The KwaZulu-Natal provincial government has raised its reservations regarding an alleged move by the Minister of Finance, Enoch Godongwana, to repay billions of rands to Ithala Bank customers whose money is trapped in the institution.
The historic provincial black bank is facing liquidation by the Reserve Bank’s Prudential Authority for allegedly violating several banking provisions, and its customers are unable to deposit or withdraw money.
The provincial government, through its finance MEC, Francois Rodgers, said it has learned that Godongwana addressed a letter to the Reserve Bank governor, Lesetja Kganyago, on April 3, informing the governor that a government guarantee amounting to over R2-billion will be issued to facilitate payments to 223 166 Ithala retail depositors.
Facilitation of repayments
According to Rodgers, Godongwana further allegedly instructed Kganyago to appoint a private-sector financial institution to facilitate the repayments to Ithala retail depositors.
He argued that Godongwana made this proposal without first canvassing his idea with the government of provincial unity (GPU) even though he alluded that the province would be responsible for the repayment of the guarantee.
Rodgers, on behalf of the GPU, stated that he wanted to make it clear right away that the province does not support Godongwana’s actions.
According to Rodgers, he and his colleagues at the provincial treasury have always worked in good faith with Godongwana and the National Treasury regarding inherited issues involving Ithala Bank, and they have complied with all information requests.
They have also supplied detailed information on the liquidity of the entity and preferred action plans to address the inherited challenges.
Actions never discussed with provincial government
“We expressed that the province will secure a guarantee that would be used to secure the accounts of Ithala retail depositors, and a private sector financial institution would then be appointed to allow Ithala depositors to trade on their accounts, which have been illegally frozen by the repayment administrator since January this year.”
“It is worth reiterating that Mr Godongwana’s actions were never discussed with the GPU, but they have dire consequences for the provincial fiscus.
“It is disappointing to note that numerous attempts by MEC Rodgers to meet with Minister Godongwana on this matter have not been met with a response,” the provincial treasury said in a statement sanctioned by the provincial government.
It added that Rodgers remains open to meeting with Godongwana and other relevant stakeholders for the establishment of a mutually beneficial solution to this crisis.
The National Treasury has not yet responded to a request for comment.
