EYE RAPID EX­PAN­SION

Post­bank as­pires to lend­ing, while Ithala’s plan is to at­tract pub­lic sec­tor de­pos­i­tors

CityPress - - Business - DEWALD VAN RENSBURG and PADDY HARPER busi­ness@city­press.co.za Source: SA Re­serve Bank

The two new bank­ing li­cences in the works for state-owned en­ti­ties will tech­ni­cally cre­ate state-owned banks, but on a scale that is in­con­se­quen­tial in the over­all scheme of South Africa’s con­cen­trated fi­nan­cial sec­tor. Both Post­bank and Kwazulu-Na­tal-based Ithala SOC are await­ing bank­ing li­cences as pre­req­ui­sites to planned rapid ex­pan­sions into trans­ac­tional bank­ing as well as lend­ing.

Once Ithala has a bank­ing li­cence, it aims to be­come a fully fledged bank and es­tab­lish a na­tional foot­print.

The Post­bank ap­pli­ca­tion is cen­tral to the SA Post Of­fice’s (Sapo’s) po­si­tion­ing to pay so­cial grants in fu­ture and may be granted as early as next month.

This would, by it­self, give Post­bank a client base of mil­lions and make it the con­duit of sev­eral bil­lions of rands in tran­si­tory de­posits ev­ery month.

Post­bank of­fers sav­ings ac­counts, but as­pires to be a lender.

In his re­cent bud­get speech to Par­lia­ment, Min­is­ter of Telecom­mu­ni­ca­tions and Postal Ser­vices Siyabonga Cwele said the Sapo ap­pli­ca­tion for full li­cens­ing of Post­bank was on track, fol­low­ing the ap­proval granted by the bank­ing reg­u­la­tor in July.

Cwele said that, de­spite Sapo’s chal­lenges, Post­bank was “well cush­ioned, man­aged and prof­itable’’ and had cap­i­tal of R1.4 bil­lion.

Ithala hopes to have its li­cence by the end of the year.

A pil­lar of Ithala’s ex­pan­sion plans is to draw in pub­lic sec­tor en­ti­ties as de­pos­i­tors.

Since 2014, it has fallen short of its goals in this re­gard, achiev­ing de­posits from the pub­lic sec­tor of R331.7 mil­lion by the end of March 2016, com­pared with a tar­get of R517.4 mil­lion.

In Fe­bru­ary, KwaZulu-Na­tal eco­nomic de­vel­op­ment MEC Sihle Zikalala said Ithala had R600 mil­lion in de­posits from var­i­ous mu­nic­i­pal­i­ties and pub­lic en­ti­ties.

This is in­con­se­quen­tial at 0.2% of the pub­lic sec­tor’s de­posits in the bank­ing sys­tem as a whole – about R320 bil­lion at the end of last year.

To­tal de­posits in the lo­cal bank­ing sys­tem come to roughly R3.5 tril­lion.

Ithala has the sup­port of highly in­flu­en­tial ANC lead­ers in the prov­ince, in­clud­ing eThek­wini Mayor Zandile Gumede and Zikalala – and the party it­self.

The prov­ince in­tends to move its ac­counts, cur­rently held by Absa, to Ithala, as do a num­ber of mu­nic­i­pal­i­ties, in­clud­ing the eThek­wini metro.

Ithala has been get­ting ex­emp­tions from the SA Re­serve Bank to con­duct bank­ing busi­ness for sev­eral years and has a R1.4 bil­lion loan book largely con­sist­ing of home loans. Ithala is owned by the prov­ince’s de­vel­op­ment fi­nancier Ithala De­vel­op­ment Fi­nance Cor­po­ra­tion.

“Ev­ery ef­fort is be­ing made to meet the re­quire­ments for a full bank­ing li­cence and to be­come a fully fledged bank in keep­ing with Ithala’s man­date to serve the pre­vi­ously un­banked,’’ said Ithala’s CEO Peter Ire­land.

BIG­GER GAME

South Africa’s two as­pi­rant state banks are start­ing from hum­ble bases, but many pro­mot­ers of the con­cept en­vis­age some­thing far more am­bi­tious.

Some call for a state bank buoyed by pub­lic sec­tor de­posits, while oth­ers say the ex­ist­ing de­vel­op­ment fi­nance in­sti­tu­tions (DFIs) should merge to form the ba­sis of a sig­nif­i­cant new fi­nan­cial in­sti­tu­tion.

