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SOUTH AFRICA - FINANCIAL PATHFINDERS?

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South African Finance minister Trevor Manuel and Central Bank chief Tito Mboweni - leading the new lending way.

Tom Dennen

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South African flag

"The South African banking system has effectively been insulated from the global financial crisis mainly as a result of the prevailing exchange control regulations," said First National Bank spokesperson Xolisa Vapi recently.

But that is definitely not the whole story.

The separation of church and state has been an only partially successful bun fight for centuries – politicians are as hard to nail down as deities and all deliver in inverse proportion to their promises.

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In this light I came up with a new rule: The separation of state and finance, but I fear this rule has been largely pre-empted by the South African National Credit Act.

Which may be why the world is looking at South Africa today as an innovator in financial thinking.

As we enter the worst recession since the 30’s, which is in fact a real depression generally agreed to have been caused by the reckless and avaricious lending practices of American financial giants, global lawmakers are focusing on a recent piece of South African legislation, the SA National Credit Act (NCA) which, while not necessarily separating finance from state, at least intelligently regulates private lending.

Greed may have put an end to the global financial system as we know it.

Until now, we would have thought it impossible for major US banks and financial institutions to ‘lose’ as much as $435 billion by investing in ‘leveraged’ sub prime mortgage instruments.

 Translation: American banks knowingly sold worthless debt, sold debt ‘books’ they knew beforehand would, nay, never could be paid back and sold them anyway – mostly to European central banks who are now with due cause ‘reportedly furious’ with Wall Street.

(That $435 billion, by the way, is 'only' just over half the size of the otherworldly ‘economic stabilization solution’ to the crises in the United States, the $700 billion bailout, half of which has been suddenly put on hold as Secretary of Treasury Paulson is accused of ‘bailing out’ only his friends on Wall Street)

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Global interest in the NCA

Several sources including government have reported that Peter Setou, a senior manager at the National Credit Regulator (NCR), which implements South Africa's new Act, said that in the light of the global credit crunch many African and European nations are looking to South Africa to help them put some teeth into their credit policies.

"There has been a lot of interest from mainly African and European countries wanting to study the Act," Setou was widely quoted as saying. "For instance, we are currently assisting the Namibians to develop legislation similar to what we have."

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Tom is a contributor to public debate on issues affecting our survival; works with a London and a South African think tank, is a working journalist and author.

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