Embattled KwaZulu-Natal-based Ithala SOC Limited’s CEO Dr Thulani Vilakazi, has told the provincial legislature that it is in the government’s hands to save the bank from being another failed financial provider, further plunging the poor black majority into the peripheries of economic exclusion.
“Ithala is not the first black financial institution formed before 1995 to become a victim of the new dispensation. There was the Bank of Transkei, it also went a similar route,” Vilakazi said. He said this when he appeared before the KZN legislature Standing Committee on Public Accounts (Scopa) recently.
CEO addressed Scopa at KZN legislature
Vilakazi appeared together with the bank’s chief financial officer, Mahomed Gafoor.
The Bank of Transkei, which was later called Meeg Bank, was founded in 1976. The year coincided with the independence of the Transkei.
It played a prominent role in the financial infrastructure, providing critical banking services to the local population and businesses.
Meeg Bank was later sold to ABSA.
Vilakazi detailed how Ithala had tried in vain to get both the provincial and national government to accelerate its application to operate as a fully-fledged bank. He said Finance Minister Enoch Godongwana had told the bank’s senior officials that his hands were tied.
Tried in vain to obtain a banking licence
“Under Section 2 of the Banks Act we approached the minister. We wanted to find an instrument that would replace the exemption notice framework. This was because the Prudential Authority (PA) would not entertain a further granting of exemption,” he said.
He said Godongwana’s argument was that Section 2 of the Bank’s Act only covers institutions of development finance. They do not cover deposit-taking institutions. And as such, Ithala’s case could not be advanced.
Vilakazi was explaining the genesis of their woes. These eventually led to the SA Reserve Bank (SARB), through the PA, asking the courts to liquidate Ithala.
Ithala disputes report that it is insolvent
Johan Kruger, a payment administrator appointed by the SARB, concluded that the entity was technically and legally insolvent. Ithala Bank, however, disputed this. If the PA is successful in its court application, it will spell the demise of Ithala.
Many Ithala clients are poor small business operators who rely on its pro-poor lending criteria. Ithala falls under the provincial department of economic development, tourism, and environmental affairs. It boasts a physical footprint spanning the entire KZN.
In some rural areas, Ithala Bank is the only financial institution with a physical presence.
The bank’s mandate is to offer financial support to working-class communities. Also to small businesses and public entities who are usually sidelined by big banks. This as big banks have stringent lending practices. Since its formation, the bank has operated under a temporary Banks Act exemption. During this time it was working towards obtaining a permanent banking licence.
