Nationalisation will be the key pawn in this year’s game of politics
South Africa’s banking sector has been under fire since the beginning of the year and the public scrutiny shows no signs of letting up given the Competition Commission’s damning report implicating South Africa’s top three banks in scandalous dealings.
With the banks getting a lot of flak and their credibility questioned there is an opportunity to resuscitate the debate on the nationalisation of banks, especially given the government’s recent commitment to radical economic transformation.
In his 2017 State of the nation address (Sona), president Jacob Zuma called on the citizens of South Africa to “unite in driving radical economic transformation for the good of our country”.
“We mean fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favor of all South Africans, especially the poor, the majority of whom are African and female, as defined by the governing party, which makes policy for the democratic government,’’ said Zuma.
“In this way, we seek to open the economy to new players, give black South Africans opportunities in the economy and indeed help make the economy more dynamic, competitive and inclusive. This is our vision of radical economic transformation,” he continued.
The president’s speech came after two massive blows to the banking sector in the past few months.
2017 began with the Mail and Guardian exposing a preliminary report compiled by the Public Protector showing how the apartheid government breached the constitution by supplying then Bankorp (now Absa) with a series of bailouts from 1985 to 1995 –amounting to a “bill” of R2.21-billion.
Late last year, Black First Land First stormed the office of former public protector Thuli Madonsela, demanding she investigate a report alleging that R26-billion was spent by the Reserve Bank on bailouts, announced that it would protest outside about 50 Absa branches demanding the bank should pay back the money.
Meanwhile the ANC Youth League gave Absa 21 days to respond to their memorandum on the same subject, or else they would occupy every Absa branch countrywide.
Absa, however, said there were “several factual and legal inaccuracies that are contained in the provisional report.”
Barely a month later, the Competition Commission, whose role is to investigate, control and evaluate business practices, wrapped up its two year-long investigation, finding that 18 banks (three of which were South African) were involved in price-fixing and market allocation in the trading of foreign currency involving the rand.
The matter has since been referred to the Competition Tribunal for prosecution, which could see the banks fined as much as 10% of their local annual turnover.
Some have questioned the convenience of the banking scandals, more than insinuating that it plays into the hands of the Zuma faction who are, at the very least keen for distraction from the president’s seemingly endless scandals. At worst, it’s a way to get at Finance Minister Pravin Gordhan, with scurrilous attempts largely failing at linking him to ‘white monopoly capital’.
Either way, the backlash from across the political left has been vocal.
“These acts of corruption have crudely exposed the ethical crisis in the South African banking sector. The act of manipulating the currency is an attack on the constitutional mandate of South African Reserve Bank to protect the value of the South African currency,” ANC spokesperson Zizi Kodwa told Fin24.
The EFF has gone further.
“The EFF has been as the forefront of fighting financial crimes in South Africa and we believe that the revealed scandal of the colluding banks must be dealt with decisively,” said the EFF. “Politically, the South African government must commence processes of establishing a viable, efficient and sound State Bank which will insulate our country from the callous thirst for maximum and immoral profits pursued by the existing banks.”
“The cowardice government must now illustrate to the banks that despite their systemically important financial position, they are not above the law and not beyond reproach,” the EFF continued.
With the banking sector’s motives in question this may be a signal that the ground is fertile for a variety of political actors to push for the nationalisation of banks, given the banking sector’s recent failures and government’s recent commitment to radical economic transformation.
The issue of nationalisation is of course not new. Former president Nelson Mandela once confirmed the ANC’s commitment to the nationalisation of mines, banks and monopoly industries.
“The nationalisation of the mines, banks and monopoly industries is the policy of the ANC,” said Mandela in a 1990 address. “And a change or modification of our views in this regard is inconceivable. Black economic empowerment is a goal we fully support and encourage, but in our situation state control of certain sectors of the economy is unavoidable.”
Legend has it that Mandela was discouraged from this course of action by then Chinese leader Jiang Zemin, who warned that it would lead to a total collapse of the then brittle South African economy.
In theory, nationalisation would mean that private assets would become public assets, bringing South African banks under the public ownership of the government and allowing for the implementation of policies that will restore the banking sector’s credibility through fostering accountability and transparency.
Ideally, prioritising the reduction of the debts households and businesses endure – by borrowing money from private banks and the subsidisation of other sectors to grow the economy – is a step towards transforming the economy.
However, as fertile as the ground may seem, the current government’s track record suggests that nationalisation of the banks would present the government with the perfect opportunity to use the state’s resources to further promote patronage, corruption, and cronyism.
The ANC government today finds itself in a precarious situation, no longer displaying the fearless spirit that we have come to identify it with.
This may easily be put down to the government’s corruption scandals and its inability to wholly deliver on its promises, which led to the ANC losing key metros in the 2016 local elections.
We’ve seen the erosion of the bond the ANC fought so hard to establish between itself and South Africans, an erosion that has the ruling party’s every proclamation and promise questioned, double and triple-checked. So when the waters are tested, and the populace are asked whether the government should nationalise and run the banking sector in its entirety, the answer is a resounding: ‘No.’
Along with the alleged capture of state owned enterprises such as Eskom and SAA, and being accused of negligence in the electricity dispute between Eskom and several municipalities, Zuma was found to have violated the Constitution and asked to “pay back the money” when it was found that he spent R215-million of public money to upgrade his private home.
It’s money that could have been redirected towards the higher education crisis that has seen our universities plagued with protests as the call for free education intensifies.
As it stands, the ethics of good governance are at the mercy of economic determinism in South Africa. In other words, governing has become heavily influenced by the economy.
Access to the economy has become collateral for forging patrimonial bonds making patronage a political tool that allows not only for the centralisation of power but also excessive abuse of it.
Nationalisation would therefore leave people at the mercy of a government that has already proven to be self- serving and intent on growing personal wealth.
The banks’ questionable dealings have opened the door to this debate and will make “nationalisation” a key pawn in this year’s game of politics.