Many people, including the official opposition party, criticized the Gauteng provincial government for its plan to establish a provincial state bank.
It followed after the provincial government said it received a due diligence report approving its plans to establish a state-owned bank and pharmaceutical company.
Finance MEC Jacob Mamabolo told BusinessDay TV that a state-owned bank is critical to transforming the financial sector in the province and the country.
The bank is set to be established despite the challenging economic environment of South Africa and Gauteng in particular.
Gauteng’s bank will work alongside the Postbank, which has long been positioned to become a fully-fledged state-owned bank.
While the Postbank will operate nationally and support similar initiatives to the Gauteng-run bank, the province’s bank will be designed to address the specific needs of the province.
A state-run bank will also address market needs and segments that South Africa’s commercial banks have failed to address, said Mamabolo.
It will support the province’s Township Economic Development Act to boost the informal economy and fund township entrepreneurs.
“We believe that the Gauteng state-owned bank will help unlock the economic potential of townships and SMMEs in the province”, Mamabolo said.
Bureau for Economic Research (BER) chief economist Hugo Pienaar slated Gauteng’s provincial-based state-owned bank plans.
He highlighted that Gauteng’s provincial-based state-owned bank is in addition to the government’s plan to launch a fully-fledged national state bank.
“First, sort out the decaying infrastructure, water shortages, and crime in Gauteng before embarking on vanity projects,” he said.
DA Gauteng shadow MEC for finance Adriana Randall said they would not support the establishment of a provincial state bank.
“It will be yet another dysfunctional state-owned entity that the ANC and its cadres will raid to the detriment of hard-working South Africans,” she said.
“Gauteng should rather focus on ensuring that the Township Economic Development Act is properly implemented to assist struggling township entrepreneurs and SMMEs,” she said.
The DA is also demanding that Mamabolo provide them with a copy of the due diligence report from the SARB, giving the green light to establish this State Bank.
It is also unclear how the bank will be funded. The Gauteng treasury, which recently tabled a budget of R818 billion for 2023/24, has not yet established the funding mechanism for the establishment of the bank.
Mamabolo said the next step that they have to look into is the preparation of a business case which will establish the operating model.
“We have enough money to establish it. As a province, we will look at how to finance, start, and support it,” he said.
Mamabolo said the Gauteng government would initially reprioritise the provincial budget, borrow from the National Treasury or work with the private sector to ensure the two entities can be established.
Gauteng would not be the first province to have a state-owned bank as the KwaZulu-Natal provincial government runs Ithala Bank in its province.
The African National Congress (ANC) in KwaZulu-Natal also wants a national state-owned bank to co-exist with the Ithala Bank.
ANC provincial chairperson Siboniso Duma told ANC secretary general Fikile Mbalula that the Ithala Bank should not be sacrificed at the altar of the mooted state bank.