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By unknown | Oct 22, 2009 | COMMENTS [ 0 ]

THE Financial Sector Charter is close to collapse, a senior Treasury official warned MPs yesterday.

Ismail Momoniat, the Treasury's head of financial sector policy, told Parliament's finance committee there were renewed discussions on Tuesday about ways to save the charter, which sets empowerment and transformation targets for the banking sector.

In a wide ranging meeting based on the Treasury's annual report, the department's chief, Lesetja Kganyago, also slammed negative adjustments by international rating agencies and said the government would try to convince them they were wrong.

He said most of the rating agencies, whose opinions set the price at which South Africa can borrow abroad, had put the country on review with a negative outlook after the global financial crisis erupted. They feared the country would not be able to fund its current account deficit or keep spending going.

Kganyago said Standard and Poor's was likely to be the first agency to revisit South Africa. He said the Treasury would try to show them where they went wrong and win a better rating.

Standard and Poor's confirmed South Africa's long term rating at BBB+ and its foreign currency issuer rating at A3 in June, but with a negative outlook.

Moody's Investor Services moved South Africa's foreign currency rating up one notch to A3 in July.

Defending the financial sector charter in the same meeting, Momoniat said it had set high targets for black access to capital and to financial services.

The charter was negotiated by business, labour and government between 2002 and 2004, when it went into effect, but was overtaken by the government's own codes of good practice.

The charter would be the effective agreement if it was gazetted, but progress has been stalled for two years by a dispute over the 10percent black ownership threshold set in the charter. The government's code calls for 15percent black ownership, but does not set any targets for access to services.

Unions argue that the ownership target of 10percent is too low, but bankers say measures to help fund previously disadvantaged people out of the poverty trap are more important than enriching a few people.


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