Parliamentarians raise concerns about the possible closure of Ithala Bank

Members of Parliament on Wednesday voiced significant concerns regarding the potential liquidation of Ithala Bank, a financial institution regarded as a crucial facilitator of socio-economic development in KwaZulu-Natal.

The debate, which was held in the National Council of Provinces (NCOP), highlighted fears that the bank's closure could reverse hard-won transformation gains and exacerbate the financial exclusion of historically disadvantaged communities.

Ithala Bank, which has long operated under regulatory exemptions, is facing possible liquidation following an application from the South African Reserve Bank's (SARB) Prudential Authority, citing persistent failures to meet essential banking licensing requirements.

IFP MP and NCOP deputy chairperson Poobalan Govender, who sponsored the debate, said the future of the bank was one important decision that will speak directly to securing the future of socio-economic rights for millions of people.

Govender said the bank was a vehicle that provided economic access in the form of loans to start businesses and to encourage savings and investments.

“If we allow its closure we risk plunging many into deeper poverty and reversing hard worn gains in socio-economic transformation and leaving millions of people without crucial financial support to sustain businesses and livelihoods,” he said.

ANC MP Mxolisi Kaunda said the bank faced being an institution of the past due to some elements of mismanagement and raised the issue of the problematic banking system as it was not allowed to be a fully fledged mutual bank to provide all banking services.

“The recent suspension of its licence by the Financial Sector Conduct Authority (FCSA) due to failure to meet financial soundness will have a detrimental impact,” Kaunda said.

He called on Ithala, the Prudent Authority and the FCSA to prioritise an out of court settlement.

“We recommend a phased approach be developed to allow Ithala to gradually meet financial soundness requirements by providing adequate time to secure necessary capital and regularise its operation,” he said.

DA MP Swart Paul John Swart said Ithala was not merely a financial institution but carried a historic meaning for playing a significant role in supporting those excluded from traditional banking systems.

“We support the existence of a strong sustainable development finance institution but we must also be honest. We cannot support continued misuse of taxpayers’ money on entities that are poorly managed, politically compromised and financially unstable,” Swart said.

EFF MP Khanya Ceza said Ithala was brought to its knees after struggling to obtain a banking licence and it did not get support from the National Treasury.

“We were not surprised by these outcomes. The banking sector is dominated by white people who control 90% of the banking assets,” he said, adding that banks owned by blacks were under attack from SARS wanting to eliminate bank ownership not aligned to “Stellenbosch interests”.

Ceza accused the Government of National Unity (GNU) of folding its arms and allowing Ithala to face liquidation.

“The intention of the GNU has always been to weaken the state and kill off any capacitation of state-owned banks in this country,” he said.

“The ruling elite are complicit in frustrating and preventing transformation of the economy,” said, Ceza, adding that leadership failures at the bank failed to ensure consequence management to address challenges.

He said the closure of Ithala would increase the cost of accessing financial services for vulnerable groups and made financial exclusion worse by leaving more people without access to banking facilities and services.

“As the EFF we reject the actions of SARB, the National treasury and the ANC-led government. We demand immediate intervention to protect Ithala Bank and call on SARB to fulfill its legislative duty to transform the financial sector to serve the interest of the majority, not just a privileged few,” Ceza said.

MK Party’s Sibongiseni Majola said the alarming prospect of Ithala’s closure would transcend mere regulations.

“It poses a grave threat to economic inclusion and makes inequality worse in South Africa,” Majola said.

He blamed the complex web of regulation constraints and technicalities on Ithala being not granted a licence.

“If this issue remains unsolved, it could result ultimately lead to the bank’s irreversible shutdown.”

KwaZulu-Natral MEC Economic Development, Tourism and Environmental Affairs Musa Zondi said the possible or imminent liquidation of Ithala will not just  mean loss to jobs, it will also result in financial disaster for communities that have no alternative access to service providers.

Zondi said Ithala was not a poorly run institution, but was caught up in regulatory gap that Parliament could help close.

“What is needed is not regulatory certainty but legislative intervention.”

mayibongwe.maqhina@inl.co.za