The Amended Financial Sector Code (FSC)

Reference documents:

B-BBEE Amendment Act
Amended Codes of Good Practice
Amended Financial Sector Code

In this article we briefly discuss some principle of the amended Financial Sector Code.

The Amended Financial Sector Code (FSC) was published for public comment on 17th March 2016 and became effective on 1st December 2017.

The amended code was designed with to expedite transformation broadly by use of a new item:‘Black Business Growth Funding’, as indicated in Ownership Statement FS100, paragraph

This paragraph states “A measured entity subject to code FS600 (banks and life offices) can top up the shortfall in its Ownership points through the provision of ‘Black Business Growth Funding’, as an Equity Equivalent that becomes available on the exit of empowerment partners. Such financing can be provided at an individual company level or in a collaborative effort with other industry players”.

Emphasis is placed on black women on the Employment Equity and Skills Development scorecards whereby separate measurement indicators were introduced. In contrast to the Generic Codes, compliance targets in the amended code are not based on the overall demographic representation of black people, as defined in the Regulation of Employment Equity Act and Commission of Employment Equity report. Preferential Procurement weighs heavily towards procuring from black-owned businesses and local procurement. The focus of Socio-Economic Development is on income-generating activities directed to beneficiaries.

The introduction of the Empowerment Financing and Access to Financial Services on the amended scorecard aims to support black-owned businesses. The includes black industrialists and black agriculture funding to aid the land reform process.

The amended sector code applies to:

Management of collective investment scheme assets;
public entities involved in the financial sector, e.g. Land Bank;
Private equity, venture capitalist, and impact investors;
Retirement Fund Administration;
Long & Short-Term Insurance;
Financial services intermediation and brokerage
Asset management, consulting and administration;
Management of investments on behalf of the public,

Priority Elements and the infamous Discounting Principle

These priority elements and sub-minimum targets apply to Large Enterprises and Qualifying Small Financial Institutions (QSFIs) as per the amended codes.

The sub-minimum requirements for Priority Elements are set out as follows:

Ownership – 40% of the Net Value points.
Skills Development – 40% of the total Weighting Points, excluding Bonus Points.
Enterprise & Supplier Development – 40% of the points for Preferential Procurement, Enterprise Development and Supplier Development sub-categories.
Empowerment Financing – 40% of the total Weighting Points, which excludes Bonus Points.

Supplier Development and Enterprise Development are not applicable for organisations operating in Empowerment Financing.

Where an entity is exempted from Empowerment Financing, the priority status does not apply to Empowerment Financing.


There are variances between the amended financial sector’s ownership Scorecard compared to the general amended codes in that the targets remain the same but the Weighting Points for Economic Interest and New Entrants differ.

The points allocated are 3 for both “Economic interest of black people and new entrants” compared to 4 and 2 respectively in the amended codes.

Bonus points apply to the Ownership Scorecard : Direct/Indirect black ownership of more than 15% awards 3 points.

Economic Interest and Voting Rights above 32.5% awards 2 points but staggered as follows: 1 point for achieving 32.5% and a further point for achieving 40%.

Indicators and methods for local branches of foreign banks

Management Control

This element measures board participation in terms of Voting Rights and Executive Director composition. Black people and black women are measured separately for ‘other executive senior, middle and junior management’. In each occupational level category, Africans are measured against the National Economic Active Population (EAP) target of 75%. The total achievable weighting points is 20 points.

Skills Development

This element measures Skills Development spend against a target for each occupational level that is based on the Leviable Amount of each level. Skills Development Expenditure on learning programmes which fall within the Learning Programme Matrix for ‘executive, senior, middle and junior management’, as well as non-management employees, are measured as a percentage of the Leviable Amount for those particular occupational levels.

Points are awarded for Skills Development Expenditure on black employees with disabilities, as well as black people participating in learnerships, apprenticeships and internships.

4 Bonus Points are awarded for the absorption of black unemployed people at the end of the learnership programme.

Enterprise and Supplier Development

This element has three categories, namely Enterprise Development, Supplier Development and Preferential Procurement. Targets for years one to three and three years plus were introduced. The targets and weighting points differ from the standard Amended Codes.

Bonus points, in addition to the Enterprise and Supplier Development scorecard, align with the Amended Codes. These points are awarded for procurement spend from black Stockbrokers, Fund Managers and intermediaries based on procurement recognition levels as a percentage of the total value of trade allocated.

Compliance with at least three of the following five points is required:

At least 25% procurement spend must be from local suppliers.
50% of new jobs created during the measurement period must be for black people and the total proportion of black people since the last measurement period may not have decreased.
At least 25% of Socio-Economic Development contributions must be absorbed in educational activities, or at least 25% of Enterprise Development contributions must be directed towards black women-owned businesses.
At least 85% of the Leviable Amount should be paid to South African employees by service industry entities.
Skills transfer: Organisations must spend a minimum number of days, as indicated in the table below, in assisting Enterprise or Supplier Development Beneficiaries to increase their operational and/or financial capacity and this process may be outsourced.

Additional articles will deal with more detailed information of this amended sector code in the new year.

Author Craig Tonkin

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