New state-owned bank and pharmaceutical company gains ground in South Africa
Gauteng is working on establishing two new state-owned enterprises – a bank and a pharmaceutical company.
Gauteng Finance MEC Jacob Mamabolo said that a due diligence report on the new state bank had been finalised and handed over to the Gauteng Provincial Government.
“This is a major milestone that we have reached and gives the process of establishing the state bank a thumbs up. We are now in a better position to move to the next level to consult with the Premier and consult broadly with stakeholders, including the Economic Development and Labour (Council),” Mamabolo said.
“The due diligence report clears the legal hurdles and provides Gauteng with a strong legal framework towards establishing a state-owned bank. We are now in a better position to move forward knowing very well that the work that we are doing complies with the legislation.”
The new state-owned bank aims to address current market issues by:
- Integrating small, micro, and mid-sized businesses (SMMEs) and unserved individuals in the formal financial sector;
- Driving a mission of financial inclusion and security while offering a differentiated value proposition to customers whose needs are not being met by current bank offerings;
- Provide tailored products, including launching a streamlined, low-cost transaction product set with value-added features and expanding to include loan products in the future.
“We are convinced that by supporting township entrepreneurs, including ensuring that they have access to tailor-made financing products to expand their businesses, we will create new jobs, increase access to goods and services, and promote much-needed economic development in our communities,” the MEC said.
“The state-owned bank is one of the key mechanisms that can support us to grow the township economy and increase the overall contribution of Gauteng to the country’s gross domestic product.”
As reported by Business Day, the MEC said that the new bank will not compete with the proposed state-owned bank that the national government wants to introduce.
However, several experts have voiced their concerns that such a strategy – which draws parallels with the national government’s plans for its state-owned bank – will not work, as providing credit to those that cannot afford it would deepen South Africa’s debt burden.
Speaking to ENCA, Dawie Roodt, the chief economist at Efficient Group, said that a state-owned bank, a lender of credit, could see people using funds to purchase goods without having the money to pay back the bank.
Roodt added that it does not serve the country’s needs and that lending money to poor people who can not get money from regular banks can potentially lose ‘big money’.
Pharmaceutical company
Due diligence reports for the state-owned pharmaceutical company have also been completed, which supported the establishment of the entity, Mamabolo said.
The new company will manage supply chains, medicine procurement, the distribution of medicines to the provincial healthcare facilities, inventory, dispensary to the public and other objectives.
The process was followed by appointing an advisory panel of pharmaceutical and healthcare policy experts from the public and private sectors.
“The panel’s role is to provide strategic guidance and advice on developing a business case for the pharmaceutical company and participating in consultations with relevant stakeholders,” he said.
“The panel will serve as an important mechanism for the proper regulation and oversight of the work to be conducted and will play a critical role in providing research and development support, disseminating proper information on medicines and addressing public health problems.”
The MEC said that his department finds establishing the new state-owned bank and pharmaceutical company incredibly important, with over R4 million already being spent on the due diligence reports.
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