No Need for a State Bank

At the recent ANC National Policy Conference, I found myself sitting next to a senior ANC leader at plenary on the last day and we ended up having a very intense and informative discussion about economic policy issues, amongst which was the idea of forming a state bank, which this senior ANC leader was in support of.

I argued that the ANC does not need to advocate for a state bank in order to advance its economic transformation objectives. This was because, firstly, if we look at the current status of our state owned entities(SOEs) which are supposed to be primary drivers of development within the context of our aspirant developmental state, neither we as honest, sincere, patriotic ANC members who put South Africa first, nor the rest of society have any objective reason for believing that the ANC-led government can run a state bank efficiently and effectively in order to advance its socio-economic transformation agenda.

I know this is radical, mind-boggling stuff for those out there who believe that people who are in the ANC can never be objective, but one can’t ignore the glaringly obvious and damning facts before us, as relates to the state of our SOEs.

My second point, which may be more palatable to some within the organisation than my first one, was that one does not need a state bank to try and transform the economy and solve the problem of black exclusion from access to capital and other financial services sector products that would enable black people to play a more significant role within the mainstream economy.

A good example of this is seen in how the Afrikaner people built their own private financial services sector institutions, including banks, in order to resolve the same problem, which they were faced with in the 1930s and 1940s.

A point from the ANC’s 1992 Ready to Govern document bears referencing in this regard:

“State ownership is not posited as the in-principle alternative to all private monopolies: rather, this would be informed by the impact such ownership would have on the ability of the economy to address poverty and inequality and to encourage growth and competitiveness. Secondly, the developmental state should be responsible for enterprises that provide public goods such as infrastructure and basic services. Thirdly, the private sector, including monopoly capital, is treated not as an enemy, but as a potential partner – and yet one that needs to be regulated. Lastly, balance of evidence would inform decisions to either increase or reduce the public sector while protecting consumers and workers.”

There is nothing innately progressive about state ownership per se, just like there is nothing innately counter-revolutionary about private ownership. What is important at every juncture is to look at state capacity to drive development, investment and the economy at large as well as the ability of the state to direct and channel the private sector to national development aims and objectives.

In the 1930s, out of a realisation that they would never achieve their objective of self-determination without actually attaining economic power, Die Volk convened an economic Volkskongress in Kimberly to come up with workable solutions to their problem of economic marginalisation.

This was the brain child of the Afrikaner Broederbond, who appreciated the simple fact that economic power was a necessary pre-condition for Afrikaner self-determination and as such the latter would not be attainable without the former.

(I am still of the persuasion that the ANC itself needs a Broederbond of sorts behind it if it is ever to truly renew itself, along the Leninist “better fewer but better” principle ironically enough, but that is a discussion for another day and another opinion piece from me perhaps).

Out of this Volkskongress was birthed the idea of building financial institutions that would bridge the gap of access to funding for Afrikaner peoples, as established financial institutions at the time were not playing ball when it came to giving ordinary Afrikaners access to capital and funding for various economic activities that are part of developing yourself as a people group.

One of the many institutions that were formed as part of this resolve, was a bank which became a colossal institution that advanced Afrikaner developmental interests, Volkskas Bank, a bank that was formed with the aid and assistance of government, through the Ministry of Finance.

It grew to become one of the four largest banks in South Africa under the National Party government and was one of the three biggest Afrikaner monopolies in the country at the time, even investing in other industries beyond banking to the point that almost half of its profits came from its industrial endeavours at a point in the 1980s.

So, even the quest for black industrialists is doomed to fail, if we do not address this particular issue of transforming the financial services sector by promoting and supporting the development of black institutions within this critical economic sector, which drives all other economic activity in fact.

Volkskas was an Afrikaner bank, an institution (amongst banks and financial institutions that Afrikaners built during the time) that was brought about as a result of concerted, deliberate efforts by Afrikaners to transform the economy in their favour using state power so as to become a powerful force economically.

What began as a humble cooperative bank grew into a powerful commercial banking and industrial conglomerate, with the turning point coming in the late 1940s when the National Party came to power. Volkskas was formed specifically to address the economic impoverishment of Afrikaners (along with other Afrikaner businesses that grew to become conglomerates and today are even competing at a multi-national level).

These were private institutions that were supported by the state, through the National Party government (with the Broederbond running the strings in the background), but none of them lost their developmental thrust and impact for the Afrikaner people. With the coming of the National party to power in 1948, state power was used to channel funds to Afrikaner businesses such as Volkskas.

The Broederbond were at the forefront of all this and these were the finest and sharpest amongst the Afrikaner community, who were very patriotic when it came to the advancement of Afrikaner interests.

