Amid the decision by the South African Reserve Bank’s Prudential Authority for the provisional liquidation of Ithala SOC Limited, the KwaZulu-Natal government of provincial unity (GPU) is racing against time to save the entity.
The Prudential Authority (PA) this week filed court papers at the Pietermaritzburg High Court wanting the move to be set in motion.
The PA further said if the court gave the green light, it would enable the appointment of a liquidator. The liquidator in turn would utilise the insolvency legislation to recover and distribute the funds of about 257 000 depositors of the state-owned financial and insurance provider.
The decision was triggered by Johannes Kruger, a repayment administrator appointed by the PA, who said the entity was legally and technically insolvent. This, according to the Prudential Authority, puts the depositors’ money at great risk of being lost.
But Cosatu in KwaZulu-Natal told Sunday World that it appeared there was a concerted effort to do away with financial institutions geared towards assisting those in the economic periphery.
“We are very much disappointed as Cosatu in KZN. Ithala is one of the very few banks that look after the financial needs of the poor and the marginalised. Our view is that the Reserve Bank should be supporting institutions such as Ithala.
It’s clear that there is an agenda to monopolise the financial sector,” Edwin Mkhize, Cosatu KZN provincial secretary, said.
He pointed out that there might be issues about how Ithala runs its affairs but it should not be allowed to collapse.
“If there are corrupt elements or issues of maladministration, let’s sort out those. But we should not kill Ithala,” said Mkhize.
Cosatu said the move would affect close to 400 employees.
Francois Rodgers, the finance MEC in KZN also added his voice, saying calling for the head of the financial institution was premature.
“Our biggest concern is the approach and attitude adopted by the Repayment Authority (RA) under the leadership of Mr Johannes Kruger.
Since his appointment by the Prudential Authority, it appears Mr Kruger has been hell-bent on taking over control of the entire Ithala operation, a move which has hamstrung operations at the bank and in fact compounded supersede legal action by the PA is proof of this fact,”
Rodgers said.
He stated that the KZN treasury supports the recent move by Ithala to challenge the court action. Ithala filed an urgent interdict to stop the PA in its tracks.
Ithala has long battled to attain a permanent banking licence, only operating with a temporary one.
The licence allows the bank to operate like a fully-fledged bank and also accepts deposits. It was granted to allow the institution to operate while awaiting approval of a permanent commercial banking licence.
The bank has ambitions of becoming a state bank.
Ithala was established in 1958 as a development finance agency owned by the former KwaZulu homeland administration.
The late IFP founder and homeland chief minister Prince Mangosuthu Buthelezi is credited with founding the bank to assist the poor who were unable to access capital.
The KZN Office of the Premier said the cabinet would meet soon to deliberate on how Ithala could be saved.
The ANC particularly in the province had always lamented that Ithala must be given a permanent banking licence.
The lamentations however have not yielded any positive results.
Mafika Mndebele, the chairperson of the legislature portfolio committee on economic development and tourism said the PA’s decision was undermining the ongoing efforts to assist Ithala.
