South African State Bank will likely fail and cost taxpayers money

Efficient Group director and chief economist Dawie Roodt said a state bank lending money to poor people is a bad idea and that it is likely to lose money.

Roodt’s shared his views in an eNCA discussion following ANC secretary general Fikile Mbalula’s comments about their state bank plans during a workshop in KwaZulu-Natal.

Mbalula said the government should move quickly in implementing the resolution on the State Bank, including finding a way to capitalise on the bank.

The idea of a state bank emerged from the ANC’s policy discussions as an intervention to “progressively affect the structure and depth of the South African financial system”.

“One of the fundamentals about a state bank is the uncompromising, unapologetic role of the interventionist role of the state,” he said.

Mbalula added that the architecture of the idea of a state bank is the South African Communist Party. “It is something good from the communist party,” he said.

He said solutions were needed to address the lack of access to capital, especially for women and young people.

“It must include the transformative and diverse allocation of capital along race and gender lines,” he said.

Mbalula’s comments align with South African finance minister Enoch Godongwana’s feedback that they are looking at launching a housing bank.

In January, Godongwana said the housing bank would provide loans to public sector employees and the gap market.

The gap market is people who earn too much to get RDP houses and too little to get mortgages from banks.

Roodt is not convinced that the ANC’s plan for a state bank is a good idea which will serve the country’s needs.

He said the ruling party’s plan is most likely to give poor people access to credit to buy houses, cars, and other expensive things.

“If you create a state bank to lend money to poor people who can’t get money from normal banks, there is the potential to lose big money,” he said.

“Many poor people will not be able to repay their debt, which means it is another state institution which is going to fail.”

Roodt added that a state bank losing money would eventually result in taxpayers footing the bill.