LUMKILE MONDI: Decisive action on VBS shows the way for failing SOEs
Financial institutions play a critical role in economic development. By mobilising savings, they allocate funding to areas that can achieve high growth rates, creating jobs and increasing revenues for the state that are needed to fulfil its constitutional mandate. The demise of VBS Mutual Bank is therefore to be regretted. It could have had a positive effect in rural areas, where credit in small packets and large volumes can have a huge developmental impact on rural lives. But earlier in the week the Prudential Authority’s unopposed application to the Pretoria high court to liquidate VBS was successful. VBS played a critical role in rural communities when it started operating in 1982. The Prudential Authority’s move to protect VBS depositors’ money is commendable, but the bank’s ability to give rural communities access to a financial institution, and the mobilisation of the savings that are required for investment in a country whose economic infrastructure continues to be defined by...
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