Controversy surrounds the proposed Bill to convert the Development Bank of South Africa into a company, writes Lynda Loxton
NEW parliamentary finance committee chairman Sipho Mpahlwa had a baptism of fire this week when the committee once again flexed its muscles and refused to rubber stamp an important Bill.
Appointed on February 17, Mpahlwa almost immediately had to cope with a crisis that saw the Finance Department’s director general, Maria Ramos, rush down to Cape Town in a vain bid to soothe the committee.
On Wednesday the committee refused to approve a Bill aimed at giving the Development Bank of Southern Africa (DBSA) legal status and convert it into a company as it felt that all the interested parties had not been consulted and it did not want to approve the Bill in haste only to repent later.
Instead, it asked the DBSA and the Finance Department to resolve differences concerning the planned change with interested parties and report back as soon as possible.
If these differences could not be resolved, public hearings would be held, possibly on March 10.
Ramos said this would have no effect on the government’s full support for the DBSA, which taps about R1-billion from the financial market each year to fund infrastructure projects.
The rejection of the Bill followed objections from several organisations hastily consulted on Tuesday night after minority parties in the committee had expressed reservations about several aspects of the Bill.
Formed in 1983 through a treaty between the former South African government and its so- called black homelands, the DBSA was thrown into a legal limbo following the adoption of the new Constitution.
DBSA chief executive Dr Ian Goldin told the committee that the Bill would give the bank legal status and provide it with a share capital of R5-billion, of which R2-billion would be held by the government.
This would help the bank retain its AAA rating in the face of the withdrawal of government guarantees and allow it to continue to provide low-interest loans to high-risk infrastructure projects.
Goldin said its AAA rating was also important as the bank had not received any government funding since 1994 and about 75% of its funding came from the financial markets.
Ramos told the committee that after extensive consultation with interested parties, it had been decided that the bank should be converted into a company and should concentrate on providing concessional finance for infrastructure projects.
Democratic Party and Inkatha Freedom Front committee members questioned the fact that the DBSA was not formally being turned into a bank and therefore made subject to all the necessary financial controls.
They also wanted to know whether all the interested parties that could be affected by the bank becoming a company had been consulted and if it would not, in fact, pose unfair competition to commercial banks and other government financial institutions.
African National Congress committee members were concerned about who had been consulted about the Bill and faxes were hastily sent to organisations such as the Council of South African Banks, the Registrar of Companies, the Department of Trade and Industry and its business finance house, Khula Enterprise Finance Limited.
On Wednesday, committee members were dismayed to receive faxes from some of these saying they had not been consulted about the final draft of the Bill, believed it would give the bank an unfair advantage or would give it powers to encroach on their territories.
Some committee members who had not attended Tuesday’s meetings expressed misgivings that converting the bank into a company could open the way for “privatisation by stealth”.
Ramos admitted that the Bill had only been published on January 24 and that some interested parties might not have had time to study it. But she said they had all been broadly consulted about the Bill and its aims, which had formed part of the transformation of the bank in the past two years.
She said it had been decided after taking legal advice that it would be best to convert the bank into a company, along the lines of the Industrial Development Corporation, rather than a bank.
It would not be a deposit-taking institution, but would raise funds in the market for infrastructure projects that other banks regarded as too risky to support.
It was true that the bank had in the past granted loans for other projects but this had been because of its historic role of funding the former homelands.
It, therefore, had loans that supported small business, but these would be transferred to Khula. It also had land acquisition loans, and these would be transferred to the Land Bank when it had completed its restructuring process.
The bank was not involved in housing loans and would leave these to the National Housing Finance Corporation. “It is not the objective of the DBSA to compete in any way with the private sector,” Ramos said.
She said it was also not the aim to open up the way for the privatisation of the bank and it would be a statutory body subject to the control of Parliament.