Budget Speech 2020: Proposed State Bank 'will follow all regulations'
JOHANNESBURG – Finance Minister Tito Mboweni on Wednesday allayed fears about the establishment of the State Bank, saying that it would comply with all necessary banking regulations.
This as Mboweni unveiled the details of the proposed State Bank and a R30 billion Sovereign Wealth Fund as the government forges ahead with unpopular initiatives.
Economists have been vocal against the idea of the State Bank and a wealth fund when the country is swimming in debt, also arguing that private banks were more than capable of serving the unbanked population.
Mboweni told Parliament that the preferred options for the establishment of a bank were now ready after tasking his deputy to undertake the State Bank project. Parliament last year passed legislation to allow state-owned enterprises to apply for banking licences.
Mboweni said the “architecture” of the State Bank would be that of a retail bank operating on commercial principles.
“The State Bank will be subject to the Banks Act, and will have an appropriate capital structure and performance parameters on investments and loan impairments. It will be regulated by the Prudential Authority on its own merits,” Mboweni said.
“We will also consolidate the currently fragmented system of national and provincial Development Finance Institutions.”
The establishment of the State Bank was first mentioned by President Cyril Ramaphosa during his State of the Nation Address two weeks ago, saying that Mboweni would give more details on it.
During a media briefing earlier, Deputy Minister of Finance David Masondo reiterated that there were quasi-state banks like the Post Bank and Ithala operating at national and provincial levels.
“This process gives us the opportunity to consolidate the proliferation of many state banks and make sure that the State Bank is compliant with the Banks Act,” Masondo said.
“There are failures in so far as the poor getting access to banking services and financial inclusion with existing banks. We are also going to ensure that (the State Bank) deals with market failures in the SMMEs sector.”
Masondo said the National Treasury would be drafting a policy paper that would deal with formalising the State Bank.
In Parliament, Mboweni also announced the formation of the South African Sovereign Wealth Fund with a target capital amount of about R30bn, which converts to roughly $2bn. He said a sovereign wealth fund was an important long-term tool for saving and investment, and could contribute to strengthening the fiscal framework.
“Given the legal, administrative and procedural issues involved, a relevant bill will be submitted during the course of this Parliament,” Mboweni said.
“There are a variety of possible funding sources, such as the proceeds of spectrum allocation, petroleum, gas or minerals rights royalties, the sale of non-core state assets, future fiscal surpluses and money we set aside.
“This will ensure that we continue to invest in the future generations of this country in a fiscally-prudent manner.”