IN A DESPERATE bid to save Ithala Bank from the brink of liquidation, Inkosi Zuzifa Buthelezi, son of the late Prince Mangosuthu Buthelezi, has initiated a petition that aims to rally support for the 60-year-old black-owned bank.
This comes in the wake of serious allegations of insolvency and non-compliance made by the Prudential Authority (PA) of the South African Reserve Bank (SARB), prompting concerns over the bank's future and the welfare of its clients.
Prince Buthelezi was instrumental in the establishment of Ithala Bank.
In an exclusive interview with the Daily News, Zuzifa Buthelezi declared, “We will fight until the bitter end to ensure that we save the bank which serves black people. We will not allow the forces that are behind the collapse of Ithala bank.”
His plea underscored the vital role the bank played in the financial ecosystem for black South Africans, particularly those from the impoverished communities that rely on its services.
Ithala Bank finds itself entangled in a legal battle as it fights to avoid liquidation, an outcome the PA has deemed necessary. The PA has levelled severe accusations against the bank, claiming it has incurred losses exceeding R500 million and has breached essential regulations such as the Banks Act and the Financial Advisory and Intermediary Act. Despite these claims, Ithala maintains its assertion that it is in good standing and capable of honouring its obligations.
The stakes are high, with the Pietermaritzburg High Court yet to determine Ithala's fate. The PA, a regulator tasked with oversight of financial institutions, in pushing for the liquidation of the bank, argued that the situation threatens not just Ithala’s operational integrity but also the financial security of approximately 257 000 clients, who depend on its banking services.
The issue of a banking licence has hovered like a dark cloud over the institution. Despite becoming a wholly-owned subsidiary of the Ithala Development Finance Corporation Limited (IDFC) in 2001, the bank has struggled for over a decade to secure a permanent banking licence. This month’s developments escalated matters dramatically, as the PA advanced its stance by issuing the directive to have the bank liquidated following a series of warnings over compliance failures.
The recent announcement by the PA was met with a swift rebuttal from Ithala in disputing the claims of insolvency. The bank accused the appointed repayment administrator, Johan Kruger, of operating arrogantly and callously, particularly regarding the suspension of deposits and withdrawals, which they argued, undermined customers access to their funds.
In the face of rising concerns from depositors, the National Treasury sought to offer some comfort, stating that retail deposits are backed by a government guarantee, contingent upon procedural resolutions for transitioning accounts to alternative financial institutions. This assurance highlights the government's commitment to safeguarding depositor interests during a turbulent period.
Reverend Musa Zondi, the KwaZulu-Natal MEC for Economic Development, has also urged calm, asserting that the crisis surrounding Ithala was not merely a question of insolvency but also relates to fostering equitable processes regarding the bank’s licensing challenges. His advocacy at government levels was aimed at securing a resolution that balances depositor protection with the bank’s ongoing viability.
As the legal pressure mounts, the narrative surrounding Ithala Bank's financial turmoil reveals more than just numbers; it speaks to the broader implications for black-owned banking institutions in South Africa. Political support has poured in from various parties, including the Inkatha Freedom Party (IFP), DA, uMkhonto weSizwe Party, and lobby group Injeje YabeNguni, all rallying behind Ithala’s fight for survival.
The coming days are likely to be critical as Ithala battles to maintain its place in South Africa’s financial landscape, a fight that could have a profound effect on both its clients and the larger movement for economic empowerment. With tensions high and public interest piqued, all eyes will be on the courtroom proceedings that may define the future of this pivotal institution.
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DAILY NEWS