Plan to convert GEP to Provincial Bank is reckless

September 13, 2018

by Adriana Randall MPL – DA Gauteng Shadow MEC for Finance

The Democratic Alliance (DA) does not support Premier David Makhura’s call to convert the Gauteng Enterprise Propeller (GEP) into a Provincial State Bank.
GEP has been plagued by complaints of maladministration and corruption.
However, these allegations have been ignored by the MEC for Economic Development, Lebogang Maile, as nothing has been done to remedy the situation.
Furthermore, GEP is still without a CEO for almost two years now and it does not seem like there are any immediate plans to fill the position.
The acting CEO, Leah Manenzhe has been accused of intimidation and abuse of power.
Given the current situation at GEP, it is not viable for this state-owned agency to be turned into a Provincial State Bank.
Should GEP be turned into a Provincial State Bank, this could likely result in another VBS Mutual Bank situation.
Two municipalities in Gauteng have invested with VBS bank and now find themselves in dire financial straits, as it is unlikely that they will recover the money they’ve invested.
International research shows that public sector banks have performed poorly according to financial measures, such as returns on equity or assets and the extent of non-performing loans.
In addition, state-owned financial institutions not only pose systemic risks to their economies but also threaten governments with potential liabilities and thus there is often a need for a rise in taxes or reduction in government spending to make up for such financial shortfalls.
It is clear that the Premier did not consider the challenges faced by GEP before announcing plans to convert it into a Provincial State Bank.
I will be tabling questions in the Gauteng Provincial Legislature (GPL) to ascertain amongst other things, what the lending policies or criteria of the State Bank will be, how this differs from commercial banks and what the position of the State Bank will be regarding non-performing loans.

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