The Afrikaners basically implemented cadre deployment effectively, deploying the best amongst themselves to take over the state and other aspects of South African society in order to advance Afrikaner interests and ensure that they brought about Afrikaner economic emancipation and self-determination, through channelling resources and funds to Afrikaner business entities that were patriotic insofar as it came to Afrikaner people.

Therefore, instead of dogmatically advancing for a state bank, perhaps we should be looking at developing black-owned, black run banks and financial services businesses that will contribute to our developmental aspirations. Patriotic black capital within the financial services sector and other sectors of the economy, is what we should be focussing on producing, using state power and resources, just like the National Party did, in order to bring that about. Even in a highly developed capitalist state such as the United States of America, capital is highly patriotic and never goes against the aims and objectives of the nation-state.

China, which is celebrated for having developed “socialism with Chinese characteristics”(it is just another form of state capitalism in my view, but I will let you decide on that one) has developed a whole range of business enterprises, many of them privately owned and run, which are subject to the developmental aims and objectives of the state and where they veer off, the state is capacitated enough to be able to discipline them and bring them back into line with national development aspirations, as we have seen Xi Jinping doing, very successfully so in fact, in the past couple of years.

I am reminded of a conversation I had over a couple of pints with a mate of mine from my varsity days who is now a leader in the financial services sector, not too long ago. He said to me, “Mugsy, you okes have over R2 trillion in government spend per annum in order to drive economic transformation, so why do you okes often complain as if you don’t have the capacity to do so? With that kind of spend, you okes can even direct private sector investment towards the areas that you deem critical for national development, but it seems as if there is no political will to do so. Why does the ANC act like a powerless opposition party when it has so much leverage as a party that has been in government for so long?”

To highlight his point even further, total consolidated government spending will amount to R6.62 trillion over the next three years.

Government must not only use its annual spend, but also vehicles such as the Public Investment Corporation and the Eskom Pension and Provident Fund as pertinent examples, to drive economic transformation and build black banks and financial services institutions in order to bring about economic transformation and development, as opposed to taking workers’ money and investing it in ventures such as Bounty Brands, which have no developmental thrust and transformative impact, but rather contribute to capital flight and the loss of the money of workers.

The Unemployment Insurance Fund, whose money and investments are managed by the Public Investment Corporation, recently lost R1.8-billion in public money by indirectly investing in Bounty Brands. This is money that belongs to South African workers, which is a crucial safety net for those workers who become unemployed.

Government should have facilitated the growth and development of banks such as VBS and Ithala into those kind of transformative, developmental entities like Volkskas was, but instead the reverse is happening and we are actually seeing these entities being collapsed and destroyed.

Government should have been able to facilitate the mobilising of money from stokvels and burial societies, to develop those kinds of patriotic, developmental black owned entities.

The ANC-led government has to be decisive, unapologetic and intentional about building black banks, black financial services institutions like the National Party did with the likes of Volkskas Bank, Sanlam etc.

This must be implemented whilst heeding the words of Frantz Fanon in his book, The Wretched of the Earth, “The national middle class which takes over power at the end of the colonial regime is an under-developed middle class. It has practically no economic power, and in any case it is in no way commensurate with the bourgeoisie of the mother country which it hopes to replace. In its wilful narcissism, the national middle class is easily convinced that it can advantageously replace the middle class of the mother country.

But that same independence which literally drives it into a comer will give rise within its ranks to catastrophic reactions, and will oblige it to send out frenzied appeals for help to the former mother country. The university and merchant classes which make up the most enlightened section of the new state are in fact characterized by the smallness of their number and their being concentrated in the capital, and the type of activities in which they are engaged: business, agriculture and the liberal professions.

Neither financiers nor industrial magnates are to be found within this national middle class. The national bourgeoisie of under-developed countries is not engaged in production, nor in invention, nor building, nor labour; it is completely canalized into activities of the intermediary type. Its innermost vocation seems to be to keep in the running and to be part of the racket. The psychology of the national bourgeoisie is that of the businessman, not that of a captain of industry; and it is only too true that the greed of the settlers and the system of embargoes set up by colonialism has hardly left them any other choice.

Under the colonial system, a middle class which accumulates capital is an impossible phenomenon. Now, precisely, it would seem that the historical vocation of an authentic national middle class in an under-developed country is to repudiate its own nature in so far as it is bourgeois, that is to say in so far as it is the tool of capitalism, and to make itself the willing slave of that revolutionary capital which is the people.

In an under-developed country an authentic national middle class ought to consider as its bounden duty to betray the calling fate has marked out for it, and to put itself to school with the people: in other words to put at the people’s disposal the intellectual and technical capital that it has snatched when going through the colonial universities.”

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Mugabe Ratshikuni works for the Gauteng provincial government; He is an activist with a passion for social justice and transformation. He is branch Treasurer of the ANC Ward 115, Florence Mophosho branch, Greater Johannesburg Region. He writes here in his personal capacity.