Transcript SAIA APPROVED (PTY) LTD

THE SOUTH AFRICAN
INSURANCE ASSOCIATION
Barry Scott
Chief Executive
Agenda
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What is the SAIA
Charters in general
Financial Sector Charter
Questions / discussion
SAIA –
WHO AND WHAT WE ARE
SAIA is the umbrella body for the short-term
insurance industry, which promotes and creates
an awareness and understanding of the industry.
54 members
The SAIA Board
Mr Ronald Napier (Chairman)
Mr Nick Beyers (Deputy Chairman)
Mr Bruce Campbell
Mr Paolo Cavalieri
Mr Steffen Gilbert
Mr Rob Gordon
Mr Andreas Kleiner
Ms Margaret Louw
Mr Willem Roos
Mr Adam Samie
Mr Herman Schoeman
Ms Denise Shaw
Ms C Silverman
Mr Mike Strydom
Mr Mike Truter
Mr Alexander Weissleder
Lloyd’s South Africa
S A Eagle
Mutual and Federal
Hollard
Santam
AIG
Munich Re
Compass
OUTsurance
Lion of Africa
Guardrisk
Stanbic Insurance
Gerling General Insurance
SASRIA
Credit Guarantee
Swiss Re Africa Ltd
History
• SAIA’s roots go back to the early part of this
century, when the Council of Fire Insurance
Companies was formed in 1907.
• Various other associated bodies were formed from
time to time. In 1973, one controlling body was
formed, namely the SAIA.
CHARTERS IN GENERAL
The development of charters
is:
a political process
the result of a series of
negotiations
BEE development
1994
– New political dispensation in SA
– Emergence of first BEE initiatives
1995
– Increased emergence of BEE Companies
1998
– JSE meltdown
– Subsequent fall of Black Chips
1999
– Nail debacle
BEE business issues
2000
– More high profile failures
– Thebe (Macmed & FBC), Sekunjalo (Leisurenet),
Malesela
2001
– Real Africa Durolink stumbles
2002
– Move to Broad Based BEE
BEE legislative development
1996 – 1997
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National Small Business Act
National Empowerment Fund Act
Skills Development Act
Employment Equity Act
1998 – 2000
– Preferential Procurement Act
– Promotion of Equality and Prevention of Unfair
Discrimination Act
– Liquid Fuels Charter
BEE legislative development
2001
– Rural Development Program
– BEE Commission Report
2002
– Mineral Resources Act
– Mining Charter
2003
– Strategy Paper for Broad Based BEE
– Broad Based BEE Act
Government BEE strategy
Policy Objectives
Substantial / significant
• Increase in
 Ownership & control
 Number of enterprises
 Senior/executive
managers
 Income levels
 Broad based community
ownership
• Accelerated economic
growth
Key principles
 BEE broad based
 Inclusive & apply to all
sectors of economy
 Compliance with good
governance & ethics
 Part of growth strategy
Charters unpacked
Liquid Fuels
Mining
• Initiated 2000
• 25% BEE ownership of
aggregate value
• All facets of industry
• Covers EE, capacity
building, procurement,
JV’s, exploration & finance
• Agreed 2002
• 26% BEE ownership by
2012, 15% by 2007
• Covers EE, capacity
building, procurement,
beneficiation, CSI & rural
development,
management & ownership
Future sector charters
• Information Communications & Technology
Sector (ICT Charter)
• Agricultural Sector – various sub-sectors already
have Charters drafted
• Food processing Sector
• Property & Construction Sector
Business rationale for Charters
• We support State attempts to enhance
competitiveness by:
– expanding the productive base
– encouraging value-adding activities
• Redistributive effects should widen consumer
base
• Contribute to skilled and economically active
population
• BEE will enhance medium/long term stability
• Will yield new opportunities for all
Introducing the
Financial Sector
Charter
Key Outcomes
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Sectoral Transformation strategy
Interventions on targeted areas of the economy
BEE financing strategy
A basis for engagement with stakeholders
Principles
• A commitment that is voluntarily developed by
the Sector
• A transformation framework that establishes
mechanisms for BEE
• A balanced scorecard approach to measure
achievements in broad transformation and BEE
objectives
• Growth & development of the sector integral to
BEE
• Provisions subject to sound business principles
Context
• Very low levels of black participation
– Black senior management accounts for less than 10%
– Diminished black ownership in the Sector
• Low levels of investments in areas of national
priority
– Infrastructure, Low income Housing, Black SMEs, BEE
Transactions
• High number of un-banked / uninsured persons
– Dismal provisions of effective access to financial
services and products (LSM 1-5)
Vision
“…promoting a transformed, vibrant and
globally competitive sector that reflects the
demographics of SA, and contributes to the
establishment of an equitable society by
effectively providing accessible financial
services to black people and by directing
investment into targeted areas in the
economy”
Why a Charter?
