KZN government pledges to return funds to Ithala depositors this festive season

Some festive cheer is in the pipeline for long-suffering Ithala Bank clients, this after the KwaZulu-Natal (KZN) provincial government pledged to return depositors' funds held by the financial services provider during December.

Ithala clients' accounts were frozen ever since the South African Reserve Bank's Prudential Authority (PA) made a liquidation application in January.

About 257,000 deposit accounts were frozen due to this matter. The announcement to release depositors' funds was made on Monday, which came after prolonged negotiations between key stakeholders, including the Office of the President and the National Treasury.

Provincial Premier Thami Ntuli made the announcement at a press briefing session. He acknowledged there were historic challenges that have long plagued the institution.

The difficulties faced by Ithala have not only impeded the institution’s operational viability but also impacted the lives of families and small businesses across the province.

“We had to engage the presidency and the National Treasury, which led to the breakthrough we are reporting today."

"The delays were not caused by the provincial government; rather, our commitment to finding a solution did take time,” explained Ntuli.

“We wanted to ensure transparency and keep everyone updated on the steps we were taking,” he said.

Ithala, owned by the KZN provincial government, was reported to be insolvent in early 2023. This sparked an application from the Prudential Authority (PA) for the institution’s liquidation, a move that threatened to place depositors' investments at risk.

There was hope for depositors in May when Ithala won a court application to continue operations, apart from deposit-taking. However, the PA took that ruling on appeal with the KwaZulu-Natal High Court and won, which resulted in accounts being frozen yet again.

While the entity has been commonly referred to as a bank, Ithala did not have the requisite banking licence, having missed the December 2023 deadline to acquire such credentials.

The PA then moved in to declare that all deposit-taking after the deadline was illegal. In December 2023, Kruger was appointed by the PA to recover unlawfully collected deposits and protect the interests of depositors after Ithala’s accounts were frozen.

The Gauteng High Court confirmed Kruger's authority, which included an expanded mandate to oversee Ithala's operations. As part of the conditions of the bailout between the provincial government, Treasury, and Presidency, the PA was asked to withdraw its legal actions against the bank.

DAILY NEWS