An announcement that the controversial KwaZulu-Natal-based Ithala Bank will house the newly launched public wealth fund has been met with skepticism, with economists warning that the fund should not be turned into another VBS Mutual Bank scandal.
The public wealth fund, modelled around a sovereign fund, was announced during the State of the Province Address by premier Nomusa Dube-Ncube in February.
The mooted state-owned investment fund was officially launched at a Public Wealth Fund Conference organised by the provincial department of economic development, tourism and environmental affairs last week.
However, academic and economic analyst Precious Lugayeni has warned that there must be strict control and monitoring mechanisms to avoid turning the fund into a piggy bank for political elites and their cronies.
“It is a good initiative on paper, but my worry is that there are no guarantees that it will be properly managed,” said Lugayeni.
“We must guard against creating another VBS Bank, where public money was stolen. I’m also concerned that the fund will be managed by Ithala Bank, because we know its history.
“The financial institution also does not have a permanent banking licence. This means the funds may need to be invested in other banks, which will defeat the entire purpose.”
Lugayeni also questioned how the plan will be funded.
“Saudi Arabia, for instance, uses its oil reserves to fund similar initiatives. Other countries rely on their mining proceeds, and we do not control any of these.”
Ithala will set up a vehicle within its investment portfolio to house the fund, it has been revealed.
Ithala, which falls under the department of economic development, has long suffered reputational damage which it has not completely cleansed itself off.
At the heart of the Ithala’s woes is political meddling.
Sunday World reported previously how money was channeled from the financial institution to cover legal costs of former president Jacob Zuma during his arms deal trial in 2005.
In an explosive affidavit deposed at Norwood police station in 2021, former ANC MP Sizani Dlamini-Dubazana revealed that she was hounded to use his company, Hola Recruitment and Selection Services, to borrow about R3.4-million from Ithala Bank.
The money was disguised as a business loan and was never repaid.
Dlamini-Dubazana further alleged that former health minister Zweli Mkhize was the key mover in facilitating the loan during his tenure as MEC for economic development.
Siboniso Duma, current MEC for economic development, said the fund should be given a chance, describing it as a game-changer.
“We know that there are public perceptions around Ithala, but the institution has done well to rebrand itself,” Duma said.
“This [public wealth] fund will assist government achieve social and economic objectives.”
The Moses Kotane Institute, a provincial research entity, has been tasked with a fact-finding mission to establish how the idea can be set in motion.
According to the proposed plan, funds will be invested in bonds markets, real estate, stocks, and other financial instruments.
Follow @SundayWorldZA on Twitter and @sundayworldza on Instagram, or like our Facebook Page, Sunday World, by clicking here for the latest breaking news in South Africa. To Subscribe to Sunday World, click here.
