The National Treasury is willing to help KwaZulu-Natal’s Ithala Bank to get a banking licence, finance minister Enoch Godongwana has indicated, but cautions he cannot override the decisions of the Prudential Authority.
In 2024, parliament’s standing committee on finance urged that solutions be found to prevent the bank’s demise. The Prudential Authority is requesting provisional liquidation. The committee’s report was adopted by the National Assembly in December.
In a written reply to a parliamentary question by IFP MP Nhlanhla Hadebe, Godongwana said the Treasury would work closely with the provincial government and Ithala “to assist Ithala in meeting the licensing requirements in terms of the applicable legislation, so that Ithala can be in a position to successfully apply for registration with the Prudential Authority. Once registered, this will allow Ithala SOC Ltd, to fulfil its mandate, which mandate is derived from the KwaZulu-Natal provincial government.
“Following the release of the standing committee’s report, National Treasury engaged both the Prudential Authority and the Financial Sector Conduct Authority. However, it should be noted that neither the Treasury nor the minister of finance are legally able to determine or intervene on licensing decisions in relation to mutual or other types of banks. However, the Treasury has ensured that there are no legal impediments to Ithala applying for licensing, as a mutual bank.”
Godongwana cautioned that due to the provisional liquidation legal process under way “any assistance that National Treasury may provide to Ithala in the future is dependent on the conclusion of the legal challenges between Ithala and the Prudential Authority”.
Hadebe wanted to find out what mechanisms the Treasury had put in place to ensure that independent regulatory bodies such as the Prudential Authority aligned their decisions with broader government policies. This includes national developmental priorities and how the Treasury intends to safeguard the developmental mandate of Ithala Bank, particularly its role in supporting small businesses, rural financial inclusion and corporate social responsibility initiatives.
He also wanted to know what steps the Treasury had taken to engage the Prudential Authority to ensure that the resolutions adopted by the National Assembly were fully considered before the decision to apply for the provisional liquidation of Ithala.
Ithala operated as a bank under an exemption notice issued by the Prudential Authority which lapsed in December 2023. However, it failed to obtain authorisation to establish a bank as it did not comply with the authority’s supervisory concerns and the requirement to restructure to comply with the Banks Act or the Mutual Banks Act.
The Banks Act does not allow provincially owned state-owned entities to be registered as banks.
According to the Prudential Authority the 67-year-old Ithala Bank has made had a cumulative loss of R520m from March 2008 to March 2024 and apart from 2014/15 and 2015/16 has had a loss every year since 2009/10.
Ithala has applied to court to be allowed to continue operating pending the outcome of the provisional liquidation application. It has accused the Prudential Authority of being intent on destroying it. The bank has also filed an urgent interdict to overturn directives halting deposits and withdrawals.
The Prudential Authority appointed a repayment administrator in December 2023 to take control of the deposits. The powers of the repayment administrator have also become the subject of litigation by Ithala.
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