2005-02-22,+Financial+Sector+Campaign+Coalition+2004+Annual+Report

Financial Sector Campaign Coalition =Annual Report for 2004=

2.1 Nedlac 2.1.1 Financial Sector Summit 2.1.2 Financial Sector Summit Agreements 2.1.3 Summit Implementation Assessment 2.1.4 Financial Sector Charter 2.2 Review **of Summit agreements implementation** 2.3 FSCC participation in Nedlac Community Constituency 2.4 Parliamentary hearing 2.5 FSCC Cape Town march 2.6 Charter developments 2.7 Mzansi National Bank Account 2.8 Consumer credit issues 2.9 Establishing Provincial FSCCs 2.10 Co-ordination 2.11 Reporting to member organisations 2.12 Media 5.1 Building provincial FSCC structures 5.2 National public hearings 5.3 Provincial public hearings Nedlac 5.5 Financial Sector Charter Council 5.6 Policy and legislation 5.7 Building our own financial institutions
 * 1 Introduction**
 * 2 Activities IN 2004**
 * 3 RESOURCES**
 * 4 ASSESSING OUR PROGRESS**
 * 5 CHARTING THE WAY FORWARD**


 * 1. INTRODUCTION**

In 2004 the Financial Sector Campaign Coalition consolidated its position as the dominant civil society organisation influencing financial sector transformation in South Africa. The year under review saw a number of achievements and developments that have firmly established the FSCC as the primary stakeholder with which both policymakers and regulators and industry bodies engage on transformation issues.

The Coalition has demonstrated that a diverse group of civil society organisations can come together around a single issue and campaign effectively for a specific set of goals that the individual organisations would have little prospect of achieving.

In 2001, the FSCC decided to use the social dialogue forum of the National Economic Development and Labour Council to enforce its demands for financial sector transformation. As a result, much of the FSCC's work has of necessity been geared towards Nedlac negotiations. In the latter half of 2004, these efforts started to bear fruit and have resulted in the establishment of the Financial Sector Charter Council, full involvement by community and labour groups in finalising the Charter targets, the launch of the Mzansi national bank account and new policy and legislation for consumer credit, co-operatives and alternative financial institutions.

This report discusses and analyses these developments in some detail and records the Coalition's other activities and achievements during 2004. The report assesses the FSCC's strengths and weaknesses and highlights some of the lessons we have learned in the campaign. It identifies the challenges we faces in charting a course for the coming year.

The year under review has been very busy with a number of processes being finalised, agreements being reached and new activities being undertaken.
 * 2 ACTIVITIES**

The product of Nedlac is agreements, so much FSCC time in the past year has been spent in meetings hammering out agreements on implementation of the Financial Sector Summit. Despite resource constraints that have hampered FSCC participation in some instances, Nedlac has provided an invaluable platform for the FSCC and has enabled the Coalition to engage with policymakers, legislators, regulators and business representatives on its demands for financial sector change.
 * 2.1** **Nedlac**

The signing of the Financial Sector Summit declaration on 20 August, 2002 marked the end of the beginning of our campaign to transform the financial sector so that it would better serve the needs of all our people. It was the start of the long haul - implementing the agreements and ensuring the financial sector made good on its commitments. Through the efforts of community and labour groups, the Summit agreements were incorporated //in toto// into the country's economic development blueprint Growth and Development Summit agreements in June 2003.
 * 2.1.1 Financial Sector Summit **

The Summit was a direct result of pressure from the Financial Sector Campaign Coalition and grew out of the SACP's "Make the Banks Serve the People" campaign. For the past two years, the FSCC has led efforts to ensure the implementation of these hard-won agreements. As a result of the decision to use the Nedlac forum to negotiate the Summit agreements, much of our focus during the past two years has of necessity been on working through Nedlac structures to implement the agreements.

As we embark on the third year of implementation in 2005, FSCC members are voicing concern that despite some significant achievements, overall implementation is slow and fragmented and that some elements in the business constituency use the multilateral social dialogue forum to delay and undermine the Summit commitments. They are also concerned at the tendency within government to continually renegotiate the terms of some agreements, or to bypass Nedlac in implementing them.

The financial sector summit declaration contained 13 detailed agreements on measures to be implemented jointly by the partners to transform the financial sector.
 * 2.1.2 Financial Sector Summit Agreements**

The stated goals of the Summit were: § § To provide sustainable and affordable banking services, contractual savings schemes and credit for small and micro enterprise and poor households, § § To support higher levels of savings and investment overall, § § To expand developmental investments that create jobs, raise living standards and strengthen the economy, and § § To encourage broader and more representative ownership, control and employment within the financial sector itself and in the economy as a whole.

