Economic Development, Tourism and Environmental Affairs MEC Musa Zondi is concerned about the move to liquidate Ithala Bank. Picture: Supplied
HUNDREDS of Ithala SOC Limited employees are rocked by fear that the decision by the central bank to liquidate the bank might cost them their jobs.
One of the employees said the situation has come down heavily on the KwaZulu-Natal state-owned bank’s 400 employees.
“Everyone at Ithala is affected because they don’t know what is going to happen to their future.
“Staff members are asking why is this happening to them because there is no stealing of money, there is no mismanagement,” said the employee.
He said people would talk about the theft of money that happened many years ago instead of looking at what happened in the past four years.
The National Education, Health and Allied Workers’ Union (Nehawu) has also condemned the action that would have a devastating effect on the future of its members.
“Ithala SOC currently employs more than 400 workers and has funded thousands of bonded houses throughout KZN, banking the unbanked rural communities of KZN, hosting thousands of stokvels, banking churches and various societal groups such as the taxi industry and all other informal businesses and SMMEs,” read a statement from the union.
The provincial government had on Friday filed an urgent application at the Pietermaritzburg High Court to interdict Johannes Kruger, who was appointed by the South African Reserve Bank (SARB) and Prudential Authority as a repayment administrator for the bank, from halting transactions, which prevented depositors from accessing their funds.
However, the court postponed the case to January 27.
At the same time, a case by the SARB at the Pietermaritzburg High Court seeking an order to institution provisional liquidation against the bank would be heard on January 30.
An employee, who asked to remain anonymous, said the bank had done nothing wrong to warrant its closure.
The woes that drove the bank to the verge of being liquidated were due to its failure to meet requirements to secure a major commercial bank to sponsor it with banking facilities after it lost a contract with Absa, said KwaZulu-Natal MPL Mafika Mndebele, the chairperson of the provincial parliament’s Economic Development and Tourism Portfolio Committee.
He said other challenges, such as mismanagement, irregular expenditures, operating without a board for some time, and failure to meet the SARB and PA’s stringent measures for it to get a license happened many years ago.
He said after it had lost its contract with Absa, which provided it with an operating license for clearing and settlement in the national payment system, the bank’s future became vulnerable.
It was reported after its deal with Absa came to an end in 2023, Ithala tried unsuccessfully to secure another deal with Standard Bank.
Mndebele said major banks wanted Ithala to have a certain amount of money to secure an operational deal from them.
He said the provincial government was in the process of coming up with a plan to raise funds through its other state-owned businesses for Ithala to secure an operating license from commercial banks, and that plan was nearer to being successful.
“That is why we believe that the action of Prudential Authority was premature,” he said.
He said the government would be fully behind Ithala in opposing PA and SARB’s court application to secure the liquidation.
He said irregular expenditure and certain senior politicians, whose identities he named but could not disclose for legal reasons, might have affected Ithala’s book balance when they failed to repay loans many years ago. He said the banks experienced such challenges many years ago and it has since corrected them.
“There were irregular expenditures, which ranged to millions, but irregular expenditure sometimes does not necessarily amount to corruption,” he said.
Although there was no fruitless and wasteful expenditure reflected on Ithala’s Integrated Annual Report for 2023/2024 financial year, it incurred a loss of R52.4m due to bad debts written off.
“Staff losses and other fraud incidents incurred for the group in the current year to the value of R6.5m (2023: R3.5m was identified relating to theft occurring in prior periods),” read the report.
Economic Development, Tourism and Environmental Affairs MEC Musa Zondi said the bank obtained a clean audit report from the Auditor-General last year.
He said its assets exceed liabilities, reinforcing its financial stability.
“Existing business operations and confirmation that depositors’ funds are safe,” read Zondi’s statement.
bongani.hans@inl.co.za