KZN Treasury at loggerheads with Sarb over Ithala

The KwaZulu-Natal Treasury has thrown its weight behind beleaguered Ithala Soc Limited, which is opposing a provisional liquidation application by the South African Reserve Bank (Sarb).

The matter is heard on Tuesday (28 January 2025) in the Pietermaritzburg division of the KZN High Court.

In a statement issued on social media platform X on Sunday, the Provincial Treasury repeated Ithala’s claim that it “does not have a solvency and liquidity problem”.

(The KZN government is the shareholder of Ithala.)

“As of 31 October 2024, Ithala’s total assets amounted to R3.25 billion, while total liabilities amounted to R2.93 billion,” the KZN Treasury notes.

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On Thursday 17 January, the Prudential Authority, a unit of the Sarb mandated to supervise banks and other financial institutions, confirmed in a statement that it had applied to the Pietermaritzburg High Court for the provisional liquidation of Ithala.

According to the Authority, the repayment administrator that the Sarb appointed, has established that Ithala is “technically and legally insolvent” and that this exposes depositors to a potential loss of their deposits.

Ithala hit back and vowed to oppose the application, accusing the repayment administrator of initiating liquidation proceedings before any formal liquidation order has been issued by the courts.

The provincial treasury notes that “further arguments on Ithala’s functionality” will be demonstrated in the Pietermaritzburg division of the KZN High Court.

ALSO READ: Treasury to ‘protect’ 257 000 clients affected by Ithala liquidation

Depositors and workers at risk

Francois Rodgers, KZN Finance MEC, notes the actions of Johannes Kruger (the repayment administrator acting on behalf of the Prudential Authority) put at risk Ithala depositors, workers, suppliers and clients, as well as “countless Sassa [South African Social Security Agency] beneficiaries”.

“The entity offers essential financial and non-financial support to many small and informal businesses that provide jobs, particularly in rural and other communities that are not typically supported by commercial financial institutions.”

The Government of Provincial Unity (GPU) is determined to ensure that the entity receives the necessary support for survival, Rodgers adds.

The National Treasury has however given its assurance that Ithala retail depositors would be protected by a government guarantee and notes that it would ensure the accounts of depositors can be migrated timeously and funds made available.

ALSO READ: ANC tasks transformation sub-committee to rescue embattled Ithala Bank

Ithala’s non-bank status

Ithala was historically allowed to operate as a bank under an exemption notice, although it was never granted a banking licence.

The exemption notice lapsed on 15 December 2023. In addition, the Financial Sector Conduct Authority (FSCA) suspended Ithala’s licence in August 2024, citing liquidity concerns.

Ithala’s operating systems were also called into question, with updates on software and maintenance falling by the wayside, which opens the bank to risks such as cyberattacks.

This article was republished from Moneyweb. Read the original here.