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Financial services are the economic services provided by the finance industry

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Financial Services Charter Financing
It was quite refreshing to see some progress made when the Financial Services Charter
announced its empowerment financing proposals. In a report released in July 2003 by
Empowerdex on the impact of the financial services charter, it examined the potential
amount that could be dedicated to empowerment financing. This financing was estimated
to range between R62 billion to R123 billion, which translates into 5% to 10% of targeted
investments. At that time there was an estimated R1.23 trillion of wealth that was
managed by the South African financial services companies.
The proposed empowerment financing of R122.5 billion translates to approximately 10%
of the wealth managed by the financial services industry, using July 2003 amounts. This
is good news for the following reasons:
This may be in line or even exceed the desired targets of The Growth and
Development Summit.
It alleviate some of the empowerment deal financing crunch which ranges
between minimums of R162.4 billion to R355.6 billions (using the JSE as a base)
to be able to reach 25% black ownership targets.
The financing available for low-cost housing, infrastructure and black agriculture
represent market access opportunities for black construction companies and black
farmers. This forms a good compliment to the construction and the AgriBEE
charters.
Furthermore these proposals ensure that approximately 10% of the financial services’
asset allocation is dedicated to developmental financing over the next five years. The
question that arises in one’s mind is whether this is enough to satisfy the financing needs.
The answer is no, it is not enough but it does help in addressing the empowerment
financing shortage. It is heartening to see that the committed amount may actually
increase.
The allocation of the funds will be based on the market shares, which could use funds
under management as a benchmark. This would effectively have two implications. The
first is that more responsibility is placed on those financial services companies that have
more funds under management. Secondly, the entities that are currently setting aside
funds for the empowerment financing may meet their allocated target much sooner thus
scoring highly in the first years of the charter.
The different types of financing have different impact on economic growth. There is
financing of equity deals that result in shares shifting from whites to blacks without
necessarily creating new jobs or new opportunities. But this financing is necessary to
ensure that the equity ownership profiles of companies change over time. Furthermore
the financing of the acquisition of operational assets by black people has a much more
impact in the economy in that it may result in job creation and facilitate much more
robust participation of black people in the mainstream of the economy. Infrastructural
finance has multiplier effects on the economy and thus proves to be a good catalyst for
growth. The financing of the operational capacity of black SMEs is critical to economic

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Financial Services Charter Financing It was quite refreshing to see some progress made when the Financial Services Charter announced its empowerment financing proposals. In a report released in July 2003 by Empowerdex on the impact of the financial services charter, it examined the potential amount that could be dedicated to empowerment financing. This financing was estimated to range between R62 billion to R123 billion, which translates into 5% to 10% of targeted investments. At that time there was an estimated R1.23 trillion of wealth that was managed by the South African financial services ...
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