A provincial state-owned bank for Gauteng?

If Gauteng MEC for Finance, Jacob Mamabolo has his way, the country’s economic hub could soon have a state-owned provincial bank.

Mamabolo delivered the provincial medium-term budget policy statement on Tuesday in Johannesburg.

During his address, Mamabolo said Gauteng’s medium to long-term strategy for revenue generation includes the establishment of a state-owned bank and pharmaceutical company.

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Finance for township SMMEs

Mamabolo believes the bank will be key to unlocking financial services and fostering financial inclusion for SMMEs, especially those in townships.

“We believe that this bank will play a critical role in mobilising development finance to augment our limited resources while also providing other financial services for SMMEs (small, medium and micro entreprises),” he said.

Speaking to The Citizen, Mamabolo said a state-owned bank will empower township SMMEs by providing them with easy access to funding.

“We’re quite sure that our bank will play a positive role in giving SMMEs an ecosystem for particularly debt financing,” he told The Citizen.

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‘Debt-friendly funding ecosystem’

Financial inclusion and access to funding options remain a challenge for most entrepreneurs starting out, with commercial banks often reluctant to grant debt due to high risk.

Mamabolo said financial access is a hindrance to the growth of most SMMEs, adding that a better ecosystem was needed.

“If we don’t have debt finances for SMMEs, how are they going to grow because the big banks are not looking at them?” he asked.

As an example, Mamabolo said an SMME based in Soweto is unlikely to get business funding from a mainstream bank as its geographical location is often considered high-risk.

“We have passed an Act to support townships – how will we support them if we can’t give them easily accessible, consistent, reliable and debt-friendly funding ecosystem?” Mamabolo asked.

“One thing I know we must do is to create easy access to money for SMMEs in the townships,” he told The Citizen.

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Mitigating risks

Asked if he wasn’t concerned about the bank’s potential susceptibility to corruption and looting of funds, Mamabolo said it was better to focus on eliminating associated risks than rejecting the idea completely.

“It’s better to start with a non-deposit-taking bank,” he said, explaining that would allow the bank to build its profile, performance, governance, while dealing with corruption,” he said.

“DBSA is a bank, but they’re not taking deposits,” Mamabolo added.

The provincial department has since explored numerous potential banking models and after, consultation with the Executive Council, has resolved to adopt a development finance bank as the best model.

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A pharmacy too?

One of the cards on Mamabolo’s table includes plans to establish a state-owned pharmaceutical company to improve the delivery of pharmaceutical and medical products while generating revenue for the province.

“We are confident that by the end of the financial year, we would have submitted sound and compelling business cases for both entities for consideration by national government,” he said.

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Breeding lab for corruption

Meanwhile, economist Dawie Roodt isn’t optimistic about the finance MEC’s grand plans.

“I’m afraid not a single one of these proposals are going to do much about sustainable job creation and will only contribute to further mismanagement and opportunities for corruption,” he said.

With national elections fast approaching , Roodt believes the provincial government’s promises are purely political.

“Most of this is just electioneering, and I don’t think most of it is going to be realised,” he said.

The government has received criticism from some experts for its youth employment initiatives, with some saying the role of government is not to create jobs but to create a favourable environment for the private sector to thrive.

Roodt echoed the same sentiment. “If you want to grow the economy and create sustainable jobs, you have to get more private sector participation and not more state participation,” he said.

“It doesn’t matter whether it’s a bank or pharmaceutical company, that’s only going to cost money and it’s not in the long term going to contribute to economic growth,” he concluded.

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