• August 2002 Nedlac Financial Sector Summit
• “despite significant progress … society remains
characterised by racially based income …”
• “… inhibits … full potential economic potential …”
Why a Charter?
• “… addressing inequalities …”
• “… unlock the sectors potential …”
• “… financial sector … is central to … BEE”
What is the Charter?
• Transformation Charter in terms of the BroadBased BEE legislation;
• Framework upon which BEE will be implemented
in the financial sector;
• Partnership programme as outlined in
Government’s Strategy for Broad-Based BEE
What is the Charter?
• The basis for the sector’s engagement with other
stakeholders including Government and labour;
• Mechanism to establish targets
• Outlines processes for implementing the charter
and mechanisms to monitor and report on
progress.
Signatories
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Association of Collective Investments
Banking Council of South Africa
Bond Exchange of South Africa
Foreign Bankers Association
Institute of Retirement Funds
Investment Managers Association of South Africa
JSE Securities Exchange
Life Offices Association
South African Insurance Association
South African Reinsurance Offices Association
Association of Black Securities and Investment Professionals
(mandated by the Black Business Council)
• Government
• NB – no labour / community involvement
Who is Subject to the Charter
• Voluntary Charter
• Applies to all institutions active in the financial
services sector:
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Banks
Long-term insurers
Short-term insurers
Re-insurers
Managers of collective investments
Listed entities …
• Any other institution may opt-in
Exemptions
• Less than 50 employees – human resource
development provisions
• Less than R10m designated investments –
empowerment financing
• Both of the above – totally exempt, but may optin
• Companies subject to global policy – certain
Board member provisions
• Companies subject to global policy – ownership
provisions
• Wholesaler – access provisions
Brokers?
• No direct reference to brokers
• Commission not included anywhere in the Charter
• Brokers may opt-in
– Government / Parastatal business
• Important role to play
– procurement
The pillars
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2.
3.
4.
5.
6.
7.
Human Resources Development
Access to Financial Services
Empowerment Financing
Procurement & Enterprise Development
Ownership & Control
Shareholder Activism
Corporate Social Investment
HR Development
• Building a diverse, non-racial, non-sexist and
sustainable intellectual pool
• Un-quantified commitments to:
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Mentorship, Career Path programs
Cultural Diversity and Gender sensitivity programs
Where possible, support Educational Institutions
Skills Audit to be undertaken to identify black skills
shortage
Skills Development (5 points)
• Skills spend
– Additional skills spend to address black skills
– 1.5% of the financial institution’s payroll
• Learnership programs
– Black matriculants up to an equivalent of 4.5% of staff
to be enrolled in the 1st learnership cycle (3 years)
– Charter Council to investigate the feasibility of a 2nd
learnership cycle
Employment Equity (15 points)
2008 Employment Equity targets
• Black Senior Management from 2002 estimate of
9.9% to a minimum target range of 20% to 25%
• Black Middle Management from 2002 estimate of
17% to a minimum of 30%
• Black Junior Management from 2002 estimate of
28% to a minimum target range of 40% to 50%
Targets for women
Black women targets (including exec level) to be reviewed in
2007 but aim for 33% of black targets in all categories
• Black Women Senior Management from 2002 estimate of
1.6% to a minimum target of 4%
• Black Women Middle Management from 2002 estimate of
5% to a minimum target of 12%
• Black Women Junior Management from 2002 estimate of
12% to a minimum target of 15%
Access (18 points)
• Broadening the effective provision of financial
services to LSM 1-5
• To ensure that majority have access to basic
affordable financial services
• Defining Effective Access:
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Accessibility – within 20km radius of a point of service:
Affordability – cost effective services to LSM 1-5
Innovative, user friendly products/services; and
Non-discriminatory practices.
