- The Financial Sector Transformation Council (FSTC) has demanded that all financial institutions, from individuals to large corporations, provide it with BEE compliance reporting by 28 June.
- The FSTC appears to be overreaching by demanding B-BBEE reporting from financial institutions not involved in B-BBEE transactions or certification processes. Sakeliga questions the FSTC’s authority to compel businesses to spend time and money on such reporting and to impose sanctions on non-reporting role-players.
- Financial institutions should exercise caution when dealing with the FSTC’s demands, including delaying decisions where possible, seeking clarification on the FSTC’s mandate, and obtaining legal advice before coming to a decision.
Sakeliga questions and seeks clarification on the Financial Sector Transformation Council’s (FSTC) authority to compel compliance with BEE reporting from financial services businesses.
In March, the FSTC demanded that all financial institutions – from individual brokers to large corporates – provide evidence of their Broad-Based Black Economic Empowerment (B-BBEE) status (Reporting Notice 1 of 2024). Following this and similar FSTC notices in 2021 and 2022, several industry role-players now appear to be under the impression that non-compliance with reporting may result in formal or other statutory sanctions against them.
However, presently no legislation Sakeliga is aware of compels financial institutions to participate in or certify their businesses’ racial profile under the B-BBEE Act.
The FSTC appears to be overreaching by demanding B-BBEE reporting from financial institutions not involved in B-BBEE transactions or certification processes.
Sakeliga has therefore requested the FSTC to provide us with a clarification and substantiation of its position within 30 days. This is well in advance of the FSTC’s ostensible deadline of 28 June 2024 for industry compliance with its questionable directive. Sakeliga intends to share information it obtains from the FSTC with financial services providers, in order that they may better consider their possible response to the FSTC.
In general, financial institutions would be well-advised to delay their decisions and obtain legal advice before considering compliance with the FSTC’s directive. It is likely that the FSTC would use the information provided against you in future, in pursuit of non-value adding sectional and political interests.
Sakeliga’s position remains that the public interest is best served when businesses employ a strategy of maximum achievable non-compliance with government’s policy of BEE and its demands for BEE reporting.
Sakeliga's Mission: Building Scalable Solutions to State Failure
- Join thousands of dedicated, mission-aligned funders
- Protect our communities from a failing state
- Secure a flourishing economy in the place you love
BEE is a temporary harmful government policy. The policy professes to seek empowerment, but in fact requires businesses to jeopardise their mission of value-generation for adherence to political directives with a bureaucratic and racial focus. Instead of encouraging value-adding economic co-operation across communities, BEE adds layer upon layer of structural cost to doing business in South Africa, raising the cost of goods and services, and thereby making virtually everyone poorer.
In our letter to the FSTC this week:
- Sakeliga questions:
- the FSTC’s power and authority to require financial institutions to invest time, effort, and costs in complying with its reporting notices.
- whether the FSTC possesses legal authority to impose sanctions on non-compliant role-players.
- Sakeliga requests that the FSTC provide:
- reasons for deeming Reporting Notice 1 of 2024 to be within its power.
- reasons why it is requiring compliance from all financial services providers.
- clarity on the extent and source of its ostensible authority to impose sanctions on non-participating role-players.
- Sakeliga informs the FSTC of our comprehensive request for information under the Promotion of Access to Information Act, concerning the FSTC’s:
- status as a sector council under the B-BBEE Act.
- activities, records, decisions, and policies concerning sanctions for non-compliance with FSTC directives, such as financial and professional penalties.
- co-operation with the Financial Sector Conduct Authority (FSCA), the B-BBEE Commission, the Prudential Authority, and the Department of Trade Industry and Competition where it concerns the policing, investigation, enforcement, and imposition of sanctions against financial institutions.
Click here for our attorney’s letter to the FSTC.
Find out more about Sakeliga’s important litigation work and how to support it here.