The parties recognised that to achieve these aims requires a financial sector which is more diverse in terms of the nature, size and ownership of institutions. All its different components must assume a //strong developmental role.//

The signatories committed themselves to implementing the 13 agreements //as a package.// The following points are extracts from the Summit declaration and form the basis of the FSCC's demands:

§ § **Access to basic financial services:** To engage effectively in the economy, encourage savings and improve the quality of life, every South African resident should have access to affordable and convenient payments and savings facilities. Both the public and private sector financial institutions must play a role in achieving these aims.

§ § **Universal access**: The parties will jointly research the economics of basic financial services and on that basis establish mechanisms and timeframes for achieving universal access.

§ § **Development of sustainable institutions to serve poor communities.** While the large formal financial institutions have an important role to play in providing services for the poor. They must interact with and support smaller institutions, especially co-operative banks and NGOs that can provide micro-credit to the poorest households. We need to harness the energies of the existing institutions in our communities, such as stokvels and burial societies, in order to mobilise our people's savings. The smaller financial institutions serve to increase the diversity of the sector and broaden ownership.

§ § **Second and third tier deposit-taking financial institutions** The parties agree on the need for new enabling legislation for so-called second and third tier deposit-taking financial institutions. As a start, they have agreed key principles for legislation for financial co-operatives. The legislation should ensure that these institutions operate according to co-operative principles and enjoy adequate prudential oversight. Following the Summit, the parties will also make proposals on ways to enhance the developmental impact of the regulatory framework.

§ § **Financial co-operatives** The parties also agree that all the constituencies should seek to support financial co-operatives and micro-credit providers. After the Summit, they will engage on a concrete support programme.

§ § **Micro lending** In the absence of realistic alternatives, many wage-earners have had to resort to micro-lenders when they need credit. In too many instances, the result has been an accumulation of excessive debt at a high price. Following the Summit, the parties will propose appropriate regulation for micro-lenders to minimise the negative effects of usurious practices.

§ § **Regulation of credit bureaux**. Credit bureaux should play a positive role by providing creditors with necessary information on potential borrowers, which will reduce information asymmetries in the market. The parties have proposed elements of a regulatory framework to ensure that they supply only reliable information that is relevant to a person's creditworthiness; that they are more open to consumer complaints; and that there is no scope for unfair discrimination in their operations.

§ § **Discrimination.** The parties have agreed that, within the context of the Equality Act of 2000, every subsector within the financial sector should establish or strengthen a code to end unfair discrimination. Government should legislate uniform norms on disclosure of financial services by race, gender, location and categories of amount. People who face unfair discrimination should have an effective route for adjudication.

§ § **HIV/AIDS.** The parties are particularly concerned about the need to end unfair discrimination against people with HIV and develop appropriate services for them. Following the Summit, they will work together to achieve this end, and especially to ensure that people with HIV have improved access to housing finance and other services

§ § **Capital markets and investment.** The parties agree on the need to increase overall investment and in particular projects that strengthen infrastructure, create jobs, meet basic needs, stimulate economic activity in the poorest regions and communities of South Africa and/or support development throughout southern Africa. They agree on the need to establish a system to identify these projects. On that basis, they will engage around the establishment of realistic targets and monitoring mechanisms. In addition, they will develop training for fund managers and retirement-fund trustees to enable them to adopt more informed and appropriate investment strategies.

§ § **Development finance institutions (DFIs) and other state-owned financial institutions.** Following the Summit, the parties will make proposals around the developmental impact of these institutions and, if necessary, recommend improvements. A particular concern is to ensure that the PostBank should maintain and expand its services to poor communities.

§ § **Savings initiatives.** The parties have agreed on activities to promote a savings culture, mobilise our people around the need to increase savings and improve the savings facilities available to all our people.

§ § **A great deal of work.** The parties recognise that the proposed measures require a great deal of work following the Summit. We have agreed to meet at least once a month to review progress and strengthen our proposals. To ensure our success in this process, the NEDLAC constituencies commit to providing the necessary capacity, time, energy and enthusiasm.

At its first steering committee meeting of the year in February 2004, the FSCC decided to conduct a Summit agreements audit. Our conclusion was that despite significant achievements in some areas, overall delivery was disappointing. Much remains to be done, not least of which is ensuring that attempts to delay, undermine and, in effect, renegotiate the Summit agreements do not succeed.
 * 2.1.3 Summit Agreements Implementation Assessment**

The commitment to working collectively has been consistently eroded in the implementation period, with parties, mainly business and, to a lesser extent, government, going outside the Nedlac process to implement selective parts of the agreements package, thus denying labour and community organisations any involvement in shaping the outcomes. The best known example of this unilateral hijacking of the Summit agreements is that of the Financial Sector Charter.

