Gordhan: Idea for bank inquiry arises from one company

8 September 2016

Cape Town - The proposal of an inquiry into South Africa's banking system arises from "one particular company", Finance Minister Pravin Gordhan told the audience during an interview session at the Open Book Festival in Cape Town on Thursday.

Gordhan was interviewed by political analyst Justice Malala, who asked Gordhan about his thoughts on the proposed judicial inquiry into banks. Minister of Mineral Resources Mosebenzi Zwane had earlier issued a statement - which he alleged was a Cabinet resolution - in which he called for such an inquiry. This followed a decision by certain banks to stop offering services to companies tied to the Gupta family.

Speaking of the company referred to above, Gordhan said: "We have had many engagements with this company. Later today or tomorrow there will be a setting out of a number of interactions we had between this company and Treasury.

"It is our view that if any of us have been disadvantaged, then fairness can be obtained via our legal system. My view of our finance industry is that if there are serious complaints, go to court. And if that does not work, we can look for other ways to solve issues."

Gordhan explained that the finance ministry has a difficult set of responsibilities.

"We regulate in line with international best practice and international policy requirements. Secondly, we have to ensure that we create the right kind of legislative framework to have financial stability. Just as we could survive the 2008/09 financial crisis due to our good financial system - we can do so again," said Gordhan.

"On the other hand, we also have to ensure our citizens are treated fairly by banks. The so-called twin peaks approach ensures stability and that the market treats customers fairly. There are always some complaints about treatment by banks."

According to Gordhan, the framework for banks will change in SA over the next few years. He would, for instance, like to see the creation of a market conduct authority over time.

Economic growth

In response to a question about a possible downgrade of SA by ratings agencies, Gordhan said everyone in SA should focus their minds on the positive and hopefully avoid a downgrade in that way.

In his view it is unlikely that the country will go into a recession as the latest gross domestic product figures released for the second quarter have been cause for optimism.

"Hopefully we can keep afloat above a 0% growth rate - maybe even close to 1% growth. There are a lot of uncertainties, though, and they are not all internal to SA. Lots are external," explained Gordhan.

"Ratings agencies have basically said 'give this guy a bit more time'. One agency is visiting us again in two weeks and another in December. We now have to prove that we are in the process of implementing the package promised, and demonstrate the results."

Gordhan said the process brings a combination of both politics and economics into play.

"Excellence is a rare commodity sometimes, but sometimes it is there and must be used," he said.

This article first appeared on Fin24, see here.