Economist warns of challenges in establishing state bank

An economist at Old Mutual Investment, Johann Els, says it will be extremely difficult for the government to find capital for the establishment of a state bank and funds for starting a sovereign wealth fund.

President Cyril Ramaphosa confirmed in his State-of-the Nation Address that the government was set to establish the fund and the bank. Ramaphosa also said he supports the establishment of additional banks in South Africa that would focus on offering services to people living in the townships.

He said he would like to see a bank that also focuses on small and medium enterprises – which are key to the financial welfare of the country.

The African National Congress has been punting the idea over several years and has the support of opposition parties such as the Economic Freedom Freedom which saw its proposal to nationalise commercial banks rejected in Parliament in 2017.

The Democratic Alliance is against the establishment of both the fund and the bank. Els says the government has too many financial problems to deal with for it to successful establish the two entities.

“On the other part, Eskom’s problems remain unresolved, calls for free education. We would have done a whole lot better than where we actually are. They can’t run the state-owned enterprises effectively. Where are we you to find the money to capitalise the state bank, where are going to find the money to state a sovereign wealth fund. There’s lots of other problems that we must fix first.”