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Why state-run bank will be a disaster

Feb 16 2017 20:24

Cape Town - The Organisation Undoing Tax Abuse (OUTA) cautioned against the call for a state-run bank following a scandal by banks allegedly manipulating the rand.

"The idea of a state-controlled bank smacks of ulterior motives and OUTA believes that in light of the current high levels of corruption and squandering of state funds within government, a state-run bank under the control of the current government leadership could be a recipe for disaster."

READ: '10% rand rigging fine for banks is peanuts'

OUTA said while the state has every right to have the state-controlled Post Office to apply for banking license, if granted it would need to be operated independent of political interference and within a competitive environment, with no support from taxpayers' funds.

"The laws and regulations which apply to all banks must apply equally to the state-controlled bank, to ensure exceptional governance and sustainability."

The civil rights body said the problem with state owned institutions that operate in a competitive environment, such as the South African Airways, is that they tend to fail and require bailouts from Treasury.

"Government is not good at doing business in a competitive environment and even when they operate in a monopolistic environment – such as Eskom – they fail to be efficient and end up costing the consumer billions of additional rands due to inefficiencies, lack of governance processes and corruption."

READ: Punish guilty banks harshly, urges ANC

OUTA suggested that to drive competitiveness and a vibrant economy, the state needs stay out of the business of business and instead, it should focus on ensuring the checks and balances from oversight bodies - such as the Competition Commission and others – are in place to effectively tackle any unwarranted conduct.

"Government should applaud the success and conduct of the Competition Commission in this and other instances of exposing anti-competitive conduct.

"Furthermore, OUTA believes the state should take steps to beef up the capacity of this credible organisation, so they can do more good work in routing out the unwarranted behaviour within business and state-owned entities."

If the government believes it should opening up state-controlled entities in reaction to unruly business conduct, then it would need to be consistent with that principle, said OUTA.

"This would mean they should look at starting a state-controlled construction company in reaction to the recent collusive conduct in the construction industry. Going this route would eventually end up with the state tendering to do business with itself and that will take the entire nation down the road of a failed state,” said OUTA’s chairperson Wayne Duvenage.

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outa  |  banks  |  banking industry

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