• Impact of these access standards to be assessed
by the Charter Council
Access targets
• Transactional Banking products & services
– 80% (LSM 1-5)
• Bank Savings products & services
– 80% (LSM 1-5)
• Collective Investments products & services
– 1% (LSM 1-5)
• Life Assurance products & services
– under discussion (LSM 1-5)
• Short term Risk Insurance products & service
– 6% (LSM 1-5)
• SAIA Access Committee
• Consumer and financial education
– 0.2% of each institution’s post tax profits p.a.
– SAIA programme to assist insurers / others
Empowerment Financing
• Mobilising resources for investment in socioeconomic transformation
• “Affected Institutions” – those taking “designated
investments”
• “Designated investments” – deposits, savings,
investments, risk insurance premiums
• “At least” R75bn originally targeted
• R122bn currently targeted
– BEE transaction financing (5 points)
– Targeted investments (low-income housing,
transformational infrastructure, agriculture, black
SME’s) (17 points)
Targeted investment / BEE Transaction
Financing targets
BEE Transaction Financing
R50bn
Low-income housing
R42bn / R32bn
Black SME finance
R4bn
Agriculture
R1.5bn
Transformational infrastructure R25bn
Procurement & Enterprise
Development
• To support the development of sustainable black
enterprises, 3rd tier financial institutions & black
SMEs
• BEE Accreditation to reflect the Sector’s
transformation strategy and its approach to
empowerment
Procurement
• Procurement from BEE accredited companies:
– 50% by 2008
– 70% by 2014
• Conditional upon Charters in:
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Information and Communications Technology
Advertising sector
Automotive industry
Building sector
• Targets reviewed in 2005
• Specific review of claims targets for short-term
insurers in March 2005
Enterprise Development
• Objectives
– Foster new BEE companies
– Develop existing BEE companies
• Mechanisms
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Skills transfer
Secondment of Staff
Infrastructure Support
Technical Support
Procurement & Enterprise
development
• Premium scoring to be awarded to Black Owned,
Black Women-owned, Black SMEs or excellent
performers in Sectoral Charters
• Un-quantified Commitments
– Promote early payment to Black SMEs
– Encourage existing suppliers to become BEE
accredited
Ownership & control
Enable genuine participation in the holding and
strategic direction of the Sector
• Black ownership to be aimed at:
– Promoting productive and sustainable participation by
black people
– Encourage involvement of broad based constituencies
in BEE transactions
– Encourage ownership that is likely to add value to the
financial institution
– Encourage funding structures that facilitate transfer of
economic interest
Ownership targets
• 25% total black ownership in 2010 (14 + 4
points)
– A minimum of 10% must be Direct ownership
– A maximum of 15% may be Indirect ownership
– Direct ownership above the minimum 10% can earn a
maximum addition of 4 points
• Foreign institutions may achieve an equivalent
score through
– An additional BEE Transactions target equivalent to
25% of the local institution’s value; &
– JVs and partnership with Black companies in terms of
paragraph 10.3
Control targets (8 points)
• Black people in Boards of Directors to be a
minimum target of 33% by 2008
• Black Women in Boards of Directors to be a
minimum target of 11% by 2008
• Black people in Executive Management from the
current % to a minimum target 25% by 2008
• Black Women in Executive Management from the
current 2% to a minimum target of 4% by 2008
Shareholder activism
• Shareholder activism is a critical component to
the continued confidence and long term growth
of the sector
• Financial Institutions (including Pension Funds
and Fund Managers) commit to undertaking
various programs to promote shareholder
awareness and encourage activism
• Indirect ownership points in the scorecard are
subject to financial institutions reporting on their
support for shareholder activism
Corporate social investment (3 points)
• Projects aimed at black people, have a strong
developmental approach & contribute toward
transformation
• Promote investment by the sector in areas
specific to the needs of the majority
Target –
- 0.5% p.a. of post tax operating profits
Application
• Targets apply from 1st January 2004 until 31st