Following the Financial Sector Summit, financial institutions led by the Banking Council decided to implement selective parts of the agreements through an industry transformation charter. At the same time, BEE legislation was in the process of being drafted, so the Finance Charter is something of an unusual hybrid: it is a product of a Nedlac sector summit but was crafted in terms of the Broad-based Black Economic Empowerment Act.
 * 2.1.4 Financial Sector Charter**

Government supported the sector's contention that allowing business to work alone, with some government oversight, outside Nedlac, would expedite delivery of the charter. Labour and community constituencies protested at this elite boardroom process, but to no avail. The FSCC was asked to exercise patience in awaiting the outcome of the business/government Charter process. Other policy and legislative processes, including the Community Reinvestment Bill, were put on hold in anticipation that the Charter would deliver the same outcomes through industry self-regulation.

The Charter was launched in October 2003. We have noted in various forums throughout 2004 that the Charter has a number of positive elements but falls short of the goals articulated in the Summit agreements.

These positive points include the fact that the Charter marks a decisive break with past attitudes of financial institutions. During much of the first decade of democracy, the sector remained largely unchanged and unchallenged. The commitment to adopt a transformation charter was evidence of progress that banks and insurers had finally agreed to change their policies and practices and to allocate significant resources to previously ignored individuals, institutions and investments.
 * 2.1.4.1 Charter provisions**

The Charter committed the sector to investing up to R75billion in low-cost housing, infrastructure development, black SMEs and agriculture, and funding BEE transactions. The industry also committed to providing retail banking services to the unbanked majority of South Africans. The Charter set a target of providing retail banking services within 20km of 80% of all households in Living Standards Measure 1-5, those with monthly incomes of below R2 500.

The positive provisions of the Charter are offset by a number of serious shortcomings. First and foremost, the Charter is non-prescriptive, relying on the goodwill and self-interest of the sector for implementation. Non-compliance will result in a financial institution scoring badly in terms of a BEE scorecard, the consequence of which could be failure to secure government contracts. The Charter does not acknowledge the important provision that the transformation agreements should be implemented as a holistic package. It has unacceptably low employment equity commitments, e.g. only 4% senior black women executives by 2014, and weak procurement commitments which, instead of encouraging preferential procurement, could actually encourage fronting.
 * 2.1.4.2 Charter shortcomings**

Additional weaknesses of the Charter are its silence on HIV/AIDS and on the challenge of providing services to the informal economy. An estimated 2, 3 million people employed in the informal sector were absent from the minds of the Charter drafters. The document also fails to fulfill the Summit commitment to building co-operatives and alternative financial institutions.

The industry failed to meet the deadline specified in the Charter of 30 June 2004 to finalise the Charter targets and commitments. These included finalising the investment targets and establishing the Charter Council which will monitor and evaluate its implementation.
 * 2.1.4.3 Charter Developments**

The Charter targets deadline was missed for two reasons: firstly because financial institutions and the drafters of the Charter could not agree amongst themselves on the amounts to be allocated to various commitments. Bankers wanted the total amount increased from R75bn to R95bn but insurance companies disagreed. Black professionals in the industry, represented by the Association of Black Securities and Investment Professionals (ABSIP), which was involved in drafting the Charter on behalf of the Black Business Council (now BUSA), demanded that half of the total be allocated to black economic empowerment transaction financing.

The second reason for the Charter delay was the refusal of the financial sector to agree to equitable representation in the Charter Council for the Nedlac community and labour constituencies and the refusal of the constituencies to participate in the Charter processes until equitable representation was agreed.

Overall progress in implementing the Financial Sector Summit agreements is captured in the table below.

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 * 2.2** **Review of Summit agreements implementation**
 * SUMMIT AGREEMENT**
 * SUMMIT AGREEMENT**
 * PROGRESS**
 * COMMENT**
 * Access to basic financial services**
 * Access to basic financial services**
 * Financial Sector Charter**
 * Mzansi account launched 25 October 2004.**
 * Agreement on future steps, monitoring & implementation**
 * Achieved**
 * Needs monitoring & evaluation**
 * NT/SARB research report on competition in SA banks**
 * Universal access**
 * Universal access**
 * Financial Sector Charter**
 * 80% LSM 1-5 in 10km**
 * Achieved**
 * Needs monitoring & evaluation; Charter Council to set generic access stds.**
 * Development of sustainable institutions to serve poor communities**
 * Development of sustainable institutions to serve poor communities**
 * Some policy & legislation in progress on co-ops, financial co-ops; alt fin institutions**
 * Progress too slow; needs more work**
 * Second and third tier deposit-taking financial institutions**
 * Second and third tier deposit-taking financial institutions**
 * Legislation in 2005**
 * New laws 2005; need plans for implementation**
 * Financial co-operatives**
 * Financial co-operatives**
 * Bill published**
 * New law 2005**
 * Micro lending**
 * Micro lending**
 * Consumer Credit Policy & Bill published**
 * Slow progress but now on track; DTI refuses to table Bill in Nedlac; new law mid- 2005**
 * DTI Research report on cost of credit**
 * Regulation of credit bureaux**
 * Regulation of credit bureaux**
 * Consumer Credit Bill published; interim measures by Dec 2004.**
 * Consumer policy published**
 * Slow progress but now on track; DTI refuses to table Bill in Nedlac; new law mid 2005; interim regulations by Dec 2004.**
 * Discrimination; HIV/AIDS**
 * Discrimination; HIV/AIDS**
 * Banks end mortgage insurance HIV tests;**
 * Claim end to redlining**
 * Insurers end policy exclusions.**
 * Must monitor & evaluate; measure against CRA.**
 * Capital markets and investment.**
 * Capital markets and investment.**
 * RTF conference 29-30 October 2004**
 * Pensions policy by Dec 2004**
 * Work to be co-ordinated with Charter Council on 5% GDS investment.**
 * Engagement on pensions policy;**
 * Research report on cost of savings**
 * Development finance institutions (DFIs) and other state-owned financial institutions.**
 * Development finance institutions (DFIs) and other state-owned financial institutions.**
 * No progress. Postbank in FSC.**
 * Much more work reqd.**
 * Savings initiatives**
 * Savings initiatives**
 * Mzansi; govt bond**
 * More reqd;**

