine transformation in an objective and independent manner. They have been unwilling partners in the Charter process. Their intransigence has ranged from refusing to finalise performance standards to refusing to align with the BBBEE Codes. Banks believed controlling the Charter would enable them to hold on to their wealth, and their economic and financial muscle would shield them from transformation.

The banks have indicated that they will pull out of the Charter if they do not get their way on their two non-negotiables. At the same time, they say if government instructed them to align, they would comply, because then they could explain to investors they had been forced to do so, and did not comply voluntarily.

Recently, the banks have also embarked on an extensive, self-regulated so-called transformation process parallel to the Charter, co-ordinated by the Banking Association. This process includes co-ordinating banks' compliance with the Codes as well as overseeing sector-specific programmes such as consumer education and access.

Conclusion

Basa did not state this week that banks were withdrawing from the Charter Council, which is due to meet on 10 December 2009. Instead, Basa appears to be attempting to unilaterally restructure the Charter Council and to exclude Community and Labour. They have tried and failed to get government to restructure the Council by excluding Community and Labour.

The Charter Council constitution does not give Basa the authority to exclude any other Charter participant or member, although it does allow Basa to resign. In terms of Clause 20.2 of the Charter:

"A member may resign from the Charter Council at any time by delivering written notice to that effect to the Charter Council at its office, and that member shall thereupon cease to be a member of the Charter Council."

Basa is a "member" of the Charter Council in terms of 3.1.2 of the Charter Council Constitution. If the banks do not want to be part of a collective, representative, multi-stakeholder transformation Charter Council, they should resign. Community and Labour should not walk away from the Charter in response to bad behaviour from the banks. If anyone pulls out, it should be the banks.

There are a number of choices in dealing with the Equity Equivalent proposal, including BEE transaction and financing.

As the workers and the poor of this country, represented by labour and the community organisations we can choose one of two choices:
• We could refuse the demands of the banks; or
• Agree to include it, provided that any BEE transactions meet genuinely broad-based criteria
Banks should say whether they have been mandated and whether indeed they do support the Basa position.

It is clear to us, given what some of the CEOs of the banks have said, that BASA did not have the mandate to issue such a dismissive and reckless statement.

It is for all these reasons that the SACP, working together with the Financial Sector Campaign Coalition, will resuscitate its mass campaign to make banks serve the people!

Asikhulume!