DA slams Makhura for planning to create ‘another VBS’

The Democratic Alliance (DA) in Gauteng labelled as “reckless” a plan by Premier David Makhura to convert the province’s agency established to fund small and medium-sized enterprises and township businesses into a state bank.

The agency, the Gauteng Enterprise Propeller (GEP) was established to promote and develop small enterprises in the province.

It was reported earlier this year that Makhura planned to establish a provincial state-owned bank to replace the GEP, which the premier criticised for failing to meet Gauteng’s economic targets.

In a statement on Thursday, DA Gauteng shadow MEC for finance Adriana Randall said the party did not support Makhura’s call to convert the GEP into a provincial state bank.

Randall said should the GEP be converted this could likely result in another VBS Mutual Bank situation.

VBS Mutual Bank was placed under curatorship earlier this year following allegations of mismanagement.

The West Rand District Municipality and Merafong Local Municipality in the Gauteng province had invested millions in the controversial bank.

“[N]ow [these municipalities] find themselves in dire financial straits, as it is unlikely that they will recover the money they’ve invested,” Randall said.

The shadow MEC said according to international research, “public sector banks have performed poorly according to financial measures, such as returns on equity or assets and the extent of non-performing loans”.

“In addition, state-owned financial institutions not only pose systemic risks to their economies but also threaten governments with potential liabilities and thus there is often a need for a rise in taxes or reduction in government spending to make up for such financial shortfalls,” Randall said.

The DA said it was clear that Makhura had not considered the challenges faced by the GEP before announcing plans to convert it into a provincial state bank.

Randall said the agency had been plagued by complaints of maladministration and corruption, adding that Gauteng MEC for economic development Lebogang Maile had allegedly ignored these complaints and done nothing “to remedy the situation”.

“Furthermore, GEP is still without a CEO for almost two years now and it does not seem like there are any immediate plans to fill the position.

“The acting CEO, Leah Manenzhe, has been accused of intimidation and abuse of power.

“Given the current situation at the GEP, it is not viable for this state-owned agency to be turned into a provincial state bank,” Randall said.

Randall said she would table questions in the Gauteng provincial legislature to ascertain, among other things, what the lending policies or criteria of the proposed provincial state bank would be, how this differed from commercial banks and what the position of the bank would be regarding non-performing loans.