Finance minister Enoch Godongwana has approved a R2bn guarantee to Ithala Bank’s 223,166 retail depositors.
The guarantee will facilitate payments to the depositors by one or more banking institutions to ensure the accounts of depositors can be migrated timeously and funds can be made available.
The move by Godongwana follows the suspension of Ithala’s banking licence last year after it failed to meet financial soundness requirements.
The Prudential Authority also placed the bank under provisional liquidation January, alleging that it was unlawfully accepting deposits.
Ithala has been deemed technically and legally insolvent, and the liquidation application is being opposed by Ithala in court.
The move by the finance minister, however, has received a cynical reaction from KwaZulu-Natal finance MEC Francois Rodgers, who said he was not informed of the guarantee and was made aware of it through a letter by Godongwana, which was addressed to SA Reserve Bank governor Lesetja Kganyago.
In a statement on Friday, Rodgers said that the guarantee would have “dire consequences for the provincial fiscus. Godongwana, without first canvassing his idea with the KwaZulu-Natal government of provincial unity (GPU), alluded that the province will be responsible for the repayment of the guarantee.
“MEC Rodgers, on behalf of the GPU, wishes to state at the onset that the actions of M. Godongwana are not supported by the province,” Rodgers said in a statement.
“We expressed that the province will secure a guarantee that would be used to secure the accounts of Ithala retail depositors, and a private-sector financial institution would then be appointed to allow Ithala depositors to trade on their accounts, which have been illegally frozen by the repayment administrator since January this year.”
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