‘I am not clear what ill the state bank would try to cure’ – Kganyago

The South African Reserve Bank governor, Lesetja Kganyago, this week said he did not know what the value or role of a state bank would be for the country. 

Kganyago made the statements during an interactive online discussion on Wednesday, 6 October, hosted by independent policy think tank, the Centre for Development and Enterprise (CDE). 

In May, the national treasury said it was forging ahead with a new state bank that would serve the most needy in the country. 

The governor was asked what role a state bank might play that was not already being played by commercial banks. 

“The South African financial inclusion figures show that over 80% of people have access to financial services in South Africa.”

“If a state bank comes in, I suppose it might end up playing in the 20%,” he conceded. “I am not clear what ill the state bank would be trying to cure.” 

Kganyago continued: “I don’t know what the role of the state bank will be … but the state owns a retail bank called the PostBank, an infrastructure bank called the Development Bank of Southern Africa, an industrial bank called the Industrial Development Corporation of South Africa. The state also owns the largest asset manager on the African continent, the Public investment Corporation.”

The South African Communist Party (SACP) secretary general, Blade Nzimande, has previously made a call for South Africa to establish a state-owned commercial bank, suggesting that African Bank should be absorbed into such an entity. 

Sarb has been seeking a buyer for its 50% stake in that institution, which was placed under curatorship in 2014. It served notice on the bank last year.  

Kganyago said the state would have to apply for a banking licence “like everyone else”, and if it met the criteria, Sarb would license it. But such a bank would need to have adequate capital and liquidity, and would then need to compete in the financial services space. 

“You can ask American and European banks that came into our financial services space: South African banks know how to compete and I would like to see the state play in that space to compete,” he said. 

The South African banking sector was very competitive, he reiterated, and very concentrated. 

“Competition in financial services comes from two interesting forces. The first is from the FinTech space, which are players who are using technology to provide new financial services. But the big competitor for banks, for me, is BigTech. It is going to be your Amazon, your Apple … that is where real competition for the banks is going to be coming from.” 

Webinar host and CDE executive director Ann Bernstein asked Kganyago whether state capture was finally over, to which he responded: “I don’t know if it’s over, but when it comes your way, you will know it.”

“When it was coming [in] our direction we could see that it was coming,” he said.  

State capture came about in a “sophisticated manner”, he said, as in when Sarb faced pressure about its mandate on awarding banking licences. There were calls to move this mandate back to the department of finance.

“The state capture was almost stripping the Reserve Bank of its power to license banks. And if you do not have the power to license banks, you cannot have a financial stability mandate. So, when we saw state capture coming our way, we shut the gates of the Sarb — because this is the institution entrusted with the responsibility of executing a constitutional mandate.”

Anathi Madubela is an Adamela Trust business reporter at the Mail & Guardian.

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Anathi Madubela
Anathi Madubela is a business journalist with a keen interest in the retail sector.

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