The KwaZulu-Natal government has enlisted President Cyril Ramaphosa in the latest attempt to defend Ithala against liquidation after the postponement of its urgent application against the Prudential Authority.
The provincial government is supporting Ithala in its legal tussle with the South African Reserve Bank’s Prudential Authority, which applied for the bank to be provisionally liquidated. This after repayment administrator Johannes Kruger established the bank was “technically and legally insolvent”.
That move sparked a backlash from customers, political parties and the provincial government, which has since joined Ithala in its legal bid against the PA’s application.
Ithala and the provincial government, through the department of economic development, submitted a request last Thursday for justice Muzikawakhelwana Ncube to preside over the urgent application regarding the issues facing the bank.
The matter was set for Tuesday, but it was postponed as the judge is on leave until February 17.
KZN premier Thami Ntuli said the department reached out to the judge president to allocate another judge but was told on Monday he had decided to remove the matter from the court roll.
“A meeting has been scheduled with the senior counsel representing all parties involved for Wednesday to discuss the way forward for this case. The department and Ithala legal teams will be notified by the registrar once the judge president makes a further determination regarding this matter,” Ntuli said on Tuesday.
“In any event the effect of these developments is that the urgent application set for today [Tuesday] will no longer proceed. However, our main concern at this stage is that the liquidation application remains on track for January 30.”
Ntuli, one of the 257,000 clients of Ithala bank, said the developments with the court prompted him to reach out to Ramaphosa.
We are in the process of developing, with the help of the parent company of Ithala SOC, the Ithala Development Finance Corporation, an alternative route of bridging that gap — but it’s not going to be quick
— Musa Zondi, KZN economic development MEC
“I have escalated the matter directly to President Ramaphosa. During my engagement with the president, I highlighted the rushed and questionable intervention by the PA and emphasised the need for an urgent and equitable resolution to this matter.”
He said bringing the matter to Ramaphosa’s attention and fully engaging the national government was a unanimous decision by the provincial cabinet, which was “shocked” by the “haste” with which the PA acted.
“I am pleased to report that my discussion with the president was both productive and constructive, with a firm commitment to prioritising the Ithala issue.”
Economic development MEC Musa Zondi said Ithala’s capacity to communicate directly with its customers was “disabled” on Thursday, which has prompted the KZN government, as Ithala’s main stakeholders, to rely on the media to interact with customers.
“We are in the process of developing, with the help of the parent company of Ithala SOC, the Ithala Development Finance Corporation, an alternative route of bridging that gap — but it’s not going to be quick,” he said.
Zondi added that clients who have money at the bank have since Thursday been unable to transact.
“What is happening now is that people’s monies are kept away from them, and I’d venture to say, illegally so, because there is no agreement with the owners of that money not to access it.”
He further raised concerns about the conduct of finance minister Enoch Godongwana over the R2.1bn that was issued to the provincial government as a guarantee for Ithala in December.
Zondi said the provincial government had applied for it through the National Treasury Loans Committee after Ithala went a year without doing new business after the expiry and non-renewal of their exemption notice.
He said National Treasury is now taking the funds and using them to “give comfort” to commercial banks to consider taking Ithala’s clients should it be liquidated.
“This is what is happening at the expense of the public. That is completely unacceptable because the money was issued on the basis of stabilising the funds and providing guarantees to Ithala, not to service the interests of commercial banks who in any case do not want to deal with these kind of clients.”
“National Treasury was to deliver that money to the bank account of Ithala, (but) when we opened in January our MEC for finance realised that after signing all the papers on behalf of the provincial government and giving all the guarantees that it will be kept safe, the money had not landed there.”
“So that money is already out of the coffers of National Treasury and has not reached us. It’s somewhere between Pretoria and Pietermaritzburg, but it’s now going to commercial banks. That’s what we find very strange.”
He also lambasted Godongwana for making announcements “unilaterally” to the customers of Ithala without communicating with the KZN premier.
The KwaZulu-Natal House of Traditional Leaders is the latest provincial institution to throw its weight behind Ithala. They acknowledged the issues raised by the PA but are strongly opposed to claims the financial institution is insolvent, saying that contradicts the bank’s financial statements as of March 31.
They believe the move to liquidate is “premature” and it will affect the poorest members of society.
“Ithala is the only bank that has played a pivotal role in developing rural areas on communal land under the amakhosi. Today, our people have access to banking services, and through Ithala they have been able to build family homes using the Rural Home Loan program. Ithala has provided our people with dignity and improved their quality of life,” said the chairperson, inkosi Sifiso Shinga.
“The services delivered by this bank to rural communities are far-reaching compared to other commercial banks, which make it impossible for the previously marginalised portion of our society to access financial services.”
They also called on Ramaphosa, Godongwana, Ntuli and Sarb governor Lesetja Kganyago to respond in a manner that “prioritises the interests of marginalised and downtrodden communities, resisting undue influence from capitalist structures that seek to protect the wealth of a privileged minority”.
“The amakhosi resolved to mobilise all members of traditional communities alongside izinduna, amabutho to take mass action against the liquidation of Ithala bank. All Africans should unite against actions disguised as administrative decisions but which ultimately serve to oppress African-led and black-led institutions.”
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