Two major banks declined to comment on Wednesday while two others had not responded at the time of publication, but acknowledged receipt of questions. Another did not respond at all.
The ANC Youth League in KZN has called for government departments and municipalities to close their accounts with commercial banks and take their business to a state-owned financial institution.
Ithala was suggested as a possible vehicle for this purpose. Speaking at the development finance corporation’s relaunch in uMlazi on Tuesday, Sihle Zikalala, MEC for Economic Development and Tourism, said it was what the ANC had been calling for.
But Peter Draper, political economist and managing director at Tutwa Consulting Group, said the proposal was crazy and motivated by politics. The first question was whether a state bank would be able to manage the state purse.
“With corruption and patronage on the rise, there is a risk that a state bank could be captured and used for nefarious purposes,” said Draper.
He said the goal for private banks was to make money for shareholders, while the incentives were quite different for the state. “It’s a terrible idea. We already have several state banks, mainly development banks, why another one? We have the Public Investment Corporation, which is the biggest single investor in the JSE by some measure. They are already taking government employees’ money and investing in the private sector.”
He said the call made no sense and roused suspicion.
Azar Jammine, director and chief economist at Econometrix, said it could be done, but the state would then effectively be financing its own bank and borrowing from it, with no independent oversight.
This could lead to huge abuse by state organs.
The private sector invested, motivated by the need to provide returns for its shareholders. To do the same, state banks would have to be as efficient as possible.
“I’m not saying the private sector is always efficient,” said Jammine.
Lack of oversight was the reason why the Chinese government had settled on a partial private ownership of state enterprises. That way, there was at least some sort of independent oversight from outside the state.
Jammine said the calls for the government to bank only with state banks was understandable following the investigation into collusion by banks.
“The Competition Commission findings certainly add light to the ethics of the private sector banks,” he said.
Zikalala said once Ithala was licensed and could operate as a commercial bank, even ANC accounts would have to be moved.