In acknowledging that Nedlac has provided a unique and invaluable platform for FSCC that has delivered the achievements outlined above, it is appropriate in this annual review to assess the Coalition's future role in Nedlac.
 * 2.3 FSCC participation in Nedlac Community Constituency**

Nedlac was modelled on international social dialogue institutions which function as tripartite structures involving government, labour and business - all of which engage in dialogue from their established bases using their own substantial financial and human resources. Thus Nedlac does not provide an enabling environment for poorly-resourced community organisations like FSCC. Community is at a constant disadvantage in not having adequate resources to participate effectively, yet is expected to do so on an equal footing with other constituencies and is regularly criticised for not being able to meet the expectations of the institution and other social partners.

The one aspect of the Financial Sector Summit agreements that requires renewed commitment from the Community Constituency, and the FSCC in particular, is the concluding agreement to provide the necessary 'capacity, time, energy and enthusiasm'. To sustain and improve the level of FSCC involvement, will require an expansion of the FSCC's delegation and an improvement in the capacity of its representatives to engage meaningfully and consistently in Nedlac deliberations.

This raises the question of the FSCC's participation in other Nedlac activities related to the Community Constituency. The CC is weak in terms of capacity, human and financial resources; it is poorly organised and poorly co-ordinated. Some of its members have limited ability to participate in its activities but nevertheless remain involved in its activities, creating serious capacity problems. While there is a degree of support from the Labour constituency, the business constituency is generally dismissive of, and in some instances, contemptuous of, community involvement.

In order to try to support initiatives to support CC, the FSCC co-ordinator has taken on the following roles in addition to being appointed FSCC principal member and participating in the Financial Sector Transformation Task Team: CC representative on Financial Committee CC representative of GDS implementation task team CC representative to Management Committee meetings CC representative to Executive Committee meetings CC representative to Nedlac Protocol task team CC representative in Trade and Industry Chamber CC representative in TIC consumer credit task team CC representative on administered prices task team

This workload is onerous and, in light of the continued lack of progress in resolving co-ordination, capacity and Community Constituency funding issues, it is proposed that the FSCC curtails its involvement in anything other than financial sector transformation issues. In this regard, and in order to optimise its limited resources, it is proposed that the FSCC review delegates' participation and appoint new representatives who are able to meet the requirements of participating in Nedlac. This entails, but is not limited to, attending all task team meetings, preparing constituency position papers and other inputs on a regular basis, engaging with other constituencies on //ad hoc// bases where necessary and writing up regular reports.

In September, the parliamentary portfolio committee on finance held public hearings on progress in implementing the Nedlac Financial Sector Summit agreements. The FSCC presented a report on behalf of the Nedlac community constituency which explained the slow pace of Summit agreements implementation and the deadlock in finalising the Charter. It called for the resolution of these issues.
 * 2.4 Parliamentary hearing**

Industry representatives told parliamentarians that the SACP's Red October campaign had been the catalyst for all transformation initiatives in the sector.

Following the parliamentary hearing, FSCC chairperson Blade Nzimande addressed the congress of the SA Clothing and Textile Workers Union. He invited the conference delegates to join the FSCC in marching on financial institutions in Cape Town city centre to demonstrate the Coalition's frustration with the slow pace of financial sector transformation.
 * 2.5 FSCC Cape Town march**

The demonstration was extended to include major clothing retailers who have scuttled the Nedlac-brokered agreement on saving jobs in the clothing and textile industries by limiting cheap imports, and the financing of cheap imports. Memorandums were handed to banks, insurance companies and retailers by FSCC and Cosatu leadership.

