The premier of KwaZulu-Natal (KZN), Thami Ntuli, has urged the provincial government and municipalities within the province to begin banking with Ithala Bank, effectively circumventing municipal legislation which directs local governments to bank only with a fully registered bank.
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.
It is due to resume operations, which were halted in January, after the Pietermaritzburg high court last week struck down an application by repayment administrator Johannes Kruger for the bank to be liquidated, arguing the bank had no powers to operate by itself.
The Prudential Authority had placed the bank under provisional liquidation in January, alleging it was unlawfully accepting deposits.
Ntuli made the plea during a media briefing on Wednesday, saying that municipalities should make deposits into Ithala “not out of obligation but out of conviction”.
“As the KwaZulu-Natal provincial government, we must be the first to place our deposits and transact through Ithala SOC. Let our municipalities follow suit ... There exists no legal impediment to choosing Ithala as our preferred financial partner within the province,” Ntuli said.
The premier did not elaborate on timelines regarding plans for the provincial government to begin making deposits into Ithala.
“By choosing to bank with Ithala, we are not merely supporting a financial institution, we are investing in a more inclusive and equitable economy,” Ntuli said.
MEC for finance Francois Rogers, however, told Business Day the premier had not informed him of the plans for the provincial government and municipalities to make deposits into Ithala. “Obviously Ithala is not a licensed bank, therefore as it stands right now this would not be an option,” he said.
When pressed for further explanation, Ntuli’s spokesperson, Bongani Gina, pointed to sections of the Municipal Finance Management Act (MFMA) which do not prescribe which banking institutions and municipalities may place deposits.
“While the act imposes strict controls and reporting obligations regarding the use and management of these accounts, it does not prescribe or limit the choice of which banking institution a municipality must use. Instead, it allows municipalities the discretion to select a registered bank within the Republic of SA,” Gina said.
The MFMA, however, only permits municipalities to bank with a registered bank. Should municipalities within KwaZulu-Natal seek to change their primary bankers, they are required to inform the National Treasury and auditor-general in writing within 30 days of changing its municipal accounts, in line with provisions of the MFMA.
The Banks Act does not allow provincially owned state-owned entities to be registered as banks.
Business Day previously reported that finance minister Enoch Godongwana 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.
Ntuli said he was still “seeking clarity” on the matter and has written to Godongwana in this regard.
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