Ithala bank
Image: DOCTOR NGCOBO/Independent Newspapers
Former board members of Ithala SOC Limited have described the embattled entity as a "dead bank".
A member of the board revealed that there is no future for the bank as it is not trading, it has lost customers and assets, and could soon lose workers.
However, the office of the KwaZulu-Natal Premier pushed back against this assertion, stating that the bank is in the process of being revived. Board members of the entity resigned recently amid deepening crises within the institution.
Ithala's woes began in late 2024 after the South African Reserve Bank's Prudential Authority (PA) had appointed a Repayment Administrator Johan Kruger to deal with the management of deposits that Ithala held.
While Ithala had been conducting the business of a bank and accepting deposits from members of the public, it had no banking licence but was operating in terms of the exemption granted to it by the Finance Minister.
When that exemption expired, the PA appointed a repayment administrator to recover and take possession of all deposits taken by Ithala from depositors or under its control in terms of the Banks Act.
The board members' resignations came as the provincial government indicated that members might face consequences for the near collapse of the bank.
The office of the Premier suggested that the members should account for governance challenges, including the failure to secure a banking licence.
One of them, speaking on condition of anonymity, said they had done all they could to ensure the bank survived and did not fear any investigation into their conduct while leading the institution.
They disputed the suggestion that the troubles could be laid at this board's feet, pointing instead to a complex history of regulatory intervention and political involvement that, they argue, ultimately constrained the board's role. They claimed that attempts to close down the institution have been ongoing for years.
The source acknowledged that the institution had faced profitability challenges, particularly during the Covid-19 pandemic.
"We were not perfect; there were changes, but we have done everything for the entity and we are in compliance with the law," said the member.
Speaking about the future of the bank, he said the bank was essentially dead, without new customers, a loan book, and unable to provide any services.
"At the moment, how can it continue trading? The bank is essentially 'done'."
"We have learned that there was a proposal to make Ithala SOC Limited an entity of the Ithala Development Finance Corporation, and in such a case, the entity would not require a board."
"What has happened to the bank is painful; the hardship is evident among all of our former customers. We had loyal clientele that trusted the bank; the clientele even knew some of our staff members by name and trusted them. They trusted how they were banked. But now, you see the pain in people having to travel a great distance and spend more money when collecting their grants."
Regarding their resignations, the member described it as unfair to the board members. "We are professionals; being a member of a board that was removed is damaging to one's standing and career."
"I want to state this clearly: as a member of this board, we do not fear any investigation that will look into how the board did its work because this board was always compliant with its fiduciary responsibilities."
Hannah Lidgett, DA spokesperson on Economic Development, Tourism and Environmental Affairs (EDTEA), said KZN residents deserve answers on how Ithala got to this crisis point. "What failures in governance, oversight, and accountability led to this situation?
"The DA firmly believes that a full and transparent investigation is now essential. While there are indications that a Special Investigating Unit (SIU) process may already be underway, the province cannot afford to stand back. A preliminary provincial investigation must be initiated without delay to establish the facts, identify any wrongdoing, and ensure accountability.
"What has happened to Ithala must never be repeated, and it must now be rebuilt on a foundation of ethical leadership, sound governance, and financial responsibility. KZN's people cannot continue to bear the cost of institutional failure," she said.
The Premier's office said Ithala is in the process of being revived. It added that the SA Reserve Bank's Prudential Authority had indicated that it would withdraw the liquidation application against Ithala SOC Limited, adding that this marks a critical step towards stabilising and repositioning Ithala to continue fulfilling its developmental mandate.
"The KwaZulu-Natal Government of Provincial Unity is working tirelessly to ensure that Ithala SOC continues to deliver on its mandate to serve the people of the province."
It added that following the Premier's announcement of an investigation into allegations of wrongdoing and mismanagement, all members of the Ithala board resigned.
"It is important to clarify that Ithala SOC Limited is a subsidiary of the Ithala Development Finance Corporation (IDFC). There is currently no decision to dissolve Ithala or to arbitrarily redeploy its employees across government. Any considerations regarding organisational alignment will be guided by due process, consultation, and the long-term sustainability of the institution.
"With regard to operations, Ithala is undergoing a structured recovery and stabilisation process. The government is working closely with relevant stakeholders to ensure that the institution is compliant, financially sound, and operationally capable of effectively serving its clients," added the statement.
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