KZN government to challenge liquidation of Ithala Bank: Ntuli

The KwaZulu-Natal government says it will use all possible avenues to challenge the Prudential Authority’s application to liquidate Ithala SOC Limited.

This was after the repayment administrator, appointed by the Reserve Bank, found that Ithala was technically and legally insolvent, which exposed the more than 200 000 depositors to the potential loss of their deposits.

Premier Thami Ntuli, who addressed the media together with other provincial officials, says that the action taken by the administrator was suspicious and lacked substance.

KZN government says it has assembled a team of senior legal experts to challenge the provisional liquidation of Ithala to be heard in the Pietermaritzburg High Court on Thursday.

Ithala, which is often referred to as a bank, was never granted a banking license. Instead it operated under a special exemption, granted by the Ministry of Finance, which expired in 2023.

Ithala’s sole shareholder is the KwaZulu-Natal Provincial government. The bank is said to have been the only banking option for thousands of depositors and small business owners in especially the rural areas of the province.

Ntuli says, “We must give assurance to the people of KZN that Ithala will never be buried alive. We are there to ensure that Ithala is being sustained. We will fight using all platforms and weapons we have, we will fight the valleys, in the rivers and in the hills, and even the dark forest to ensure that we preserve Ithala.”

The authority explains that a Final Exemption Notice was granted to Ithala to afford it a final opportunity to regularise its deposit-taking activities and to register as a bank.

But the regulator said that Ithala failed to comply with all of the conditions imposed in the Final Exemption Notice, including submitting its annual financial statements on time and being audited in accordance with the provisions of the Financial Sector Regulation Act 9 of 2017.

The final exemption order lapsed on 15 December 2023.

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Ithala has launched several litigation matters to challenge the authority’s implementation of its mandate.

The provincial government is questioning the timing of the liquidation litigation.

“There is something fishy, they decided that on the verge of the month’s end, they restrain the activities of Ithala understanding quite very well the impact that this was going to have. So, it makes us be worried that this may seem to be not purely administrative and technical intervention,” Ntuli adds.

The Department of Economic Development in the province says actions by the finance ministry to re-direct funds meant to cushion the institution’s clients are concerning.

KZN MEC for Economic Development Musa Zondi says, “The national minister has authorised this guarantee of R2.1 billion to give comfort to the commercial banks. Who says but these clients are rural-based, they are small businesses they are the kinds of clients we would not normally take in our own banks, we need comfort to open their accounts, they take this guarantee away from Ithala soc to give commercial banks, this is what is happening.”

Last week National Treasury assured Ithala clients that they would protect the interests of depositors.

*KZN Government Media Briefing on Ithala SOC*

Today, KwaZulu-Natal Premier Hon. Thamsanqa Ntuli addressed the media regarding the financial affairs of Ithala SOC.

The Premier reaffirmed the provincial government’s commitment to protecting Ithala and ensuring it continues to… pic.twitter.com/UhJpmgEW1W

— KZN Provincial Gov (@kzngov) January 28, 2025