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Address by Yunus Carrim ANC (MP) Standing Committee on Finance on the debate of the VBS Mutual Bank report in the National Assembly

23 October 2018

The ANC's Mangaung National Conference of 2012, resolved that the ANC set up an Integrity Commission at all levels of the organisation. The Mangaung policy resolution stated: "More urgent steps should be taken to protect the image of the organisation and enhance its standing in society by ensuring, among others, that urgent action is taken to deal with public officials, leaders and members of the ANC who face damaging allegations of improper conduct. The ANC can no longer allow prolonged processes that damage its integrity". The Commission is tasked with investigating members who harm the party's image through corruption or unethical behaviour. It does not have to wait for the accused members to appear in court before starting an investigation. As the current Secretary General of the ANC, Cde Ace Magashule reiterated during the appointment of new Commissioners in 2018: "We trust that the integrity commissioners will aid the organisation in ensuring that its integrity and good standing is upheld, so that we may all take heed in the examples of life-long activists and disciplined members of our movement such as those who have been bestowed the honours of Isithwalandwe/ Seaparankoe like Tata Nelson Mandela".

The ANC believed that the implementation of the Financial Sector Regulation Act from 1 April 2018, gives the new Prudential Authority greater powers to subpoena witnesses and require documentation to investigate allegations of wrongdoing by financial institutions. As the Banking Association of South Africa once noted: "Banks are accountable for what they do with depositors' money. To ensure that they remain true to their responsibilities and protect depositors' money, banks are subject to a significant number of regulations. There are approximately 244 pieces of legislation that banks actively monitor and comply with. This in itself makes it difficult for new entrants to enter and be successful in this industry; but it is important to recognise that onerous as the regulation of the banking industry may seem, it is designed to protect the money entrusted to banks by, workers, households, ordinary persons and owners of capital".

The rationale for restricting municipalities and their entities from placing funds into mutual banks is consistent with the objective of ensuring that funds meant for service delivery are managed as responsibly as possible.

In South African context, access to finance and financial services are key to achieve economic and social transformation. Funds controlled by the financial sector ultimately belong to customers, and financial firms are merely custodians of other peoples' money. Hence government has to regulate:

  • Safety and soundness of financial firms (prudential regulation),
  • That firms treat their customers fairly (market conduct regulation).
  • Financial stability risks, to reduce bailing out banks by taxpayers (fiscus).

The ANC is committed to the transformation of the financial sector but notes that meaningful 'transformation' of the financial sector is not merely a question of ownership of financial firms, but to how the sector supports real economic activity.

  • What services are provided to consumers? (Access/Inclusion, lower charges, more appropriate products)
  • Who owns the firms that manage the assets? How sensitive are they to our country's needs and challenges?
  • How are the assets in the system put to use? (Procurement, empowerment financing, socio-economic development)
  • Who decides how those assets are invested / put to use? (Management control, employment equity and skills development).

The ANC's focus on the transformation of the banks is also intended to make sure that their objectives are developmental and competitive by:

  • Funding infrastructure and capital projects that promote growth and jobs
  • Ensuring a more competitive and less concentrated financial sector

If incidents like the VBS one is allowed to continue, this impacts the positive progress made by the ANC government in the transformation of the financial sector. As President Cyril Ramaphosa stated after the release of the investigator's report, this is not a shame to just the people of Limpopo, but the entire country. It has the potential to scare away investors and impact the ANC government's efforts to grow the South African economy and create jobs to deal with the triple challenges of unemployment, poverty and inequity.

The ANC takes not and supports the investigator's key recommendations that:

  • That the report (and detailed annexures) should be handed to: DPCI (Hawks), SARS, Asset Forfeiture Unit and NPA
  • That criminal charges be filed against key protagonists
  • That the bank should be wound-up
  • That the SARB, National Treasury and curator should consider suing KPMG

The ANC calls on all the relevant departments and institutions to act with speed in implementing the resolutions from the report.

The ANC asserts and confirms the declaration by the party's Spokesperson, Pule Mabe, that "where there has been wrongdoing by individuals and institutions, heads must roll, and the law must take its cause without fear or favour. The manner in which authorities process this report, will be an important indication on our nation's commitment to renewal and ethical leadership".

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