Picture: sassa.co.za
The South African Social Security Agency (Sassa) has made temporary arrangements with First National Bank (FNB) to enable the 65 000 social grant recipients banking with Ithala to receive their money like all other recipients.
However, there may be delays in paying the Covid-19 Social Relief of Distress (SRD) grant.
The South African Reserve Bank’s (SARB) Prudential Authority (PA) earlier this month applied to the Pietermaritzburg High Court for the provisional liquidation of Ithala, the development finance agency wholly owned by the KwaZulu-Natal (KZN) province.
The PA said the Repayment Administrator it appointed in December last year had established that Ithala was “technically and legally insolvent”.
Sassa explained that National Treasury contacted the Banking Association of South Africa (Basa) to find support from its members, particularly for social grant beneficiaries.
In turn, Basa contacted its member banks to identify one or more institutions capable of swiftly opening new accounts for all grant beneficiaries banking at Ithala.
Sassa said the arrangement with FNB is temporary until the recipients provide it with their preferred bank of choice and urged beneficiaries not to panic.
“This process is estimated to conclude after 3 months.
“It is important to note that Sassa is not advocating nor promoting FNB as a bank of choice for grant beneficiaries.
“However, we appreciate their ability and willingness, as participants in the National Payment System (NPS), to step in to provide emergency assistance when another participant is struggling,” Sassa said.
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FNB informed Sassa that beneficiaries must activate the opened accounts and collect bank cards from their nearest branches from 28 January to 04 February 2025.
“Clients will need a valid form of identity to collect their card. In addition, joint outreaches will be held by Sassa and FNB in more rural areas to limit the inconvenience of travelling for clients in these areas.”
Sassa warned that the SRD beneficiaries could be affected by this unexpected change.
“In terms of our processes, we anticipate that their January grant payments could be delayed. A special payment run will happen as soon as possible to remedy this.”
Subsequently, the accounts of clients at Ithala, which include more than 60 000 social assistance beneficiaries, were frozen. This includes beneficiaries of Old Age, Covid-19 SRD, Care Dependency, Child Support, Combination, Disability, Care Dependency, and Foster Care Grants.
According to Sassa, the majority of its beneficiaries who banked with Ithala are in KwaZulu-Natal, while a small fraction are in Mpumalanga, Eastern Cape, Gauteng, Free State, North West, and Western Cape.
The liquidation application meant depositors’ accounts would have to be closed to allow for pending court processes, the central bank said. Adding that while this would result in “inconvenience and hardship”, it was necessary to protect depositors.
In January, the National Treasury said it would take all the necessary measures to protect more than 250,000 clients affected by the liquidation of Ithala SOC Limited.
Ithala was commonly referred to as a bank but was never granted a banking licence. Instead, it was granted an exemption by the finance minister, which allowed it to receive deposits on an interim basis.
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