Although Ithala’s ability to collect loan instalments was temporarily halted after the freezing of all its accounts, the institution says it continues to service existing clients.
Image: Leon Lestrade
Some Ithala bond finance customers say they are in the dark despite honouring their monthly payments.
With effect from December 2023, Ithala has been operating under the directive of the Repayment Administrator (RA) appointed by the Prudential Authority in terms of Sections 83 and 84 of the Banks Act.
In January last year, the RA imposed a freeze on Ithala bank accounts, and as a result, Ithala clients could not make loan repayments between January and March 2025.
All these accounts fell into arrears during the period when instalments could not be collected. Ithala has 7 891 bond loan accounts, with each one being at various stages of the credit life cycle.
Ithala says it manages fully integrated business activities that provide a range of financial and property services throughout KwaZulu-Natal. Its mandate is to promote development in the province.
The Ithala Development Finance Corporation Limited (IDFC or Ithala) was established in 1958 as a development finance agency, wholly owned by the province of KwaZulu-Natal, mandated to assist the government in promoting economic development and empowerment in the province.
Speaking to "Independent Media Property" anonymously, a customer who has had a bond with the finance institution for over a decade says they used to receive their statements monthly.
However, they say that they last got one almost two years ago. “I have never at any point received a notification of a change of the repayment method.
“We only got an sms telling us to deposit the money into an Absa Bank account. Ithala had not been deducting their monies from our account as per the agreement.”
They say that currently, they do not know where to go to enquire whether Ithala receives their repayments or not, since they do pay the money as instructed in the sms.
“We pay them every month, but we get no statements or anything indicating the balance due to them. At the moment, we are very concerned and suspect some criminal activity because we never thought such a well-known institution could relate to their cash-generating customers using an sms.
"Even today, we have not heard from Ithala. The feeling of being robbed is there because we don't know if they will disclose the correct balance when they decide to issue statements again.”
The customers went on to say that even when the South African Reserve Bank(SARB) announces interest rate cuts, as they did a few times last year, they have not received any communication, even via that sms.
“We have kept on paying the same instalment we were paying since the beginning of our bond journey with Ithala.”
A new account where clients could pay instalments towards their loans was availed by the RA at the end of April 2025, says CEO of Ithala SOC Limited, Dr Thulani Vilakazi.
He says that as a result, Ithala could not receive loan instalments from clients between January and April 2025.
“The RA’s intervention in operational activities resulted in the termination of critical services and caused a disruption in the bond management system and client services in that relationships between Ithala SOC and different service providers were also terminated abruptly,” Vilakazi revealed.
Ithala says it is not correct that only SMS communication was sent to clients. It says various forms of communication (SMSs, emails, telephone call details, branch notices, media releases, etc.) were sent out to clients to alert them about the new banking details that they needed to use when paying their loan instalments.
However, Ithala does concede that the service provider contracted to Ithala was terminated by RA and as a result, client services were affected, which includes communication to clients; individual statements are provided on a request basis.
The CEO says that approximately 60% of clients heeded the call to pay their loan instalments into the new account, and where necessary, the standard collection approach is followed in following up and collecting outstanding loan instalments.
“Although Ithala’s ability to collect loan instalments was temporarily halted as a result of what was mentioned above, and contrary to some media reports, Ithala continues to service existing clients.
“Clients with outstanding loans remain liable to continue making monthly instalments towards their loans. In the event that any clarity is sought regarding their loan status, clients are welcome to contact any Ithala branch or contact the Ithala call centre, where their queries will be addressed accordingly.”
Absa Bank Limited is aware that an Absa account is being used to facilitate loan‑repayment collections for Ithala SOC Ltd’s clients; however, Absa’s contractual relationship is with Ithala SOC Ltd itself, not with Ithala’s individual accountholders, says Daniel Munslow, the managing executive for Group Communications at Absa.
“As a result, Absa is not authorised to communicate directly with Ithala’s clients, nor to manage any aspect of their customer communications, loan information or account servicing. All client‑facing queries, notifications and statements remain the responsibility of Ithala as the product provider.”
Vilakazi adds that the communication relating to interest rate variation for all periods, including the recent cut, was sent to all clients via sms notification as per standard procedure.
“As required by law, Ithala adjusts client interest rates in line with the outcomes of the Monetary Policy Committee (“MPC”) of the South African Reserve Bank and such adjustments become effective immediately following the announcement of the MPC decision.”
According to Vilakazi, Ithala has lost potential business opportunities since the RA imposed a freeze on Ithala bank accounts last year.
He says the company has not been able to issue new loans for almost two years due to regulatory challenges and the intervention of the repayment administrator, who halted all lending operations. “As a result, Ithala has only been managing its existing loan book, which is steadily amortising as borrowers continue to repay their loans.
“This means that Ithala has been unable to grow its loan book or benefit from favourable market conditions, such as interest-rate cuts that typically improve property affordability and stimulate demand for home loans.
"Consequently, while market conditions may have supported increased lending activity, Ithala has not been able to participate in that growth due to the regulatory restrictions placed on its operations,” says Vilakazi.
The South African Reserve Bank maintained, “To clarify, Ithala SOC Limited (Ithala) is not, and has never been, registered as a bank under the Banks Act, 1990 (Act No. 94 of 1990). Regarding your query, all questions raised should be addressed directly to Ithala.”
Independent Media Property