The Nedbank Group’s decision to appoint former ABSA finance director Jason Quinn as its CEO-designate to succeed Mike Brown is sparking a heated debate across various sectors of society. Questions have been raised about whether the ‘green bank’ may have overlooked individuals such as Ciko Thomas or Mfundo Nkuhlu. Thomas currently serves as the group managing executive for retail and business banking, while Nkuhlu holds the position of chief operating officer at the bank.
Buoyed by Mary Vilakazi’s recent appointment as CEO of First Rand, some individuals expressed the hope that this ‘positive’ trajectory would continue in other financial institutions. This debate clearly indicates that the transformation agenda in South Africa is not about to go away any time soon. The country’s rights-based approach to transformation has not always been universally embraced or fully understood. White race and gender remain the central focus of the discourse, I have consistently maintained that transformation is ‘not just a numbers game’ (PowerFM, 15/12/2020) but should mean more. Nonetheless, the struggle for more black faces in the board rooms of blue-chip companies persists amid resistance and opposition from certain quarters.
In the first quarter of 2023, the Department of Labour and Employment conducted a comprehensive study of JSE-listed companies to assess their adherence to employment equity legislation. The study’s findings revealed a startlingly high non-compliance rate of 99% among private-sector employers. The remaining 1% demonstrated compliance only in administrative and procedural aspects, failing to achieve substantive compliance. In response to these findings, the department issued a stern warning and threatened legal action against Standard Bank, Absa, and FNB for their blatant disregard for employment equity regulations.
Consistent with a prevalent global trend, companies facing potential litigation for non-adherence to human rights codes often resort to out-of-court settlements or financial penalties to avoid legal repercussions. In this instance, reports emerged indicating that Standard Bank, Absa, and FNB were negotiating with the department regarding the potential imposition of penalties. These discussions centred on finding a mutually agreeable resolution to address the department’s concerns regarding the companies’ compliance with employment equity legislation.
The affirmative measures of the Employment Equity Act (EEA) and the Broad-Based Black Economic Empowerment Act (BBBEE Act) have previously been challenged by the South African Human Rights Commission (SAHRC), the Solidarity Union and other entities. In 2018, the SAHRC argued that the EEA’s emphasis on race and gender as the primary criteria is unfair to other disadvantaged groups, such as individuals with disabilities and the poor. It further contended that the quotas are inflexible and do not adequately consider the unique circumstances of individual companies. Meanwhile, the Solidarity Union challenged the EEA’s focus on race, deeming it discriminatory and unconstitutional.
In recent years, the financial sector has been plagued by a series of bitter conflicts that have left several black executives facing significant setbacks. In 2017, Phakamani Hadebe resigned from Absa, reportedly due to being overlooked for the head of corporate and investment banking position. Similarly, Peter Moyowas abruptly dismissed as the chief executive of Old Mutual Limited in 2019, sparking a protracted legal battle culminating in a recent Constitutional Court ruling upholding a R250 million damages claim against him. Moreover, Thabo Dloti stepped down as the chief executive of Liberty Holdings in 2017 following clashes with the board.
In 2021, former CEO Daniel Mminele parted ways with ABSA following a ‘mutual separation agreement’ with the company. Absa paid Mminele R30.47 million, including nearly R500,000,for his legal fees. At the time, Absa chair Wendy Lucas-Bull indicated differences in vision and approach between Mmineleand the board. Additionally, Absa Group and Absa Bank alsoannounced the removal of Sipho Pityana, Lucas-Bull’s designated successor, from their boards.
All these movements and insistence on the traditional approach to transformation demonstrate a power dynamic and competition for ‘black gold’— black executives. Black individuals have become a potent political currency for banks and big companies that help them maintain a positive balance in the government’s books. Their appointment to boards and executive roles is not so much about talent or assisting the country in moving forward but political goal-scoring. The likes of Lungisa Fuzile (Standard Bank), Hadebe, Mminele, Tito Mboweni (Goldman Sachs) and others switched to the financial sector to empower its political currency.
