PRESENTATION TO: PARLIAMENT STANDING COMMITTEE ON FINANCE

1. PRESENTATION TO: PARLIAMENT STANDING COMMITTEE ON FINANCE

2. Financial Sector Overview • SA largest by nominal GDP (21,5% of GDP), followed by manufacturing and then mining • Second fastest growing sector (5,5% from 1994-2009), after construction (5,7%) • Internationally active • Central to the growth of the rest of the economy • Capital intensive • High concentration levels (84% of bank balance sheets accounted by the big 4 banks)

3. FinancialSector Overview • Market Capitalization - R554 449m • Employment – 275 965 • Assets • Banks - 3 109 bn • Retirement Funds 1 746 bn • Long-term insurance 1 375 bn • Collective Investments 908 bn • Short-term Insurance 78 bn

4. Regulation • Highly regulated sector • Entry and participation are licensed • Risk based prudential and market conduct regulation • Stability; Efficiency; Consumer and Investor protection; Market confidence • South African Reserve Bank • Registrar of Banks; Supervisor of cooperative banks; National Payment System; Exchange Control

5. Regulation • Financial Services Board • Pension funds; Insurance; Collective Investments; Financial Advisory and Intermediary Services; Market abuse; consumer education • Cooperative Bank Development Agency • Financial Intelligence Centre • National Credit Regulator

6. Financial Sector CharterObjectives Establish framework and underlying principles for BEE implementation in the sector Provide basis for engagement with other stakeholders Establish targets and other responsibilities Outline processes for implementing Charter and progress monitoring

7. TheParticipants

8. TheParticipants

9. TransformationCommitments • Accelerating employment equity and skills development within the sector; • Increasing procurement from BEE-accredited enterprises; • Improving access to financial services • Increasing investment in low-income housing, black-owned SMME’s, agriculture and transformational infrastructure • Increasing funding for BEE transaction financing; and • Achieving BEE ownership and control targets.

10. OverviewCHARTER TRANSFORMATION AREAS

11. 2008Achievements • Human Resource Development • Senior management • Black people 25.37% [ 20%-30% ] • Black women 8.05% [ 4%] • Middle management • Black people 38.88% [ 30%]- • Black women 17.64% [ 10%] • Junior management • Black people 53.14% [ 40%-50% ] • Black women 31.25% [ 15% ]

12. 2008Achievements • Skills Development • R854m spent to train black staff • Training of Black Staff- 1.71% [ 1.5% ] • Learnerships – 1.46% [1.5%]

13. 2008Achievements • R64.64bn in targeted investment • R17.69bn Transformational infrastructure [ R25bn ] • R31.14bn Low-Income Housing [ R32bn ] • R11.37bn SME [ R5bn ] • R4.44bn Agricultural development [ R1.5bn ] • R101.20bn in BEE financing [ R50bn ] • Access to Financial Services [80% of LSM1-5 within 15km radius of full service]

14. 2008Achievements • Transaction and savings products • Services Points 74.72% [Target 80] • Full Services Points 74.72% [Target 80%] • Bank Savings products and services [97.91% of target] • Number of active Mzansi accounts: 2,308,466

15. 2008Achievements Procurement - R59.5bn spent on black suppliers = 59.42% sector procurement [ ] Ownership - Direct Black Ownership in sector – 11% [ 10% ] Management Control • Black Directors 28.41% [ 33% ] • Black Women Directors 12.06% [ 11% ] • Black Women Executives 7.64% [ 4% ] • Black Executives 40.92% [ 4% ] Corporate Social Investment .088% of profit after tax [ 0.5% ]

16. Challenges • Low targets • Under achievements on some existing targets • Other challenges • Geographic concentration • Regulatory impediments in Housing • Retirement Funds institutions • Gazetting of Charter as Sector Code

17. Conversion to Sector Code • Areas peculiar to the financial sector • Access to financial services • Empowerment financing • Targeted investments • Areas which will align with slight variances • Procurement/Enterprise Development • Definition of “Black” • Skills Development • CSI • Employment Equity • Black Women • Management Control • Area under discussion • Ownership

18. Conversion to Sector Code Alignment of the Ownership element • Direct Ownership • FSC requirements : 10% • Codes requirements : 15% Status : Agreement, 10% direct ownership plus 5% equity equivalent option 2. Ownership recognition after exit of Black partners • FSC : Once Empowered Always Empowered • Codes : Black partners to be replaced within 3 years Status : Discussions ongoing

19. Conversion to Sector Code • The distribution of the 5% equity equivalent was also agreed as follows (R17,6bn): • 20% for Enterprise Development and Procurement from Co-operatives and Black SMMEs • 25% for Co-operative Financing and Access to Financial services • 40% for Targeted Investments (eg Black Agriculture, Black SMES, Transformational Infrastructure) • 15% for B-BBEE Transaction Financing

20. Looking Ahead Gazetting of the areas already agreed to – November 2010 Gazetting of the revisions and updates of the rest of the FSC – March 2011 Process of review already underway