Ithala Bank, which recently faced threats of closure following the expiration of its temporary licence – sparking panic among its 500 000 clients, says deposits are safe and that it will not go the route of VBS Mutual Bank.
The entity, which falls under the KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs, is still awaiting a decision on the granting of a permanent commercial licence.
Ithala chief executive officer Dr Thulani Vilakazi allayed fears the bank could suffer a fate similar to VBS.
“Ithala has steered a steady ship – for over 20 years since [its] corporatisation, it has been able to meet depositors’ demands.
“And one of the key aspects is that Ithala has never -ever dipped into depositors’ funds to cover its losses,” explained Vilakazi.
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 bank has been operating on a provisional licence granted by the SA Reserve Bank.
The licence allows the bank to operate like a fully fledged bank and also accept deposits. It was granted to allow the institution to operate while awaiting approval of a permanent commercial banking licence.
Due to the failure to address the governance failures such as the filling of critical positions within the entity, the Reserve Bank appointed an administrator to oversee Ithala affairs.
The bank was also not permitted to accept deposits from its clients until it got its house in order.
The decision was later overturned by the court.
Vilakazi said Ithala is a solid business with no liquidity issues.
“All it needs is a legal instrument in the form of a licence to operate. The VBS and Ithala situation are totally different.”
Vilakazi explained that Ithala has pinned its hopes on being granted the permanent licence.
“Engagements between Ithala, the provincial government, the minister of finance, and the regulatory authorities are ongoing and, once finalised, an announcement will be made,” he said.
Early this year Ithala enlisted parliament to assist its bid to be awarded a licence. Finance Minister Enoch Godongwana subsequently proposed that the bank partner with an established bank or take the mutual bank route.
KwaZulu-Natal Premier Thami Ntuli said the seventh administration has identified Ithala among the key institutions to drive economic growth, employment and support small businesses.
“Ithala is among the institutions which we will leverage to bring about the economic growth and stimulate the small business sector.
“Ithala is also key in unlocking rural town economies,” Ntuli told Sunday World.
The financial institution is also buoyed by the unqualified audit it received for the 2023/24 financial year from the Auditor-General.
