Publication Date: 11/02/2019

The Banking Association South Africa welcomes the State of the Nation Address as a firm statement of intent on South Africa’s national priorities and policy direction. The concrete achievements and development and investment targets set out will help to pick up the pace of rebuilding business and investor confidence in South Africa.

The return of decorum, respect and humour to the event shows that South Africans can start working together again. We hope that some of this will last through the coming election campaign.

If the coming election is to help improve the lives of all South Africans, all parties have a responsibility to put forward clear, evidence-based policies that can be rationally debated, compared and implemented. South Africans need to be able to take informed decisions, based on social and economic realities, not on rhetoric.

No matter ideology or political and economic theories, unless government programmes are underpinned by affordable, practical and sustainable policies, election promises will remain just that – promises. And South Africa cannot afford another nine years of empty rhetoric, policy uncertainty and maladministration and corruption.

Despite the past decade, last year banks employed 158 000 people in total, provided 80% of adult South Africans with financial services, paid 30% of all company tax (over R74 billion), besides spending another R5 billion on social responsibility and skills development programmes. South Africa needs us, we need South Africa to succeed.

But the economy is currently in a precarious state and it is estimated that very low growth of less than two percent will continue in the coming years. It will remain stagnant until South Africa decisively tackles policy uncertainty and the crisis in state-owned enterprises. These cannot wait until after the election.

Eskom and its financial crisis are a real and present danger to the economy, which threatens industries, jobs and the sustainability of the fiscus.

We welcomed the appointment of an advisory panel to the president on Eskom. The decision to grasp the nettle and restructure Eskom into three entities, and reduce its costs and debt is the kind of decisive action, which our economy needs. We await with some trepidation the details of the support to Eskom that will be set out in the budget and is likely to include electricity price hikes and recapitalisation, among other unpopular measures. Efforts to break to culture of non-payment in many of our communities, must succeed, if Eskom is to avoid many of the problems of the past.

Beyond this, we expect the budget to be relatively low-key: with no economic expansion or fiscal space, all government can do is work to consistently to improve the policy and regulatory environment and ensure efficient and honest utilisation of the human and financial resources at its disposal.

The address lays the basis for a stronger partnership between business and government. Banks stand ready to assist with resources and expertise to help state owned enterprises, which have a huge asset base that can be used to stimulate innovation and economic growth. We have the expertise to assist the President in advising on the sustainability and future of state enterprises and request that this be used. However, too often banks find that their attempts to assist are met by expectations of a ‘blank cheque’. Financial institutions hold the savings and investments of the nation in trust. We cannot – and must not – be asked to lend the savings of workers and businesses to loss-making, corrupted or badly managed state-owned enterprises, or any ill-conceived projects. Therefore, we oppose the notion of prescribed assets, which may impede our ability to invest our customers savings to get the best return, for their benefit and that of the country.

State-owned enterprises that have no clear purpose or mandate must be phased-out, those with overlapping mandates rationalised and those that have good governance, management and a sustainable business case should be opened to investment from the private sector.

BASA is unequivocal that the cancer of corruption in almost every corner of the state has seen South Africa’s prospects for economic growth diminish and large amounts of vital resources to uplift the majority of South Africans stolen.

The establishment of a directorate to investigate and prosecute evidence that has emerged from the Zondo Commission of enquiry, and others, is an indication that the president has heard and is acting on South Africans concerns that not enough is being done to bring the corrupt to book – necessary to change the culture of impunity that has taken hold among some in our country.

A number of businesses and individuals in the private sector and other spheres of civil society have also been drawn into this vortex. As BASA, we have been clear that where our members are in contravention of the law, they must face the consequences.

Unless South Africa’s leaders move fast to tackle the problems at the root of the country’s economic crisis – not ‘challenge’, not ‘constraints’ or any other euphemism – we will continue to face the dire consequences of unemployment, poverty and inequality. The specter of further credit rating downgrades and a bailout from the International Monetary Fund (IMF) or World Bank can’t be ruled out if we don’t tackle our problems ourselves. Those who have experienced a bailout by these global institutions warn that there are few things as humiliating for a country as being told to sit down and listen to what you can – or cannot – spend your money on.

South Africa needs leaders who can make the public service and local government responsive, accountable and skilled. Despite the public sector wage bill becoming increasingly unaffordable, South Africa’s greatest malaise remains its inability to implement its laudable policies. Without an effective civil service and local government administration, election promises will again remain just that. Promises to fast-track the release of broadcast spectrum, easing visa requirements for skills and tourism, and even something as basic as the provision of proper sanitation at schools, simply take too long to implement.

The introduction of an e-visa regime to boost tourism and a return of South Africa to among the top 50 country’s for ease of doing business in the next three years, would be a real boost to the economy, if it is achieved.

South Africa needs leaders that will be consistent in protecting the mandate and independence of the South African Reserve Bank. While monetary policy is important for job creation and economic growth, it is not the only factor. Other critical factors include policies that attract investment and social development policies, like an effective education system and a workable, sustainable land reform programme, which will include expropriation without compensation. These are the responsibility of government.

BASA recognises that South Africans deserve a better public health and social security systems. The first step must be to strengthen and improve the systems we already have – making more efficient use of the available financial and human resources – before we sustainably and affordably expand them.

Ahead of the election we urge leaders to be aware that political rhetoric often has real and immediate economic consequences: for our currency on international markets, our credit ratings and our ability to attract investment. Reckless rhetoric is bad for the businesses that create jobs and contribute to the taxes that pay for social security and other development programmes.

And we ask them to be wary of making promises too easily: they are dangerous in communities riven by unemployment, poverty and inequality. When promises fail to materialise into real benefit, they can lead to anger, social instability and violence. South Africa needs leaders of integrity, who can honestly and without pandering to their constituencies or special interests, spell out the seriousness of our economic crisis and the difficult trade-offs that need to be made between what we can afford now, and what we want in the future. Leaders who can put aside the rhetoric of ‘service delivery’, and provide effective support for entrepreneurship, innovation and small business development.

For its part, the banking sector remains committed to inclusive economic growth. We have worked hard, in the last year, to develop a robust transformation agenda for the banking sector, which will be released soon.  This includes the financial sector initiating R100 billion for Black business growth funding as well as business’ commitment to the Youth Employment Scheme (YES) and the SA Small and Medium Enterprises Fund.

BASA supports the diversification of the sector through the licencing of cooperative and mutual banks and the entry of new institutions such as Discovery Bank, Tymebank and Bank Zero. We would welcome the envisaged state-owned banks – including a new human settlements development bank – if they are subjected to the same rules of competition, governance and regulation as all banks regulated through the South African Reserve Bank and the prudential and market conduct authorities. Depositors and taxpayer’s money cannot be put at risk.

Proclamations and manifestos in themselves will not change the lives of South Africans. What is required is action to increase our competitiveness, rebuild local government, and create an effective and responsive public service. South Africa cannot afford another five years of empty promises.

In the tradition of the State of the Nation Address, let me end with a quote, in this case from economist Mariana Mazzucato: “A more purposeful capitalism requires more than just letters, speeches and goodwill gestures. Business, government and civil society must act together, courageously, to ensure that their walk is as good as their talk”