At its 53rd National Conference, held in December 2012, the African National Congress (ANC), a governing party in South Africa since 1994, took a few progressive policies, most notably create a state-owned bank. However, over 10 years later, the banking regulations do not favor the creation of a state bank, albeit the party re-affirmed the policy at its two successive national conferences.
The state-owned bank can be a very effective mechanism to bring about real, meaningful transformation in a financial industry, more specifically, a banking sector, which remains largely untransformed nearly 30 years into the hard-fought democratic order and, above all, appears not to readily respond to government initiatives.
For example, the South African banks had been reluctant to lend money under the government’s R200 billion Coronavirus 2019 (Covid-19) Loan Guarantee Scheme, albeit both the National Treasury (NT) and the South African Reserve Bank (SARB) had taken a whopping 94% of the risk should businesses fail to repay them. “We had several meetings with them, and they wouldn’t budge,” revealed a visibly disappointed former finance minister, Tito Mboweni, speaking at last year’s PSG Annual Conference in Sun City, North West province.
The banks have granted loans in the region of R18 billion. Put differently, they have approved a measly 27% of the Covid-19 loan scheme applications. This has, of course, greatly impinged on the country’s economic recovery from deleterious effects of the global pandemic. Hence, the government should play a leading role in the financial industry through the state-owned bank.
Given the slow pace to policy reform, South Africans would have to wait for a long period, if not forever, for the state-owned bank to come into existence. Apart from the state-owned bank, the governing party has failed to implement yet another progressive policy, namely alter the SARB’s mandate beyond price stability to include job creation and economic growth, also taken at the 53rd National Conference, largely owing to a failure to conduct a feasibility study prior to their adoption.
To spare the country from either a commission of inquiry and/or an expert panel to investigate the state-owned bank’s feasibility, as it happened with fee-free higher education and land expropriation without compensation, the two policies taken at the 52nd and 54th national conferences respectively, the ANC should consider an existent and progressive financial institution, such as Ithala, and gradually turn it into the state-owned bank.
Using a Leviathan model, be it as a majority or minority investor, this it can do by injecting financial capital in the KwaZulu-Natal-based financier through the Public Investment Corporation (PIC), which manages assets worthy above R2 trillion.
In fact, given that the government has to exercise a great deal of financial prudence, it would be less expensive to acquire the Ithala through the model than create the state-owned bank from the scratch, as it would require massive capital, human and structural capitals. To the government’s advantage, Ithala’s mission and vision are already aligned with its overarching objectives to address the triple challenge, namely high levels of inequality, poverty and unemployment.
As spelt out in its vision, for example, the financial institution, which provides an array of financial services in KwaZulu-Natal, seeks to be an innovative and responsive financial services institution owned by and serving the state and the people of South Africa. The financial institution further aims “[t]o reduce poverty through implementing infrastructure programmes, providing access to financial services, and building the economy of KwaZulu-Natal, with a focus on rural and township areas.”
More specifically, as read its mission, it seeks “[t]o provide banking and insurance products and services focusing on corporate and retail customers thus creating a more prosperous and inclusive society where the previously disadvantaged have an opportunity for better life for all.
Molifi Tshabalala is an author and independent political analyst
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