Following the parliamentary hearing and Cape Town demonstration, Nedlac principals met to resolve the issue of the Charter Council composition. The meeting was chaired by the principal for government, Finance Minister Trevor Manuel. The meeting resolved to establish the Council on equitable lines with 9 representatives for business (including 3 for Absip) and 4 each for community, labour and government.
 * 2.6 Charter developments**

The Charter Council held its inaugural meeting on 14 October 2004. The targets contained in the October 2003 Charter promised investment in targeted fields of up to R75 billion. By October 2004, this proposed total had increased to R122, 5bn, allocated as follows: BEE transaction financing R50bn Housing R39bn Infrastructure R25bn Agriculture R1, 5bn SMEs R7bn

These targets are currently under review by the community and labour constituencies and will be finalised before the end of the year. The FSCC's positions remains clear - the priority target is affordable housing, followed by infrastructure, agriculture and financing SMEs. BEE transaction financing is lowest on our priority list and in our view should get the smallest stake. Our position is that the narrow-based big equity deals that have characterised Charter compliance efforts should not qualify for Charter scorecard credits.

The question of Charter participation focuses attention on FSCC capacity to participate in such structures on a consistent basis. The Charter Council draft constitution requires its members to fund their participation in its structures, including its co-ordinating committee. This work is time-consuming and requires a level of expertise in financial sector management. Funds must be provided to fund one person to do this work on a half-time basis.

In response to the Summit demands on universal access to financial services, the industry launched the Mzansi national bank account on 25 October 2004. Like the Charter, the Mzansi account was also developed by the industry in isolation, but nevertheless fulfils a number of FSCC demands.
 * 2.7 Mzansi National Bank Account**

Mzansi had originally been designed as a generic, no-name brand national account, which required the four big banks to collude on pricing for a period of two years, an act which is outlawed in terms of the Competition Act. The banks needed support from community and labour constituencies at Nedlac in order to obtain Competition Commission exemption to collude. The constituencies insisted that outstanding matters related to the Charter must be resolved, not just the national account, which resulted in the launch date being delayed. The National Treasury indicated it was not in favour of collusion so the banks introduced the account on a competitive basis.

A number of provisions of the Mzansi account, such as minimum documentation for opening the account, very low bank charges that reward small savings, the scrapping of Saswitch fees at all ATMs and free electronic deposits meet our campaign demands and will make retail banking accessible to the majority of the workers and the poor. In return for supporting the launch of the Mzansi account, community and labour proposed that a number of additional Mzansi features and implementation programmes should be agreed. The banks accepted the proposal and signed an agreement, ratified by the Charter Council, on future steps and minimum standards. These features will be developed over the next 6 months

The Financial Sector Summit identified access to affordable consumer credit, regulation of credit bureaus and control of micro lenders as priorities. Significant progress has been made in the past two months with the publication of consumer credit policy and legislation. In addition, after months of negotiation and initial refusal by DTI to consider interim measures, in October, the Department finally agreed to implement interim credit bureau regulations immediately. These are now awaiting gazetting by the Minister and will be incorporated into new laws in 2005.
 * 2.8 Consumer credit issues**

Despite this recent progress, implementation of the credit agreements has been frustratingly slow and disjointed over the past year due to reluctance on the part of the Department of Trade and Industry to engage in a consistent and meaningful way in Nedlac. It is the view of the Department that policy should be tabled in Nedlac, but not legislation. However, DTI tables policy at the same time as publishing draft legislation for public comment, resulting in the unacceptable situation of parties inside Nedlac deliberating on policy while business is engaging with DTI outside Nedlac on a bilateral basis to finalise draft legislation. DTI has indicated it is also willing to engage with Nedlac labour and community groups in bilaterals outside Nedlac. This poses a dilemma for Community, as it has no common identity outside Nedlac and it would undermine the very fabric of Nedlac by engaging with government outside its structure.

There was considerable resistance from business to community constituency participation in credit issues as these are negotiated through the Trade and Industry Chamber, which excludes Community. These objections were overcome in relation to the current round of negotiations but remain an issue that must be resolved.

