Parliament wants the troubled Ithala Bank to be saved at all costs as it is one of a few financial vehicles that extend loans to emerging small enterprises and home loans to rural communities.
Chairperson of the parliamentary standing committee on finance Dr Joe Maswanganyi said this week that Ithala was among the few vehicles available to push for the economic emancipation of black people.
“The bank’s developmental initiatives, ranging from granting loans to emerging small enterprises and home loans to rural communities are essential in the transformation agenda of a democratic South Africa and must be encouraged,” Maswanganyi submitted when the portfolio committee met this week.
He also noted that compliance with the Financial Matters Amendment Act will be a key catalyst towards securing the future viability of the bank and the security of deposits of its clients.
“Currently, the bank is unable to accept new clients, which will hamper [its]ability to make profits,” Maswanganyi said.
Last month the Financial Sector Conduct Authority (FSCA) and the Prudential Authority suspended Ithala’s licence, sending shockwaves to its -clients, who are mainly low–income earners. They also include among them those in the small business sector.
According to the FSCA, Ithala lacked financial soundness requirements as stated in the Financial Advisory and Intermediary Services Act.
“The financial statements of Ithala from the last four years (2020-23) show a consistent deficit (liabilities exceeding assets), worsening each year. Ithala has failed to remedy this noncompliance since the expiry of its exemption from the financial soundness requirements.”
The scathing report also said Ithala had not shown sufficient efforts to meet the requirements, and the explanation given by the financial provider was not convincing. The FSCA also instructed Ithala to inform affected clients and its product suppliers that the licence has been suspended. The suspension means Ithala is prohibited from conducting any new business.
“If Ithala fails to meet the solvency requirements and provide proof within the three-month period, the FSCA will proceed with the withdrawal of Ithala’s licence upon the expiry of the suspension period,” said FSCA.
The committee did not spare the rod for Ithala, cautioning the bank of endless litigation that hampers efforts to resolve the identified deficiencies.
“The committee will do everything in its power to safeguard their interest and ensure that the bank returns to full operation. There should be no panic on the side of the depositors and we will ensure the protection of their interests,” Maswanganyi said.
The suspension of Ithala’s licence -also ruffled feathers in the provincial -government, with KwaZulu-Natal Premier Thami Ntuli and the MEC for Economic Development Reverend Musa Zondi saying they would be writing to President Cyril Ramaphosa asking for his intervention.
Ithala is often credited to the late IFP founder Prince Mangosuthu Buthelezi, who conceived the idea of establishing the bank to assist mainly poor black people to establish businesses.
