"No rush" to impose banking tax makes Johannesburg more attractive as financial centre

South Africa appears to have a cunning plan: not content with being Africa's financial and economic powerhouse, the country wants Johannesburg to become an international financial centre. One of its attractions would be the government's unwillingness to impose a tax on banking profits.

The International Monetary Fund is urging all countries to impose harmonised taxes on banks to help pay for future crises, but the South African government is dragging its feet. "We are not going to rush," said Ismail Momoniat, deputy director-general of financial sector policy at the National Treasury. "We will take into account the fact that our banks have good systems for risk management and our financial sector is effectively regulated." It would therefore be unfair to penalise South Africa's banks for problems created elsewhere which have not caused such a ripple locally.

This view is shared by Cas Coovadia, managing director of the Banking Association of South Africa: he says that imposing penalties on banks in emerging countries which have managed the crisis well "will make banking more expensive and out of reach."

The tax would put South Africa's banks at a competitive disadvantage and would be unfair: "Well-managed banking systems such as South Africa's could end up subsidising weak systems such as Iceland", says Michael Jordaan, CEO of First National Bank. "It is unfair to tax banks on a global basis when the real problem originated in developed economies," agrees Sim Tshabalala, CEO of Standard Bank SA.

Now that the government seems to be listening to bankers' concerns, Johannesburg seems set to add one significant string to its bow. The city is at number 50 in the latest Global Financial Centre Index, above Mumbai, Gibraltar, Wellington and Moscow, but it has lost two places since the previous year and it is keen to climb up again.

One of its strengths is quality of life. A recent survey by HSBC Bank International on the best countries for expatriates to live in put South Africa in sixth place for quality of life, below Canada or Singapore but well above the US, Hong Kong, the UK or Switzerland.

Johannesburg is the world's least expensive city (at number 143) in the Economist Intelligence Unit's cost of living survey for expatriates. It can also offer fantastic weather, a green environment, a high standard of accommodation and leisure activities as well as a favourable timezone. If South Africa also stays a tax-free zone, bankers may well beat a path to the "City of Gold".