In recognition that a number of our basic demands were being met through engagement in the Nedlac processes described above, in the last quarter of the year the FSCC turned its attention to building provincial structures and mobilising members to shape new FSCC initiatives.
 * 2.9 Establishing Provincial FSCCs**

The Mpumalanga Financial Sector Campaign Coalition (MFSCC) was launched on 18 September 2004. Its members include trade unions, civic, women's, youth, community and co-operative organisations. The MFSCC held demonstrations in the province as part of the Red October campaign to demand better retail services, appropriate pricing of savings and other products for funeral schemes and stokvels and credit for black farmers.
 * 2.9.1 Mpumalanga Financial Sector Campaign Coalition **

The Free State Financial Sector Campaign Coalition (FSFSCC) held its inaugural meeting on 23 October and decided to form a planning committee before formally launching the FSFSCC. This will ensure optimum participation by a broad spectrum of organisations. This launch will take place before the end of the year.
 * 2.9.2 Free State Financial Sector Campaign Coalition **

The planned launch of the KwaZulu Natal FSCC launch in October had to be postponed due to unforeseen circumstances. It has been rescheduled for mid-January 2005 and will also bring together a coalition of civil society organisations.
 * 2.9.3** **KwaZulu-Natal Financial Sector Campaign Coalition**

Several provinces incorporated financial sector demands into their Red October 2004 land and agrarian reform campaigns. In Northern Cape, Eastern Cape, Gauteng and Mpumalanga, financial institutions were targeted in Red October marches and pickets.

The FSCC steering committee met three times during 2004, in February, May and November to plan the work of the campaign. In addition, we submitted reports required in terms of the funding contract with FHR. Resources constraints have precluded other co-ordinating meetings but when new funding is obtained, more attention must be given to improving contact between FSCC affiliates and involving them more in the decision-making process of the organisation.
 * 2.10 Co-ordination and reporting to member organisations**

Throughout the year, the FSCC made reports to SACP and Cosatu structures as well as to the steering committee representing the broad membership of the Coalition. After its July meeting the SACP PB called for the Charter Council to be established, structured on the Nedlac model with equal representation by the four constituencies: community, labour, government and business, and for all decisions to be made by consensus. The PB decided that housing should be the priority target for investment and that all other investment areas, including BEE transaction financing, should be secondary to meeting the need for investment in affordable housing. In addition, the PB called for new Charter targets to address omissions such as access to retail banking services for people who earn a living in the informal sector.

The profile of the FSCC has been raised significantly during the past year. We have generated a lot of coverage of financial sector transformation issues in print and electronic media. We have conducted a number of interviews and commented on a wide variety of issues such as housing evictions, access to basic financial services, HIV/AIDS discrimination and the nature of Black Economic Empowerment in the financial sector and in general. The chairperson of the FSCC, Cde Blade Nzimande accepted invitations to address numerous audiences including the annual meetings of trade unions, co-operatives, parastatal financing institutions and management organisations.
 * 2.11 Media**

The FSCC has conducted its activities this year with minimal funding. The Foundation for Human Rights awarded a budget of R150 000 to facilitate the establishment of the organisation but efforts to raise other funds from a variety of sources have proved unsuccessful.
 * 3 RESOURCES**

We have approached a number funding agencies, foreign governments and foundations, but with no success. The Campaign is an unusual initiative and does not easily fit the NGO mould with which funders are familiar. For the past several months, the FSCC has faced the choice between spending a considerable amount of time and effort raising funds or attending to the Nedlac and non-Nedlac activities. We chose to concentrate our very limited resources on the latter, with the result that much of the work has been done on a voluntary basis. This is unsustainable in the long term, and now that the basics of the Charter process are in place, it will be necessary to spend some time raising funds and adequately resourcing the FSCC. Resources are required urgently to employ staff and commission research.

We have reached agreements with National Labour and Economic Development Institute (**NALEDI**), the Wits Centre for Urban Built Environment Studies (CUBES) and the University of Natal to assist in research which will greatly increase our capacity to engage in a meaningful and consistent way in relevant decision-making forums. However, we urgently require funding to activate these arrangements.

The above section illustrates that while we have made some significant progress, advances have been principally in relation to consumer access, and less on the broader transformation of the sector.
 * 4 ASSESSING OUR PROGRESS**

There is however no inherent contradiction between consumer issues and the struggle for more fundamental transformation. While the two are distinct, they are also interlinked. It is through the struggle for consumer rights, like universal and affordable bank accounts and affordable housing finance that we contribute to the more fundamental transformation of the financial sector.

Obviously consumer issues promoted in a vacuum, with no link to an overall strategic objective of ending exclusive control of all financial institutions by private capital, can achieve only limited improvements in the lives of ordinary people. And capitalist financial institutions will always try to reverse these. But the struggle to secure consumer access to retail financial services is a real and concrete demand that will provide the mass of our people with a real and concrete result. This result will provide us with a platform on which to advance a broader and much deeper transformation of the sector. There is thus a dialectical link between consumer issues and the struggles for fundamental transformation of the financial sector.

What are the fundamental issues of transformation? Our ultimate goal is the creation of a state owned and socialised financial sector, essentially controlled by the workers and the poor. This means doing away with the capitalist banking and financial system as a whole, as a key feature of a transition to socialism. Therefore, issues of transformation in the current phase of our struggle should aim to contribute towards, and be informed by, this end goal.

