In South Africa we embrace the principles of the Broad-Based Black Economic Empowerment (BBBEE) Amendment Act, which serves as the basis for the Department of Trade and Industry’s Financial Sector Code (FS Code). Our long-standing commitment to transformation goes beyond the FS Code.
We believe it has the following core components
- Investing in economic growth and entrepreneurs, creating sustainable jobs and reducing inequality;
- Strengthening South Africa’s competitiveness by developing each demographic’s skills base;
- Using intellectual, financial and human capital to improve our communities;
- Transforming our own organisation through a fair,
equal-opportunity, values-based culture; and
- Addressing historic imbalances by enabling Black people, women, youth and people with disabilities to sustainably and independently participate in the economy.
Transition to the Amended FS Code
Since 2013 we have been reporting our transformation progress against the FS Code, gazetted in 2012. It was subsequently aligned with the Amended Generic Codes of Good Practice, and the Amended FS Code was gazetted (and became effective) on 1 December 2017. Other than supplier development the code has the same elements, however, certain changes within the elements do not allow for year-on-year comparison.
Other than higher targets, key changes include revised qualification points required to attain each BBBEE contributor level; priority elements and the discounting principle effect – those elements that have minimum points requirements to avoid a level discount; a new measurement – supplier development; and heavier weightings for each FS Code element.
1. Creating ownership opportunities
In 2004 we allocated 10% ownership to Black participants through the Batho Bonke empowerment consortium. 4.99% of the deal was unwound partly in 2009 and the remaining 5.01% in 2012. The deal created a net value of R2.5bn, after the consortium sold their equity. With the Amended FS Code, which recognises the Black ownership after the sale of shares, limited to the net value realised, we are still able to claim a portion of our Black ownership points in respect of the sale.
Our ownership score of 17.67 aggregates (i) the recognition of ownership after the sale by Black participants, (ii) indirect ownership, and (iii) equity equivalents from surplus empowerment financing. This translates to Black persons and Black women ownership of 14.96% (2016: 17.36%) and 6.41% (2016: 6.72%), respectively.
As part of the Separation, Barclays PLC contributed the cash equivalent of 1.5% of our market capitalisation towards the establishment of a new BBBEE structure. This contribution was used to acquire a stake in Barclays Africa, pending a new BBBEE share ownership scheme. It was valued at R2.4bn as at 31 December 2017.
2.1 Management continues to transform
The Amended FS Code requires that we disclose our ownership and management control at the effective date of our BBBEE certificate (7 March 2018).
Our Board comprises 18 directors, 14 members are South African, of whom three are Black men and three are Black women. The remaining four are Ghanaian, Kenyan and (two) British nationals. We appointed a Black South African woman, Tasneem Abdool-Samad on 1 February 2018, which increased our Board’s Black representation to 33%.
The Executive Committee comprises 11 members of whom two are Black men and two are Black women. Our Chief Audit Executive is also a Black woman, however she is an ex officio member.
2.2 Progress with employment equity
In South Africa, 71.9% of our employees, 90% of new hires and 80.8% of promotions were Black (2016: 68.6%; 88%; 82.5%, respectively). Middle management employees are a critical pipeline for senior succession, and we offer them formal learning, coaching and mentoring opportunities.
3. Forming partnerships to address skills development needs
We invest in skills development to address knowledge and skills gaps within the organisation and the wider South African labour market. We provide on-the-job training, management and leadership development, formal learnerships, internships, employee tertiary qualiﬁcation bursaries, and the Rising Eagles Graduate Programme. Of our 2 210 learnership recipients, 1 979 are Black. 363 were unemployed Black learners, 174 of whom completed their learnerships in 2017 and 93 have been permanently placed in the Group or elsewhere in the financial services industry.
Our employees leveraged the internal development offerings available to them, contributing to the reduction in bursary recipients to 805, of which 671 were Black. (2016: 1 288: 991 respectively).
We participate in formally funded programmes with BANKSETA and INSETA – statutory bodies that support and develop skills for the financial services sector.
4. Preferential procurement increasing
Our procurement spend is weighted according to the BBBEE contributor level of suppliers. Our total weighted spend on products and services increased to R17.9bn from 2 374 BBBEE-accredited suppliers (2016: R17.8bn; 2 608). However, total weighted spend with Black SMEs declined to R2.9bn from R3.1bn.
We are increasing our spend with accredited Black-owned and Black women-owned suppliers through supplier development initiatives. These initiatives increase Black SMEs’ capacity and so their ability to meet our needs. We segment contracts into smaller pieces of work and include small suppliers in our database to develop qualifying small enterprises and exempted micro enterprises.
As per the Amended FS Code, from 2017 our spend with 50% Black-owned and 30% Black women-owned suppliers is reported on a weighted basis. We have, however, presented our historical actual figures to present our progress over time.
5. Empowerment financing, supplier and enterprise development continues
Our empowerment financing is made up of targeted investments and BBBEE transaction financing. Targeted investments include transformational infrastructure that supports economic development, agricultural development, affordable housing, and Black SMEs. We exceeded our targeted investment target of R28.6bn and reached R34.6bn (2016: R31.7bn).
We have provided R15.1bn in BBBEE transaction financing for the acquisition, by Black people, of direct ownership in an existing or new entity.
Our aim is to develop SMEs to be sustainable, financially and operationally independent and for them to have access to other markets. We have contributed R108m to supplier development in the form of grants, direct cost support, low interest rates and funding.
Our approach to value-chain lending blends our commercial funds and/or guarantees with more affordable options from third parties to improve these emerging businesses’ probability of success. We have signed over R2.1bn (R215m was disbursed) in financing mandates with our corporate clients and third-party financiers to support SMEs and to optimise and transform our corporate clients and their supply chains. In 2017, we incubated 179 SMEs and launched two new programmes, being i) The Absa Accelerator Programme and ii)The Absa Development Programme, both designed to deliver high-impact, high-value business solutions tailored to each entity. To date, we have provided training, workshops and conferences to more than 100 000 SMEs, often at our enterprise development centres and through various programmes with strategic partners.
6. Socioeconomic development focusing on education
Our Shared Growth philosophy drives education initiatives centred on empowering youth. We offer skill-building programmes and mentorship to make them more employable, and ﬁnancial assistance for better education.
To alleviate the student funding crisis, we enhanced our scholarship programme, and invested R154m in scholarships for 3 568 university students (2016: R80m; 2000). We invested an additional R19m in critical and scare skills faculties in seven South African tertiary institutions (2016: R26m; 10). In support of the South African government’s Adopt-a-TVET initiative, we partnered with 36 technical and vocational education training colleges (TVETs) to introduce 1 236 students to the workplace and allow them to job-shadow (2016: 16; 480). We invested over R2.7m in training school governing body members, reaching 2 636 members across 669 schools (2016: R10m; 10 521; 2 725).
7. Access to financial services
With relevant, affordable products and services, and innovative delivery channels, we facilitate easier access to financial services and consumer financial education. We have introduced the micro branch concept, which allows customers in rural communities access to financial services. The micro branch offers sales and services as well as an electronic banking hall, giving customers another point of access. With strong customer uptake, further roll outs are planned for rural and township malls.
In partnership with PEP Stores, we serve people in marginalised and poor communities through a trusted and convenient channel. Launched in late 2014, approximately 230 000 customers use services provided through PEP Stores, which has over 2 000 stores across South Africa.