There will be no time for ideological debates about the merits or otherwise of state-owned banks during deliberations on clauses in the Financial Matters Amendment Bill seeking to enable qualifying state-owned companies to apply for banking licences. National Assembly Finance Standing Committee chair Yunus Carrim made this very clear yesterday during a departmental briefing on the Bill, when a National Treasury presentation drew attention to the ‘significant fiscal risks’ and ‘governance conflicts’ associated with state-owned banks, notes Pam Saxby for Legalbrief Policy Watch. According to Treasury deputy DG Ismael Momoniat, these issues were included in the presentation to emphasise the importance of any entity (private or public) ‘passing certain tests’ and ‘having a good business model’ to qualify for a banking licence. The Bill provides for this. There has been no change in his department’s position on the rationale for establishing a state-owned bank – which is that, where privately-owned banks are ‘unable or unwilling’ to supply a service, a state-owned bank should do so.
According to the ANC’s Thandi Tobias, ruling party policy on the issue is that ‘money contributed by the state should be controlled by it’. She was referring to ‘basic social services’ such as pensions and grants. This notwithstanding, financial sector transformation appears to be at the heart of the matter. In the ANC’s view, ‘financial inclusion’ is as much about the ownership of banks as it is about access to retail banking services – and progress towards establishing ‘black-owned banks’ should not undermined by the recent VBS scandal or the financial crisis facing so many state-owned entities. As Carrim was quick to point out, there can be no economic transformation without financial sector transformation. State-owned banks should be seen in that context – and as a fundamental requirement of the developmental state. That said, there appears to be general agreement about drawing the line at municipal banks at this stage.
Against that backdrop, regardless of the pressures associated with processing post-Budget draft legislation, the ruling party caucus is determined that the necessary amendments to the 1990 Banks Act should be in place before the end of the fifth Parliament. Amendments to the 2005 Auditing Profession Act included in the Bill have also been prioritised. To that end, the proposed new piece of legislation may need to be pared down – leaving amendments to the 1936 Insolvency Act, the 1996 Government Employees Pension Law and the 1976 Military Pensions Act to a separate Bill introduced after the elections.
Follow Pam Saxby on Twitter (@SaxbyPam)