Discovery Bank’s BEE plan: Adrian Gore responds to critics

JOHANNESBURG — AfriForum has got itself worked up in recent days over a plan by Discovery Bank to issue shares to black South Africans. It’s been quite incredible to watch AfriForum trumpet up negative noise about this black empowerment scheme, which on the surface actually looks like a completely rational plan by Adrian Gore and his team. As Gore explains in this letter, the plan also sits perfectly within legislation and is done in the spirit of inclusiveness. – Gareth van Zyl

A statement issued by Discovery:

The Discovery Bank BBBEE Scheme

As part of the launch of Discovery Bank, Discovery announced a broad-based BEE (BBBEE) Scheme in which 10% of the Bank would be owned by qualifying customers.

Adrian Gore, Discovery, Sumitomo Vitality, Japan
Adrian Gore at the launch of Sumitomo Vitality in Japan, July 2018.

Gore said “We have received a considerable amount of feedback on this proposed Scheme. Upfront it is important to stress the value we place on what our customers think of us and the extent of their loyalty to us; and therefore we take their feedback incredibly seriously. At the same time, we need to always operate in a way that is consistent with the social and legislative imperative.”

It is important to clarify the rationale for the proposed Scheme and correct certain misperceptions.

  • There is a social licence to operate. Discovery is a deeply patriotic and values-driven organisation that has committed to investing in excess of R13bn into South Africa over the next five years – the Bank is central to this. In the context of investing in South Africa, there is a clear moral imperative for transformation. Achieving this in an inclusive way is fundamental to a successful, moral and secure future for the country. The Bank’s BBBEE Scheme has been structured to support this.
  • Transformation in South Africa is legislated. The legislation requires black ownership, and specifically, as part of our licensing process, a commitment was made to the South African Reserve Bank of direct black ownership in our Bank. We need to honour this commitment.

“Based on the fundamental issues of transformation, BEE requirements and licensing, the issue then became how – in terms of the Scheme’s design and execution. We felt that a Scheme that would have broad reach by directly linking to individual customers, would be equitable and more moral and inclusive than one in which a few people or narrow groups would benefit,” said Gore.

While details of the BBBEE Scheme will be finalised next year, Discovery clarified:

  • The Scheme shares will not be given away for “free”. Qualifying customers will pay for their shares (and any interest thereon) via vendor financing within the Scheme. This approach is consistent with many other models in the financial services and banking sectors.
  • As Discovery Bank is not a separately listed entity, the shares will not be tradeable.
  • The Scheme is intended to be broad, and will be available to individual participants. There will be qualifying criteria for these participants, and this will be finalised in 2019. There will be conditional requirements that participants will need to meet over the term of the Scheme.
  • Critically, participants will share only in the additional economic value they help to create – the arrangement is not at the expense of other members.

“Our primary goal is to build a bank that is progressive, nation building and rewarding for its customers. Our vision is to build a bank that helps individuals build a financial stronger future. We will continue to consult and incorporate all legitimate feedback as we finalise the details of the Scheme,” he concluded.

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