December 2014
• Principles embodied in the Charter are perpetual
• Comprehensive review of Charter achievements
in 2009 and 2015
Monitoring
Ensuring a result-orientated and effective
implementation
• Establishment of the Charter Council
representative of the Sector and Stakeholders to
oversee implementation
Charter Council
• The Charter Council will establish an Executive with the
delegated mandate to:
– Receive, consider and approve Annual Audits from
Financial Institutions
– Issue guidance notes on the interpretation and
application of Charter
– Conduct reviews identified in the FSC
– Engage Govt., DFI’s, Regulatory Agencies & BEE
Advisory Council to promote implementation of the
FSC
• Independent Body
Charter Council
Industry Associations
6
ABSIP
3
Labour
4
Community
4
Government
4
Scorecard
• A basic and objective framework against which
Transformation and Empowerment can be
measured
• Provides a balance between imperatives for
sector transformation and black economic
empowerment
• Points scoring in the various areas only starts
from specific thresholds of performance
Scorecard
Component
Points
Human Resource Development
20
Procurement and Enterprise Development
15
Access to Financial Services
18
Empowerment Financing
22
Ownership and Control
22
Corporate Social Investment
3
Scorecard
Score %
Rating
< 40%
E
40 – 55%
D
55 – 70%
C
70 – 80%
B
> 80%
A
Scorecard – Interim Rating
Year
2004
2005
2006
2007
2008
100%
Rating
< 40%
E
40 –
55%
D
55 –
70%
C
70 –
80%
B
> 80%
A
Scorecard – Interim Rating
Year
2004
Interim
rating
40%
2005
2006
2007
2008
100%
Rating
< 40%
E
40 –
55%
D
55 –
70%
C
70 –
80%
B
> 80%
A
Scorecard
Year
2004
2005
2006
2007
2008
Interim
rating
40%
100%
Rating
< 16%
< 40%
E
16 – 22%
40 –
55%
D
22 – 28%
55 –
70%
C
28 – 32%
70 –
80%
B
> 32%
> 80%
A
Scorecard
Year
2004
2005
2006
2007
2008
Interim
rating
40%
55%
70%
85%
100%
Rating
< 16%
< 40%
E
16 – 22%
40 –
55%
D
22 – 28%
55 –
70%
C
28 – 32%
70 –
80%
B
> 32%
> 80%
A
Scorecard
Year
2004
2005
2006
2007
2008
Interim
rating
40%
55%
70%
85%
100%
Rating
< 16%
< 22%
< 28%
< 34%
< 40%
E
16 – 22%
22 –
30.3%
30 –
38.5%
34 –
46.8%
40 –
55%
D
22 – 28%
30.3 –
38.5%
38.5 –
49%
46.8 –
59.5%
55 –
70%
C
28 – 32%
38.5 –
44%
49 – 56%
59.5 –
68%
70 –
80%
B
> 32%
> 44%
> 56%
> 68%
> 80%
A
Reporting and Review
• Annual Report
– First report for year ending 31st December 2004, by
31st March 2005
– Thereafter by 31st March each year
• Members of a group should report as part of the
group, unless they are listed or opt to report
separately
• Each institution annual BEE report:
– Audited scorecard
– Progress report
Outstanding matters
• Finalize Empowerment Financing targets
• Regulations Review with Government
• Engage with social partners and Govt. on the
detail & implementation of Access Provisions
• Set up of the Charter Council (1st meeting 14/10)
• Gazette FSC as a Transformational Charter and
the Scorecard as a code of practice for public
sector procurement
• Review of HR targets ?
THE SOUTH AFRICAN
INSURANCE ASSOCIATION
Government levers - Acts
• Legislation to encourage BEE
– Has focused on workplace transformation and HR
development
• Tries to encourage industry to embrace BEE
rather than prescribe
• Ever more onerous legislation if industry does not
transform
Government policy instruments
• Legislation
 Broad based Black Economic Empowerment Act
• Regulation
 Various regulatory instruments eg quotas/licences
• State Owned Enterprise Restructuring
 Restructuring of SOE’s to transfer equity for BEE
• Preferential procurement
 Utilise State leverage in awarding contracts
• Institutional support
 State support for BEE Advisory Council & Business
forums
Government levers - Procurement
• Government is an enormous consumer of
services and in many cases it is the largest SA
customer:
– Has powerful leverage in forcing BEE
– The Preferential Procurement Act is the primary
legislation for State procurement
– Price is the main driver – but the status of BEE is a
deciding factor in awarding State contracts
Government levers - Charters
• Industry seeks to regulate itself to encourage
BEE
• Not legally binding but may be a precursor to
impending legislation or other State action
• Affords industry opportunity to decide its own
standards and time frames
• Foster a spirit of co-operation and understanding
of BEE issues