New state bank: Another ‘treasure trove’ for government – with big risks
Concern is growing around the government’s goal of making a state-owned bank, with many civil society organisations and political parties foreseeing the move as a way to loot state funds.
The opposition party, the Democratic Alliance, alleges that the legislative push to facilitate the registration of Postbank as a Bank Controlling Company capable of operating as a bank is a thinly veiled attempt to exploit state resources.
In its latest annual performance plan, the South African Postbank revealed its intentions to become a fully-fledged state-owned bank by 2024/25.
According to Postbank, its primary objective is to offer accessible and affordable financial services to various communities, including retail banking, SMEs and the public sector.
The organization, however, needs to obtain a banking license, which requires an application to be submitted to the South African Reserve Bank (SARB). Postbank plans to submit the application by the end of December 2023 and expects to receive approval in the following fiscal year, 2024/25.
The Democratic Alliance said that the only reason the South African Postbank Limited Amendment Bill was recently approved by the National Council of Provinces (NCOP) is because of political strong-arming by the ruling ANC.
“ANC’s argument for the necessity of a state bank is centred around the provision of financial services to SMMEs and economically disadvantaged entrepreneurs.
“The party claims that a state bank would serve as a viable and affordable alternative to commercial banking institutions. However, this argument is deeply flawed,” the DA said.
Instead of wasting political capital advocating for a state bank, efforts should be channelled into creating bankable business opportunities, both within the state and private sectors, the party said.
The party added that the government is yet to conduct a feasibility study for the proposed state bank – arguing that it is not a legal requirement.
The DA said that it would therefore write to President Cyril Ramaphosa to urge him not to sign the bill into law as its implementation will have severe knock-on effects on the already fragile economy.
Speaking to ENCA, following ANC Secretary General Fikile Mbalula’s comments regarding fast-tracking the bank’s development, Dawie Roodt the chief economist at Efficient Group said that the move is risky.
He said that the bank, being a lender of credit, could see people using funds to purchase goods without having the money to pay back the bank.
Roodt added that it does not serve the country’s needs and that lending money to poor people who can not get money from normal banks has the potential to lose ‘big money’.
“Many poor people will not be able to repay their debt, which means it is another state institution which is going to fail.”
He stated that taxpayers will ultimately have to pay the price of covering a future failed state bank.
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