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Finance & Governance

Why we need a Government Owned Commercial Bank

There have been talks for a while about setting up a government own commercial bank. A lot of analysts oppose this view with the argument that it will burden the already strained taxpayer. It’s no lie that the government has really not been the best when it comes to running Corporation, the SABC and the South African Airways are a perfect example. The Post Office is even more poorly run and it has not declared profits in years.

This argument against the establishment of State Owned Bank is fair; government officials would simply loot resources and depend on bailouts as we’ve seen in the past couple of years in other Parastatals. However, on the other end, what a lot of analysts and economists have ignored in the constant exclusion of the black majority in the mainstream economy through influential positions and access to business funding. They have ignored the R40 billion per annum that Stokvels generate that is not invested in the economy. What is also “coincidentally forgotten” is that most of our commercial banks charges are very high in comparison with their International Counterparts.

Frankly, the black majority is a majority consumer for all banks in the country. However, their services are only limited to the consumer level, there’s too much red tape even when most require investment funding, whether acquiring property or financing a business venture.

The African Bank debacle proved that the private sector is not always efficient and greed that lurks in the name of profit maximisation has negative consequences. A Government owned bank would certainly enable the government to use the highly liquid funds received from Stokvel contributions to make long-term investments with leveraging the funds by tax revenues. This does sound as a costly exercise but it would be beneficial if implemented correctly. A state bank is the only institution that would truly guard the assets of poor majority, as its purpose wouldn’t be to maximise shareholder wealth, however it would be to maximise the wealth of citizens and create a balanced economy by assisting the black majority where many Private Banks have failed. This proposed model sounds farfetched due to the government’s dubious track record, and its fair for us to fear a Gupta intervention on such a bank but it is critical that such an idea is explored and investigated.

The harsh reality is that inequality is getting wider, the privileges of the past for the white individuals still exist and it is far easier for them to obtain housing finance or funding for their business ventures as they stem from wealth backgrounds. The only way to address this imbalance without going the radical route of Zimbabwe is through state bank that will mainly provide investments for the black majority, through proper analyses and not recklessly of course.

Image: Pixabay

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