Ithala SOC Limited, a provincial state-owned development finance institution, is on the brink of liquidation due to financial mismanagement and regulatory breaches. The Prudential Authority (PA) filed for its provisional liquidation on January 16, 2025, citing the need to protect the interests of approximately 257,000 depositors.
The Prudential Authority’s Action
The PA’s decision follows a court application highlighting Ithala’s failure to comply with regulatory directives. Despite an order on October 24, 2024, to cease taking deposits and repay outstanding amounts, Ithala continued its operations without a valid exemption notice, resulting in unlawful deposits totalling R2.473 billion as of March 31, 2024. The company was directed to return this sum within 14 business days but failed to do so.
A solvency report by the Repayment Administrator (RA) found Ithala to be insolvent, both factually and technically. The report further indicated that Ithala’s financial performance for the year ended March 31, 2024, had resulted in a loss of R60.5 million, exacerbated by an increase in non-performing loans and a challenging economic climate.
Political Reactions and the Role of KZN Treasury
The KwaZulu-Natal (KZN) Treasury, under MEC Francois Rodgers, has expressed concern over the actions of the Repayment Administrator. MEC Rodgers has publicly criticized the approach of Mr. Johannes Kruger, the RA, accusing him of undermining Ithala’s operations rather than safeguarding depositors’ interests. The KZN Treasury aligns itself with National Treasury's stance, ensuring that the government continues working to protect depositors as the necessary technical work progresses.
In a statement issued on January 17, 2025, MEC Rodgers affirmed that the provincial government is actively working with Ithala and the Department of Economic Development, Tourism, and Environmental Affairs to secure necessary interventions. However, the MEC expressed frustration with what he described as Mr. Kruger’s efforts to take control of the bank, which he believes has worsened the situation rather than resolved it.
EFF’s Concerns Over Municipal Politics
While the liquidation of Ithala dominates the political landscape, the Economic Freedom Fighters (EFF) in KZN has also made headlines. On January 17, 2025, the party issued a statement condemning the refusal of the uMhlathuze Local Municipality to replace expelled EFF councillors. The EFF has criticized the municipality’s leadership for undermining democratic principles and has vowed to occupy the council chamber on January 30, 2025, to address this issue.
ActionSA’s Stance on Ithala’s Collapse
ActionSA, a political party focused on holding government entities accountable, expressed its deep concerns about the collapse of Ithala. The party had raised alarms in September 2024, warning that without capital support from KZN government or National Treasury, Ithala’s insolvency was inevitable. ActionSA believes that the liquidation will expose vulnerable communities to significant financial risks, particularly since many of Ithala’s clients rely on the bank for their livelihoods.
The party further criticized the lack of foresight in managing Ithala’s financial issues, particularly given the lessons learned from the VBS scandal. ActionSA is calling for immediate action to protect the depositors during this period, particularly those in vulnerable communities.
IFP's Response
The Inkatha Freedom Party (IFP) has strongly objected to the liquidation proceedings, calling it a reckless move by the Prudential Authority. The party has demanded urgent intervention from the KZN Provincial Government to prevent the liquidation and to explore all legal options to protect the bank and its clients.
The IFP also condemned the actions of the Repayment Administrator, accusing Mr. Kruger of rogue behavior and demanding his immediate removal. The party’s concerns reflect broader political tensions around the handling of Ithala’s crisis.
Legal and Court Developments
Ithala SOC Limited has responded to the liquidation application, stating its intention to challenge the PA’s directive under the Financial Sector Regulation Act. The matter is set to be heard in court on January 30, 2025, where the fate of Ithala and its depositors will be determined. If the liquidation is granted, it could have far-reaching consequences for both the bank’s clients and the broader financial sector in South Africa.
The public, especially Ithala's depositors, will be closely watching the outcome of the case, as they face uncertainty over the future of their savings.
