Photo by: Creamer Media
Finance Minister Tito Mboweni on Wednesday announced the formation of the South African Sovereign Wealth Fund, which would target a capital amount of about R30-billion.
Given the legal, administrative and procedural issues involved, Mboweni said that a relevant Bill first had to clear Parliamentary approval.
However, “a variety of possible funding sources” for the fund exist, such as the proceeds of spectrum allocation, petroleum, gas or minerals rights royalties, the sale of noncore State assets, future fiscal surpluses and money government has set aside.
In his State of the Nation Address (SoNA) this year, President Cyril Ramaphosa said that the sovereign wealth fund would be established as a means to “preserve and grow the national endowment of [the] nation, giving practical meaning to the injunction that the people shall share in the country’s wealth”.
Additionally, touching on the establishment of the State bank, Mboweni said its architecture would be similar to that of a retail bank operating on commercial principles.
The proposed State bank will be subject to the Banks Act and will “have an appropriate capital structure and performance parameters on investments and loan impairments”.
Mboweni added that the current “fragmented system” of national and provincial development finance institutions will be consolidated.
In this respect, in 2019, Parliament passed legislation to allow State-owned companies to apply for banking licences.
Postbank is in the process of applying for such a licence.
However, the National Treasury indicated that the decision to grant a licence is “ultimately the prerogative of the Prudential Authority”, which will assess each application on its merits.
According to the 2020 Budget, the design of any State bank will “protect the fiscus in the event of poor governance, nonperforming loans or shortages in capital funding”.
Once the State bank has been established, it is understood that the focus of the bank will be in dealing with “market failures” and ensuring that the poor and small business have better access to banking services.