The uMkhonto weSizwe Party (MK Party) has called on Minister of Finance Enoch Godongwana to urgently intervene to prevent the liquidation of Ithala Bank.
In a letter written by Mzwanele Manyi, the MK Party’s chief whip, he stated that Ithala Bank’s troubles are the direct result of policy decisions, which he believes Godongwana has the authority to address.
Sunday World previously reported that the Prudential Authority (PA) has submitted documents to the Pietermaritzburg High Court requesting the provisional liquidation of Ithala.
The PA in January revealed that although commonly referred to as a bank, Ithala was never granted a banking licence.
Exemption granted
Godongwana granted an exemption to Ithala as per the Banks Act 94 of 1990 (Banks Act), which allowed the entity to receive deposits while it regularised its operations.
The PA released a final notice of exemption on July 22, 2022. Ithala was given one last chance to normalise its deposit-taking operations as a result.
The PA issued a warning, stating that failure to comply would result in the exemption being removed.
On December 15, 2023, the last notice of exemption expired. This occurred when Ithala failed to meet all the conditions outlined in it.
In the letter, Manyi argues that the blame for the potential liquidation should fall on the Treasury, as it failed to act, despite the law offering alternatives to prevent this outcome.
He also highlights that the liquidation of Ithala was opposed by the standing committee on finance in parliament.
“This position is a recognition of the bank’s strategic importance in providing financial services to underserved communities and supporting economic development in KwaZulu-Natal,” says Manyi in the letter.
He said it is difficult to understand why the Treasury has not taken clear action to protect the future of the bank.
Serving historically marginalised communities
He described Ithala as a crucial financial institution that has served historically marginalised communities with distinction.
“You have, at your disposal, legal mechanisms that could have prevented this crisis: Section 2[b][vii] of the Banks Act empowers you to issue exclusion notices, which could have provided Ithala with the necessary regulatory relief to continue its operations.
“Section 1[1][cc] of the Banks Act granted you the discretion not to concur with the stringent conditions imposed by the Prudential Authority when granting the exemption notice.
“Instead, these conditions have placed undue strain on Ithala, leading to its current predicament,” reads Manyi’s letter in part.
He also pointed out that if Godongwana does not take the suggested action to save Ithala, it would raise serious concerns about the political will to sustain and support an institution that plays a key role in community development.
“We urge you to exercise your powers under the Banks Act and take immediate steps to prevent Ithala’s closure.
“There is still an opportunity to do the right thing and secure the future of this bank, in alignment with the views expressed by parliament’s standing committee on finance.”
