Sandile Zungu: State bank has its work cut out if it wants to do better than other SOEs

There is room for the proposed commercial state bank, but it has little chance of succeeding if is run the same way as other public entities who are crippled by weak administration and financial losses, according to Black Business Council president Sandile Zungu.

Zungu was speaking on the sidelines of the council's annual summit in Johannesburg on Wednesday.

Finance Minister Tito Mboweni stated during the tabling of the National Budget last week that government would be proceeding with the establishment of the new state bank, and that its "architecture will be that of a retail bank operating on commercial principles". 

Government plans to consolidate existing state-linked financial institutions into a single entity to create a state bank, which has been met with mixed reactions from the banking sector.

Managing director of the Banking Association of South Africa, Cas Coovadia, expressed doubts about the logic for a state bank, saying it might be better to allow the commercial banks to address challenges in the market.

But his views are in sharp contrast to Zungu's assessment, who believes that commercial banks have failed to service the Small and Micro Enterprises who often battle to secure finance.

"The gap exists for a state bank, because commercial banks in the country are not serving the interests of entrepreneurs," he said.

The BBC, which represents black professionals, business associations and chambers, has for a long time been calling for improved support of small businesses by the financial sector, in what is seen as a key growth enabler.

However, while Zungu believes there is scope for such a bank, he also fears the bank is bound to follow in the footsteps of other struggling state-owned institutions. In his view, its viability should be dependent on strict adherence to regulations, and it should operate without political interference. 

"If it does not adhere to that, then it is set to become another SOE, because the track record of some of the entities is nothing to be proud of," Zungu told Fin24.

He stressed that the bank must not be subjected to political interference and "account to politicians who change every five years".

If that is the case, "then we are damn against it", he said.