The mar­ket fail­ures a state bank is said to po­ten­tially solve in­clude a lack of low-cost trans­ac­tional bank­ing, over­priced credit and an over­all mis­di­rec­tion of the na­tions’ sav­ings away from job-cre­at­ing in­vest­ment.

At the re­cent par­lia­men­tary hear­ings into trans­for­ma­tion of the fi­nan­cial sec­tor, the call for a state bank, or a black bank, was raised along­side calls for the ex­ist­ing banks to trans­form.

The Eco­nomic Free­dom Fighter’s sub­mis­sion called for a “wholly state-owned bank” that would pro­vide bank­ing ser­vices to the en­tire pub­lic sec­tor while also en­sur­ing “ac­cess to bank­ing ser­vices to the poor and work­ers at min­i­mum bank charges”.

The Na­tional Union of Me­tal­work­ers of SA couches the de­mand in the same terms, call­ing for a state bank “which will con­sol­i­date all the state-owned fi­nan­cial in­sti­tu­tions to fa­cil­i­tate af­ford­able credit to the pro­gres­sive class forces”.

The SA Com­mu­nist Party has called for Post­bank to not only pay so­cial grants, but to pro­vide “devel­op­men­tal bank­ing ser­vices” that profit-seek­ing banks do not. What do you think the ben­e­fits of these banks will be? Do you feel they should have pref­er­en­tial treat­ment, and why? SMS us on 35697 us­ing the key­word BANKS and tell us what you think. In­clude your name and prov­ince. SMSes cost R1.50

The Na­tional Em­pow­er­ment Fund (NEF) is push­ing to com­bine the de­mands for state-owned and black-owned banks.

BLACK-OWNED

What South Africa needs is a bank that is 51% black­owned and 49% state-owned, NEF CEO Philisiwe Mthethwa told Par­lia­ment at the hear­ings.

Her more sig­nif­i­cant pro­posal is that the state then di­rect 30% of all pub­lic sec­tor bank de­posits into this new bank. This would be over R100 bil­lion and im­me­di­ately al­low it to be a fairly large lender.

Another vein of pro­pos­als would see the ex­ist­ing DFIs ag­glom­er­ated to form the base of a state-owned bank.

Chris Ma­likane, tech­ni­cal ad­viser to fi­nance min­is­ter Malusi Gi­gaba, re­cently told City Press that his take on a state bank is one based on the DFIs that also com­pete in the re­tail mar­ket.

A drawn-out process of ra­tio­nal­is­ing DFIs is well un­der way.

The depart­ment of hu­man set­tle­ments an­nounced last month that it had com­pleted the long-awaited con­sol­i­da­tion of three na­tional hous­ing fi­nance in­sti­tu­tions into a new Hu­man Set­tle­ments De­vel­op­ment Bank.

Min­is­ter of Hu­man Set­tle­ments Lindiwe Sisulu called it “the as­set that our strug­gling black en­trepreneurs have been wait­ing for” in her re­cent bud­get speech.

In ef­fect, the Na­tional Hous­ing Fi­nance Cor­po­ra­tion will ab­sorb two smaller en­ti­ties – the Ru­ral Hous­ing Loan Fund, and the Na­tional Ur­ban Re­con­struc­tion and Hous­ing Agency.

This amal­ga­ma­tion was first mooted in a 2008 Trea­sury re­view of the DFIs.

All three lend money to in­ter­me­di­aries such as con­trac­tors and re­tail lenders to in­cen­tivise the pro­vi­sion of af­ford­able hous­ing, un­der­stood as hous­ing af­ford­able to peo­ple earn­ing less than R15 000 per month.

The com­bined en­tity will have a bal­ance sheet of around R4 bil­lion – a small part of the R254 bil­lion in as­sets of the state’s DFIs, dom­i­nated by the In­dus­trial De­vel­op­ment Cor­po­ra­tion (IDC), De­vel­op­ment Bank of South­ern Africa and the Land Bank.

The con­sol­i­da­tion of a hous­ing bank fol­lows other con­sol­i­da­tions like the IDC’s ab­sorp­tion of the Small En­ter­prise De­vel­op­ment Agency in 2012 and the on­go­ing con­ver­sion of the Na­tional Em­pow­er­ment Fund into an IDC sub­sidiary.

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