The Financial Sector Transformation Council (FSTC) has once again flexed its regulatory muscle, demanding that financial services providers (FSPs) submit Black Economic Empowerment (BEE) reports for the 13-month period ending 31 December 2024. This move marks a continuation of the council’s seemingly baseless assertions from the previous year, epitomising the third wave of BEE—a concerted effort by the state to tighten its grip on private enterprise under the guise of empowerment metrics.

The business advocacy group Sakeliga has been quick to underscore the unchanged legal landscape: the FSTC lacks the authority to mandate BEE reporting and possesses no statutory clout to penalise FSPs that opt out of the empowerment framework. Neither a refusal to heed the FSTC’s annual reporting summons nor a shortfall in meeting the procurement benchmarks set by the 2017 Financial Sector Code constitutes a breach of an FSP’s professional or legal obligations.

Yet the FSTC persists in its campaign, wielding the spectre of “non-compliance” classifications and hinting at potential sanctions for those shunning BEE participation. This escalation—an apparent bid to entrench government policy within the financial sector—smacks of opportunism. Critics argue that it is a thinly veiled attempt to coerce firms into adopting burdensome and ethically dubious BEE structures, at no small cost to their operations.

For FSPs abstaining from BEE, the prudent course may be to disregard the FSTC’s reporting notice altogether. Those already engaged in the programme, however, face a calculus of trade-offs: a possible one-level downgrade in their BEE status versus the moral, legal, and commercial hazards of acquiescence.

Evidence from records obtained under the Promotion of Access to Information Act (PAIA), alongside legal counsel and industry testimony, lays bare the FSTC’s bluff—both last year and now. Many firms, it seems, have been misled into overestimating their obligations. The FSTC, in response to a PAIA request, pegs its authority and sanctioning power solely to the Financial Sector Code. Yet this code neither mandates participation nor compels reporting. Indeed, the council candidly admits it wields “no other sanctions”—neither fines nor professional reprimands.

For FSPs within the BEE fold, the stiffest penalty for failing to file a timely report or hitting certain priority targets is a single-level demotion in their empowerment rating—a trivial concern for those opting out entirely or tiring of what some decry as a manipulated and inequitable regulatory charade. Tellingly, several non-participating businesses report that the FSTC has taken no action against them, despite their outright rejection of its demands.

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A path forward for FSPs

FSPs seeking further clarity from the FSTC, despite the above, might adapt a template message for their purposes. Those inclined to share such exchanges with Sakeliga can discreetly copy the group at help@sakeliga.org.za or forward correspondence separately. For now, the FSTC’s gambit appears more bluster than substance—a regulatory overreach unlikely to withstand scrutiny or resistance from a sector increasingly weary of its tactics.

Sakeliga provides clear and legally defined steps for refusing compliance on their website, here.

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