There is no evidence, however, that the appointment of blacks to senior roles has impacted systemic racial dynamics of power and privilege inherited from apartheid. The financial services industry enjoys space to trample on people’s rights and shows no desire to see a genuinely liberated and prosperous South Africa. After all, the financial services sector in South Africa wields more power than in any other part of the world. Late Thandika Mkandawire once asserted that it was at least six times larger than the real (productive) economy, and this figure may have increased further after the pandemic era.
Furthermore, commercial banks understand that they occupy an essential role in the country’s financial system as implementors of monetary policy, whereas the other players control massive assets. Their political role cannot be underestimated since they have the potential to support regime change initiatives. For example, the Competition Commission is currently investigating 28 banks for alleged price fixing involving the rand. The position of the financial services industry and its place in the financial system makes it a big political bully as it unnecessarily gains“greater influence over economic policy”. This a fact that many people who are excited by the appointments of blacks to senior roles seem to overlook.
Rather than viewing the appointments of Quinn and Vilakazi as clashing opposites, the discussion should focus on the financial sector itself and the persistence of its outdated business attitudes and practices. Thus, a frank conversation about these appointments would have to examine a very disturbing picture: the reality is that South Africa has only one large bank (financial actor), akin to a chameleon that seamlessly adapts to different colours, green, blue, red and so on. There is little or no difference that separates the country’s big banks, only their colours.
In my view, this lack of diversity or ‘sameness’ hinders innovation and social progress. In a Schumpeterian context, ‘sameness’ refers to the tendency of certain economic entities to resist or avoid disruptive changes. It represents a condition where businesses or sectors become complacent, adhering to established routines and avoiding the pursuit of novel ideas or technological advancements. Social change should also be seen as an advancement that contributes to the upliftment of communities. Desné Masie argues that banks have generally been reluctant to lead the change necessary for societal transformation. They have not fully utilised the financial tools at their disposal to contribute to broader transformation goals.
Merely filling positions with individuals from diverse racial backgrounds is insufficient for achieving true transformation in the financial sector and its old-fashioned ways. The call for a more profound change stems from the belief that transformation should transcend the surface, moving beyond a mere numbers game. Bank appointments are incestuous and generally lack new thinking. Quinn’s switch from ABSA to Nedbank is a daily occurrence akin to moving from a red bedroom to a green one in the same house.
Considering the financial sector’s pivotal role in society, the state of the banking sector is deemed regressive. A critical examination of this sector reveals its regressive nature across various measures. The sector’s failure to embrace inclusivity on all performance criteria suggests a serious disconnect between its operations and the diverse needs of the South African population. The correlation between financial inclusion and poverty in most South African geographies underscores a systemic issue.
The correlation between financial inclusion and poverty in most South African geographies underscores a systemic issue. The sector is perpetuating inequalities rather than serving as a catalyst for socio-economic upliftment. This acknowledgement challenges the industry to re-evaluate its practices and redefine success beyond traditional metrics like making a profit at all costs. In the first half of 2023, Africa’s biggest bank by assets, the Standard Bank Group, posted a staggering R21.9 billion profit.
This stark financial success raises questions about the sector operating in its own world and economy, seemingly disconnected from the challenges of marginalisation, low growth, unemployment and the unaffordable cost of living many South Africans face. Like many developing countries, South Africa faces a deficit running into billions of rands to achieve the Sustainable Development Goals (SDGs), and the country’s financial health is not helping. This creates the necessity to explore innovative and alternative financing models to support the social sector and make a meaningful social impact.
University of Suffolk’s Atul Shah claims that “the global crash of 2008 kicked off a furious debate in the UK about whether or not the City of London is a real asset to the economy.” Borrowing from Nicholas Shaxson and John Christensen’s book Finance Curse (2013), the same can be said about South Africa’s ‘oversized’ financial services sector, which is evidently a huge disadvantage – socially, morally, politically and, most of all, economically. The country’s ‘financialisation’ is the worst formof economic capture and undermines our future.