In the current period, we must thus place firmly on the agenda the question of ownership in the sector. For us, transformation of ownership of the sector does not mean installing a few black shareholders heavily indebted to white capital for 10% shareholdings in existing banks. It means ownership by the working class itself, operating in the interests of the workers and the poor. It means collective ownership of alternative financial institutions.

The workers potentially command significant power to achieve this goal. It is the provident and pension funds, banking and insurance savings of the working class, the funds from their burial societies and stokvels, their very wages that drive this sector, and indeed fund capitalism as a whole under globalised monopoly capitalism.

In both the Financial Sector Summit and the GDS agreements we secured a commitment to enabling legislation and other support for co-operative banks and alternative financial institutions whose primary objective would not be to bleed dry the workers and the poor in order to return profits to a handful of shareholders.

The power of the funds potentially under the control of the organised working class can be used to build these institutions almost overnight. But finance capital has, through the Charter, sought to deflect this drive, and push the Summit and GDS agreements off its narrow agenda. As reflected in the mid-year presidential GDS review, the sector has done little to give effect to the GDS agreements, including investing 5% of investable income in appropriate financial instruments.

We must escalate our struggle, advancing towards the fundamental transformation of the financial sector. The next step can only be patient but systematic mobilisation of the working class to apply pressure to change the nature of the control and investment of their funds. We need to engage Cosatu and other worker federations on these matters but these issues should not only be limited to bilateral engagements. Led by the SACP, we need to undertake extensive education and propaganda work among the workers so they fully understand these matters.

Ours is a capitalist state. Government has been unduly pressurised to act to protect the interests of private capital and entrench the capitalist character of the state. Our financial sector campaign challenges both the dominance of private capital in the financial sector and seeks to transform the character of the state. It is for this reason primarily that government is somewhat indecisive in taking firm decisions on some of our demands. This hesitation is evident in matters such as delays in regulating credit bureaus and was demonstrated in relation to government's reluctance to intervene on the composition of the Charter Council, which delayed the Council by four months. This was because conflict over the composition of the Charter Council had become a critical manifestation and immediate terrain of a broader struggle over whether the working class and its allies would exercise a meaningful influence in the structures overseeing the next phase of transformation of the financial sector. Government's intervention eventually led to a Council of 21 members, 9 from business and 4 each from community, labour and government. This structure represents a major victory for the FSCC and its allies and demonstrates that government can be influenced to support decisions that are in the interests of those seeking to transform the economy.

For the FSCC, the objective is to empower the workers and the poor, to secure them a foothold in the structure that will drive transformation of the sector. For the SACP, this empowerment of the workers is part of a broader strategy of nurturing socialist practice and worker power in the context of capitalism.

Consciously or not, capital has recognised the significance of this challenge to its hitherto unquestioned control of the finance sector and the powerful influence it exercises over the structure and character of our economy. This is why it reacted so aggressively to suggestions of a representative Council and consensus decision-making. But faced with a united front from community, labour and government, it decided to retreat and accept a minority position rather than be seen as thwarting change.

While going along with this lesser role in the Charter Council, capital is actively seeking to open other fronts in its battle to keep the working class and the poor in a state of permanent oppression and exploitation.

It is seeking allies within the broad ranks of the national democratic movement to stand shoulder-to-shoulder with white business in defence of privilege. The different financial houses are vying for political influence within our movement, sponsoring individuals and groups that have some influence and political standing within the movement. The big transaction deals that have taken place since the launch of our campaign and in pursuit of Charter credentials - the multi-billion rand share deals in Sanlam, Absa, FNB and Standard banks, clearly have this as their ultimate objective.

A second, inter-related tactic is that of using this as a strategy to co-opt a layer of the black petty bourgeoisie, transform it into a bourgeoisie, and call this black economic empowerment. Big capital uses this co-option as an attempt to redefine transformation of the financial sector to mean 'black capitalist ownership'. Transformation becomes no more than an attempt to adjust the colour of capitalism leaving its brutal character unchanged.

Worryingly, our campaign successes have been partly appropriated to drive this elitist BEE agenda. In the name of transforming the financial sector, BEE as currently practised, is guaranteed not to bring about fundamental transformation. The bosses clearly understand the opportunism and aspirations of the black petty bourgeoisie in the sector, as represented by ABSIP, and assist them in trying to steal our victory. It suits the bosses' divide and rule agenda to allow petty bourgeois elements to project themselves as legitimate representatives of all black people. In this case the fundamental transformation of the sector is reduced to nothing more than the buying of shares by a small black elite - the deracialisation of capital.

