This week, or sometime next week finance minister Tito Mboweni will table the Financial Matters Amendment Bill in parliament. The minister published a notice on Wednesday saying that the bill will be introduced to the National Assembly this month.
The provisional date for the first public hearing into the bill is February 12 so it is still a long way before it is passed into law and the final draft might look very different after the public hearings.
In its current state, however, the bill seeks to amend the following regulations: the Insolvency Act, Military Pensions Act, the Government Employees Pension Law, the Auditing Profession Act and the Banks Act.
The most striking amendment to the Banks Act, is the proposal for provisions that will allow state-owned companies and their holding companies to qualify to establish a bank. Currently, state-owned enterprises (SOEs) are classified as private companies while the Banks Act only allows for public companies to establish a bank. The bill proposes an amendment to the definition of “public company” to include state-owned companies.
If the bill is passed as it is, certain qualifying state-owned companies that are financially sound could apply to establish a bank after obtaining approval of the finance minister. It is not specified if this will only apply to SOEs that already perform some banking functions like the Land Bank. The only criterion is that the companies will need to have assets that exceed their liabilities and if they have holding companies, the same will apply to them.
“I would understand if the PIC [Public Investment Corporation] is seen as a potential SOE that can run a bank. But there are other SOEs like the Land Bank and the Post Bank and it’s not clear if the finance minister has those in mind,” said Azar Jammine, director and chief economist of Econometrix.
Having an SOE run a fully fledged bank, however, raises questions on whether it could help troubled enterprises like Eskom and Transnet raise funds locally. Local banks have been hesitant to lend to SOEs like SAA and Denel and they are putting pressure on Eskom to address corporate governance issues if the utility wants more loans from them.
“If they lend to Eskom who would want to bank with them? I would be very worried,” said Jammine.
The tabling of the bill, which was published for comment in August comes after EFF chief whip Floyd Shivambu tabled a private member’s bill to amend the Banks Act last year. Although it does not mention anything about a state-owned bank, the bill closely aligns to the EFF’s push for the establishment of one.
It also comes shortly after the ANC’s manifesto put the issue of prescribed assets back on the discussion table and Jammine thinks when put together, these developments show that the government is trying to find new ways to fund SOEs.
“It shows that government has a lot of assets that are being run poorly and are not easily attracting new investments. It is not able to fund new investments within these organisations and is now thinking, how do we oblige people to fund these organisations. But all that government is doing is actually throwing good money after bad.”
The other proposal that is likely to receive a lot of attention is the amendment of the Auditing Profession Act. Among other things, the bill proposes giving more power to the Independent Regulatory Board for Auditors (IRBA) in terms of conducting disciplinary hearings against auditors, and to give the regulator the power to impose more sanctions.
IRBA CEO Bernard Agulhas says the regulator is pleased that in the draft, National Treasury has addressed many of the concerns which it had raised over the past two years relating to the difficulties it experiences when dealing with errant auditors and addressing the public expectations for holding auditors to account.
“Importantly, our investigations can no longer be delayed by respondents withholding evidence and working papers necessary for conducting the investigation as the draft amendment grants the IRBA the power of subpoena.”
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