IRFA Information Session Amended Financial Sector Code – Retirement Funds Scorecard IRFA 09 July 2020
Objectives The session is aimed at sharing information about : the role of the FSTC; § inclusion of retirement funds in the reporting § framework; retirement funds needs reporting requirements; § retirement and umbrella funds scorecard; § FS Code review process. §
Structure of the presentation About the FSTC; § The Amended FSC; § Overview of Elements of the FSC; § Retirement Funds Scorecard. §
About the FSTC .
Establishment Of The FSTC § The 2002 Nedlac Summit agreed on the need to transform the financial sector; § To achieve transformation, the sector committed to establishing a sectoral transformation charter; § The Charter was negotiated and signed on 17 October 2003; § To ensure achievement of the goals set in the Charter, the Financial Sector Charter Council (FSC Council) was established in 2004; § The FSC Council was established with a mandate to oversee all matters relating to the Charter and its implementation; § The FSC Council is now established in terms of the B-BBEE Act, Act number 53 of 2003 as amended by the B-BBEE Act 46 of 2013; § In 2018 FSC Council changed its name to FSTC.
FSTC Structure Council Board of Directors Reporting Working Committee Secretariat
Parties to the Development of the FSC § Financial sector trade associations - ASISA - SAIA - BASA & IBA - JSE Limited and Association - FIA - SAVCA - Batseta § Association of Black Securities and Investment Professionals (ABSIP ) - representing Black professional organisations
Parties to the Development of the FSC Government • -The Presidency, National Treasury and the Department of Trade, Industry and Competition ( the dtic ); NEDLAC Organised Labour • Congress of South African Trade Unions (Cosatu); National Council of Trade Unions (Nactu); Federation of Unions of South Africa (Fedusa); NEDLAC Organised Community • Financial Sector Campaign Coalition; Disabled People South Africa; National Co-operatives Association; The Women’s National Coalition; SA Youth Council; SA Civics Organisation.
About the FSTC How the Council Operates § Negotiations are facilitated through a reporting working committee ; § Final decision taken by the full Council ; § All decisions require consensus ; § Council is also supported by a full-time secretariat § Council funded by Trade Associations (business constituency).
Governance and Oversight § Provide oversight through governance structures; § Publish annual Transformation Report; § Continued monitoring of legislation; § Produce technical guidance notes; § Evaluate exemption and compliance applications; § Review and agree targets for Access to Financial Services and Empowerment Financing elements; § Periodically review the Financial Sector Code.
The Council’s Extended Role Facilitate funding and execution of transformation infrastructure; § Facilitate rural development and the funding of black agriculture; § Facilitate capacity development and funding for local government; § Facilitate improved governance and funding of state owned companies; § Ensure support for SMME through ESD and Preferential Procurement; § Assist with job creation; § Facilitate funding for Higher Education; § Increase financial inclusion and consumer financial literacy levels; § Identify and address potential transformation blockages and challenges. §
Regulatory Environment General Principles
The Amended FSC .
Amended FSC Scope of Application Banks • Long-term insurance • Short-term insurance • Re-insurance • Retirement fund administration • Management of Collective Investment Schemes • Financial services intermediation and brokerage • Public entities in financial sector (DBSA, Land Bank) • Asset Management, consulting and administration • Private equity, venture capitalist and impact investors • Investment managers including, but not limited to, private equity managers • Underwriting management agents • Industry Trade Associations • Retirement Funds (voluntary) •
Eligibility Generic = R50m+ turnover Qualifying Small Enterprise (QSE) R10m – R50m turnover • 100% Black Owned - Level 1 • 51% Black Owned – Level 2 • Emerging Micro Enterprise (EME) Less than R10m turnover • Level 4 • 100% Black Owned - Level 1 • 51% Black Owned – Level 2 • Start-Up = First year following commencement treated as an EME
Key Principles Each financial institution, irrespective of the fact that it is a member of a group, must be measured and reported on its own ü A financial institution that is a member of a group may be measured and reported on as part of the South African group provided that such group reporting is approved in advance by the Financial Sector Charter Council. Each financial institution to report annually to the Council ü Failing to do so will result in a level discount in the next rating (the Council “reserves the right” to name institutions as well). Verification agencies required to submit full certificate and report within 30 days of the issue date.
Overview of the Elements in the FS Code .
The BEE Landscape •Ownership •Ownership •Skills Development •Management •Enterprise & Supplier (including Development (including Employment Equity) Priority Preferential •Skills Development Elements Procurement) •Enterprise & Supplier •Empowerment Financing Development (including Preferential Procurement) •Empowerment Financing Elements •Socio-Economic Development •Consumer Education •Access to Financial Entity categories Services •Turnover > R50 million •7 Elements •Total Scorecard 112 points
FS Charter to FS Codes Retirement Funds Scorecard
Key principles • Many aspects of the FSC are not relevant to retirement funds as they are not for profit entities; • The objective of the Scorecard is to encourage retirement funds to provide for fair and equitable treatment of suppliers and employees; • The Scorecard consists of two elements only, viz., Management Control and Preferential Procurement.
Retirement and Umbrella Funds Scorecard ELEMENT Weighting Requirement to report OWNERSHIP Disclosure Fund liabilities attributable to black people MANAGEMENT CONTROL 20 Board and management Training for trustees and executive managers; SKILLS DEVELOPMENT Disclosure Member education initiatives PREFERENTIAL PROCUREMENT 80 Procurement from suppliers ENTERPRISE & SUPPLIER DEVELOPMENT N/A N/A EMPOWERMENT FINANCING N/A N/A ACCESS TO FINANCIAL SERVICES N/A N/A SOCIO-ECONOMIC DEVELOPMENT N/A N/A TOTAL 100
Reporting Principles B-BBEE Scorecard Fund liabilities attributable Management Control; to Black People Preferential Procurement FSC reporting requirements Training Trustees and executive management; Future plan on improving spend the B-BBEE scorecard Member education initiatives
Fund Liabilities • “Ownership” • Proportion of fund liabilities attributable to black male and female members; • Apply measurement principles enshrined in FS Code 100 (Ownership) – Independent Competent Person’s Report for Mandated Investments
Management Control Scorecard Description Weighting Target Board Participation Exercisable Voting Rights of Black People on 8 50% Board Exercisable Voting Rights of Black Women on 4 25% Board Black Executive management Principal Officer, executive and senior 8 50% management TOTAL SCORE 20
Measurement of Skills Development • Disclose details of training to:- • Trustees • Executive Managers • Principal Officers • Other Staff • Disclose value, average training per staff member, number of staff trained, examples of key interventions • Member education initiatives • Number of members trained • Amount spent relative to size of membership (Rand per member)
Preferential Procurement Scorecard Description Weighting Target Year 1-3 Year 3+ B-BBEE Procurement from all suppliers based on B- BBEE Recognition levels as % of Total Measured 35 75% 80% Procurement Spend B-BBEE Procurement from all suppliers that are QSEs / EMEs based on B-BBEE Recognition levels as % of 10 15% 25% Total Measured Procurement Spend B-BBEE Procurement from all suppliers that are at least 51% black owned based on B-BBEE 25 15% 25% Recognition levels as % of Total Measured Procurement Spend B-BBEE Procurement from all suppliers that are at least 30% black women owned based on B-BBEE 10 7.5% 12.5% Recognition levels as % of Total Measured Procurement Spend TOTAL SCORE 80
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