The Gauteng government is moving ahead with its plan to establish a provincial state bank to help boost the economy and create jobs for township youth.

This was revealed by premier David Makhura on Tuesday during his oral reply in the provincial legislature.

Makhura said this will form an integral part of his administration's turnaround strategy to grow the economy by funding township-based businesses.

The bank will replace the Gauteng Enterprise Propeller - the province's flagship agency aimed at supporting small business growth - as the main funder of small, medium and micro enterprises (SMMEs) and township businesses.

"We are glad that feasibility studies indicate that the proposed Gauteng state bank is technically viable and feasible.

"We face major leaks of the financing of SMMEs in township businesses," said Makhura.

"There are very good examples of public banking institutions that have really been successful, therefore, the Gauteng government will accelerate efforts towards the establishment and operationalisation of the Gauteng state bank."

However, some opposition parties in the legislature have criticised Makhura's decision to forge ahead with the plan, stating it would put taxpayers' money at risk.

DA chief whip in the legislature Mike Moriarty said: "Rather than risking taxpayers' money which we have seen in the VBS scandal, there are other state interventions to boost the economy ...

"We expect your province to engage where municipalities have recklessly invested money into VBS but the fact of the matter is you say state intervention is necessary, I agree. But it doesn't necessarily mean that the only state intervention is setting up of a bank which is entirely risky."

Moriarty was referring to the West Rand district municipality which invested R81m with VBS Mutual Bank while Merafong invested R50m.

VBS has since been put under curatorship over increasing liquidity problems.

However, EFF caucus leader Mandisa Mashego said they are in support of the establishment of the bank.

"The ANC has delayed to establish the state bank because they correctly admit that they are not going to impact on job creation without industrialising, and they are not going to advance an industrial programme without state intervention because the private sector is racist," said Mashego.