AS SCORES of Ithala Bank clients and employees faced an uncertain future, the MEC for Economic Development, Tourism and Environmental Affairs (Edtea) Reverend Musa Zondi has stepped in, attempting to save the black-owned bank from closure.
The fate of the bank founded in 1958 is now in the hands of the court after the Prudential Authority’s (PA) application to the High Court in Pietermaritzburg for Ithala’s provisional liquidation last week, citing non-compliance.
The The Prudential Authority regulates banks and other financial institutions.
As a legal showdown looms, questions are being asked about who should be blamed for the crisis, which could plunge the lives of the 257,000 depositors into disarray if it was liquidated.
It is believed in many quarters that the buck should stop with the current CEO and board for the setbacks suffered by Ithala bank.
Ithala accused the PA’s Johan Kruger, the repayment administrator (RA) appointed by the South African Reserve Bank (SARB), of arrogance and callousness.
Subsequently, the bank filed an urgent interdict to challenge the directives issued by the Repayment Administrator (RA), which includes halting deposits and withdrawals.
However, the court declined to grant the interdict, citing the imminent court hearing scheduled for Friday. The KZN provincial government, led by Premier Thamsanqa Ntuli, is also opposing the closure of the bank.
During an interview with an SABC radio station, Zondi alleged that ‘whiteowned banks’ were attempting to undermine Ithala Bank, claiming a conspiracy to attract its 257,000 customers.
He accused giant ‘white-owned commercial banks’ of hatching a plot to shut down black-owned Ithala bank.
“We suspect a third hand in all this. We know that white banks want to take 257, 000 Ithala clients, so this is a plot to destroy a black-owned bank,” said the MEC.
Zondi said that the Prudential Authority lost a similar case last month and does not understand what new evidence it has to re-apply for another liquidation.
“This decision leaves Ithala in a precarious position, as clients will not have access to their funds, particularly during the weekend when many citizens face pressing financial obligations such as funerals, weddings, medical expenses and the opening of schools,” said Zondi.
He added: “Ithala remains a solvent institution with assets exceeding its liabilities. What we are dealing with here is a licensing and operational challenge, and we are committed to ensuring fair and equitable processes to resolve it.
We understand the stress this situation causes, especially for families needing funds for funerals, weddings, medical expenses and school preparations.”
He said the government was working “tirelessly" to resolve this matter.
Although often referred to as a bank, Ithala was never granted a banking licence.
Operating under a temporary Banks Act exemption, Ithala has struggled for more than a decade to secure a permanent banking licence. That exemption expired in December 2023.
Ithala accused the PA of pursuing liquidation proceedings before a formal court order, describing the grounds for this as “fundamentally flawed, frivolous, and based on erroneous calculations”.
“Kruger’s directive to all Ithala service providers to halt operations directly undermines our customers’ access to their funds and the ability to conduct transactions,” the statement continued.
“This irresponsible action comes at a critical time, as many citizens prepare for the new school term and face essential financial obligations such as school fees,” read a statement from the bank.
The National Treasury issued a statement assuring retail depositors that their funds will be protected by a government guarantee, subject to the completion of necessary technical work.
This includes providing a government guarantee to one or more banking institutions to facilitate the timely migration of depositors’ accounts and ensure access to funds.
“While depositors will need to urgently make alternative banking arrangements, they can be assured that we will endeavour to secure their funds as far as is possible,” the statement read.
In a statement, the IFP came out guns blazing, noting the “ill-advised decision by the Prudential Authority to file for the liquidation of Ithala Bank SOC”.
“The Prudential Authority is clearly calling us to the streets, and they must rest assured we will answer with emphatic yes, right to their doorstep,”said the party’s spokesperson, Mkhuleko Hlengwa.
The Daily News approached the ANC spokesperson, Mafika Mndebele, about who should be blamed for the crisis.
He responded with a statement from the KZN’s legislature’s Economic Development and Tourism portfolio committee, which he chairs, declaring that the committee is against the closure of the bank.
The DA’s spokesperson on economic development, tourism and environmental affairs did not respond to questions.
Attempts to get comments from both the Prudential Authority and the commercial banks about the accusations were unsuccessful.
DAILY NEWS