Bank account holders are panicking after hearing that Ithala Bank would be placed into provisional liquidation. Picture: Gcina Ndwalane / Independent Newspapers Archives
A SECURITY guard company was on high alert on Friday ready to assist in calming down Ithala Bank customers who were agitated by news that the institution has been placed into provisional liquidation.
At least 257 000 depositors would be affected when the bank shuts down.
The panic among thousands of depositors started after the provincial government-owned bank announced on Thursday that it was facing an imminent closure “unless government acts swiftly to neutralise the action of an arrogant and callous Repayment Administration (RA)”.
The South African Reserve Bank (SARB)’s Prudential Authority (PA) also released a statement on Thursday announcing that it had approached the Pietermaritzburg High Court seeking an order to liquidate the bank, which many political parties previously called to be granted a license to operate as a fully fledged state bank.
However, the KwaZulu-Natal Economic Development and Tourism Portfolio Committee said it would hold the bank to fight off the liquidation.
“This action is not only necessary but also urgent, as it ensures Ithala can continue its critical mandate of serving the people and businesses of KwaZulu-Natal,” read the committee statement released on Friday.
To the minds of the clients who spoke to this journalist, millions of rand of their deposits would disappear into thin air. They said bank officials told them those using books to do transactions would be able to withdraw, while those using cards would have to wait until 12 midday on Thursday to hear how they could access their money.
A senior official of a security company contracted by Ithala said he received an SMS on Thursday night telling him to alert other guards should chaos ensue at the bank’s branches across the province.
“I got the message at night that there might be chaos because the deposits and withdrawals have been hampered.
“We are communicating with our people in Nquthu, Vryheid, Ladysmith, and Bulwer.
“Even though we have not despatched extra guards, we remain vigilant and ready to be where we have to help,” said the security official.
This reporter arrived at one of the Ithala branches soon after bank managers had finished meeting the lawyers.
The lawyers later left the branch heading high court where the matter was being heard.
A security guard said a high number of desperate bank clients started flocking to the branch in the Pietermaritzburg CBD as early as 5am, and waited until the bank opened. They wanted to know about the status of their money.
Small entrepreneur Nobuhle Sall said she was concerned about the money in her 15-year-old business account.
But she said bank officials promised that the matter would be sorted out.
“The bank officials told us that they were also shocked as they were not expecting this, they said they would appeal this as they were not given a notice of the bank shutting down.”
She said when she was desperate to open the business account in 2005, only Ithala did not give her a ru-around.
“It accepted me and is willing to upgrade people’s lives, which is why I like it,” said Sall.
Another client said: “I have lots of money in my bank account and I am concerned.”
Joseph Mkhize said he panicked because he was not given prior notice about the possible closure.
“It happened last year, but we were told that the matter has been addressed. We are again shocked when we are told that the matter has not been properly addressed,” he said.
In the statement, the bank blamed RA Johannes Kruger for allegedly throwing it under the bus while it had engaged “in an extensive discussion with the Prudential Authority (PA) to secure our ability to continue operating”.
“Johannes Kruger has unjustly order Ithala to stop accepting deposits and processing withdrawals.
“The directive persisted despite our assurance of financial stability and the backing received from key stakeholders, including the Parliament’s Standing Committee on Finance and the KwaZulu-Natal Provincial Government,” read the statement.
The bank accused RA of jumping the gun by initiating liquidation before a court order.
“The grounds for this action are fundamentally flawed, frivolous, and based on erroneous calculations.
“Ithala is solvent with assets that far exceed its liabilities.
“Moreover, the Auditor-General of South Africa has given Ithala a clean audit report for the year ended 31 March 2024,” said the bank.
The PA said the liquidation was in the interests of the depositors. It said although the bank was never granted a banking license the finance ministry granted it an exemption allowing it to receive deposits.
“Liquidator will be able to utilise insolvency legislation to recover and distribute their (depositors) funds to the extent possible.
The appointment of the RA (by the SARB) was confirmed by the Gauteng High Court, Pretoria, in December 2023 and Ithala was ordered to cooperate with the RA.
bongani.hans@inl.co.za