But a third, and even more dangerous strategy, that capital has been intensifying over these last few years is that of cutting deals with various trade unions. We have unfortunately not paid enough attention to this development, and we need to analyse it more carefully. Of course the trade union movement, from the standpoint of the capitalist class, is a multi-billion rand financial industry - pension, provident funds, insurance policies, funeral cover, micro-lending, etc. Various unions in Cosatu, and their investment companies, have developed close relationships with financial institutions. There is evidence that the bosses are actively working both inside and outside the unions to prevent workers from pooling their resources for the benefit of their members. Yet such co-ordination is a critical component of our over arching strategy to fundamentally transform the financial sector. We therefore need to raise these matters with Cosatu, intensify our work within the trade union movement in this regard, and consistently also raise some of these issues in the public arena.


 * 5 CHARTING THE WAY FORWARD**

Our major challenge in the short term is to build on the gains we have achieved and involve our members in ensuring that the gains we have made through negotiation are implemented. We need to raise the temperature of the debate and raise the tempo of our demands. And we must back our solid positions on the kind of transformation we want to see with actions that demonstrate our resolve to work for its implementation.

It is becoming increasingly clear that we need new and better ways to drive home to the owners and managers of financial institutions that we will continue to campaign vigorously for the meaningful transformation we envisaged with the launch of the Red October campaign four years ago. Notwithstanding their efforts to delay and derail our efforts, we must embark on a major campaign to translate the demands we convey in negotiations into action.

In the coming year, we must mobilise our members to take part in actions throughout the country. These must be actions that capital feels, not just sees: practical actions the captains of industry cannot ignore, because of the potential to hurt them in the only thing they care about, their bottom lines. Creative actions must be devised to bring our message to the ears of those in the banking, life insurance, short-term insurance, funeral, investment and development finance institutions. We must use democratic processes and structures to bring our campaign to the attention of the public and decision makers. In order to give effect to using and sustaining the campaign throughout the country, it is essential that the national FSCC is complemented by provincial structures. These must reflect the character of the national coalition by bringing together a diverse group of civil society structures to campaign around a single issue structures. Our goal is to have viable, vibrant structures in all provinces in 2005.
 * 5.1 Building provincial FSCC structures**

It will be very important to use the opportunities in the finance and trade and industry portfolio committees in the coming year to ensure effective participation in shaping financial sector legislation. This is especially important in view of the fact that the Minister of Trade and Industry refuses to table the consumer credit, consumer protection and other financial sector transformation-related bills in Nedlac.
 * 5.2 National public hearings**

The FSCC has not had adequate capacity to engage in these parliamentary activities in 2004 and must ensure we are in a stronger position to do so in 2005.

Similarly, we must use the structures in the provincial legislatures to encourage public participation in financial sector transformation. Once each provincial FSCC is in place, the Coalition will request provincial legislatures to hold public hearings on financial sector transformation. The purpose of these public hearings will be to hear testimony and gather evidence from individuals, organisations and communities throughout the country on their experiences in dealing with financial institutions, the problems they have in accessing retail and transactional services and the solutions they would like to see to address these problems.
 * 5.3 Provincial public hearings on financial sector transformation**

The reports from the provincial hearings and the parliamentary hearings will be compiled into a comprehensive report that will drive the campaign activities in 2005 and beyond. One of the Coalition's major challenges in 2005 will be to establish and support these provincial structures and strengthen ties between its affiliates.

We will continue to participate in the Nedlac Community Constituency and relevant task teams on financial sector transformation. In light of the issues discussed above, it is proposed that we reassess our participation in other Nedlac structures and curtail these where appropriate.
 * 5.4** **Nedlac**

We must participate effectively in finalising the Financial Sector Charter targets and in setting new ones as well as in overseeing implementation of the Charter plans. As mentioned above, this will require considerable financial and human resources if we are to be effective on the Charter Council board and co-ordinating committee as well as in the research, monitoring, evaluation and implementation activities around the Mzansi account.
 * 5.5 Financial Sector Charter Council**

The policy and legislative programmes in the departments of Finance and Trade and Industry to give effect to the Financial Sector Summit agreements will be finalised in the coming year, requiring significant input from FSCC. We have requested comprehensive policy and legislative programmes from the departments and should receive these shortly.
 * 5.6 Policy and legislation**

We face the immediate task of planning to establish a co-operative bank or other financial institution that will serve the interests of the working class and the majority of South Africans. In both the Financial Sector Summit and the GDS agreements we secured a commitment to enabling legislation and other support for co-operative banks and alternative financial institutions whose primary objective would not be to bleed dry the workers and the poor in order to return profits to a handful of shareholders. With legislation due to be introduced in parliament shortly, we must be prepared to act once new laws are promulgated. The power of the funds potentially under the control of the organised working class can be used to build these institutions almost overnight. We must be ready to meet and lead that challenge.
 * 5.7 Building our own financial institutions**

This initiative will change the nature of the Financial Sector Campaign Coalition and require thoughtful strategic planning to ensure that the gains and benefits of a broad-based, single issue coalition are not lost.