Ithala faces imminent closure as Prudential Authority moves for liquidation, Treasury steps in to protect depositors

Key topics:.Closure threat: Ithala faces liquidation, risking depositor funds.Legal response: Ithala fights back, claiming stability.Treasury support: Government guarantees depositor protection..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Kerry Lanaghan and Patrick Kidd.Ithala SOC Limited, a key financial institution in KwaZulu-Natal, is facing the threat of imminent closure after the Prudential Authority (PA) initiated liquidation proceedings. The situation has raised concerns over the safety of depositors' funds, especially for those in rural areas who rely on Ithala for essential financial services. However, both Ithala and the National Treasury have vowed to take action to protect depositors and ensure a resolution is reached..In a media statement, Ithala emphasized that the company is financially stable despite the PA's efforts to liquidate the bank. "Ithala is solvent with assets that far exceed its liabilities," the statement asserts. It also points to a clean audit report from the Auditor General of South Africa for the year ending March 31, 2024, which confirmed the institution's going concern status. Ithala added, "No evidence of wrongdoing or irregularity on the part of Ithala in its deposit-taking activities" has been found, further reinforcing its position..Despite these assurances, the bank's operations were severely disrupted when Repayment Administrator (RA), Johannes Kruger, issued a directive to halt all deposits and withdrawals. According to Ithala, Kruger's actions are "irresponsible" and "undermine customers' access to their funds." The company further explained that the timing of this disruption was particularly harmful as "many citizens prepare for the new school term and face essential financial obligations such as school fees.".In light of these challenges, Ithala has taken immediate steps to protect its interests and those of its depositors. The company's legal team is preparing to file an urgent interdict to contest the RA's orders. "We are taking immediate action," Ithala's statement affirms. Furthermore, the KwaZulu-Natal Provincial Government has engaged Minister of Finance Enoch Godongwana, seeking a temporary solution that would allow depositors to transfer their funds to another bank "until a permanent licensing framework is put in place for Ithala.".Ithala's management stressed that the failure to act on the RA's orders would have serious consequences, including "dire repercussions for the people of KwaZulu-Natal—especially for deposit holders, service providers, and our workforce." If Ithala is liquidated, over 400 jobs would be lost, and many customers, particularly in rural communities, would lose access to vital services, including SASSA grants..In response to the looming crisis, the National Treasury reassured Ithala's retail depositors that their funds would be protected. In a statement issued by the Ministry of Finance, the Treasury confirmed that "deposits will be protected by a government guarantee, subject to the conclusion of the necessary technical work." This guarantee will facilitate the transfer of accounts to other banking institutions, ensuring that depositors' funds are available to them..The Treasury also emphasized its commitment to an "orderly process that protects depositors' interests" while working with the Prudential Authority to resolve the issue. "We are working closely with the Prudential Authority to ensure an orderly process," the statement read. While the liquidation process moves forward, the Treasury is keen to reassure depositors that their funds are secure: "Retail depositors of Ithala SOC Limited can be assured that we will endeavour to secure their funds as far as is possible.".Despite the intervention by the National Treasury, depositors have been urged to make alternative banking arrangements. The Treasury stated, "While depositors will need to urgently make alternative banking arrangements, they can be assured that we will endeavour to secure their funds." Further details on how to access guaranteed funds will be provided after the court's decision on the liquidation application..The potential liquidation of Ithala has raised alarms over its wider economic and social impact. "The closure of Ithala threatens 400 jobs and would negatively impact many, particularly those in rural areas who depend on Ithala for essential financial services," the company warned. The crisis also affects vulnerable customers who rely on Ithala for basic services, including the distribution of government grants..In the face of this turmoil, both Ithala and the National Treasury are committed to ensuring that the interests of depositors and employees are safeguarded. Ithala's statement concluded with a promise to keep the public informed: "Rest assured, Ithala is committed to preventing any shutdown of operations and will keep you updated on all developments regarding our future.".As the legal proceedings continue and the court prepares to rule on the liquidation application, the future of Ithala hangs in the balance. However, with the National Treasury's guarantee and ongoing efforts by the provincial government, the hope remains that a solution can be found to protect depositors and stabilize the financial institution..*BizNews has contacted National Treasury and Ithala for comment and will update this article as soon as a response is received..What the BizNews community had to say."SOC is all you need to see, to know it's rotten. The rest is just specifics"We need less SOC and more private owned businesses. Anything that results in the orderly shutting of a state owned corruption pit, because they all are or will be soon enough, should be applauded. One down, 2000 to go."."Ithala has helped many sucessful business people i know around KZN and the fathers and grandfathers who i respect so much and till now those businesses are still going. Their kids and grandkids have taken over from their parents those small businesses."While Ithala was helping them, traditional banks that we have didn't wanna touch them when they started their businesses and Ithala was the only bank that believed in their vision and that vision has helped communities and their respective families. Same private banks you're saying are good they didn't want to help these respectful fathers and Ithala helped them."[A community member] just now late December shared to us as a group a sad story of how banks in 🇿🇦 literally don't believe in small businesses and the story he shared is just one of millions of people that are in the same boat. Im currently helping 3 gents who are in the same boat where our private banks cant touch them, pretty much similar story to what [a community member] shared with us in December but different industry (logistics)."Now yes there's corruption in government and you'll be crazy if you deny that. But to think that 🇿🇦 banks will make life easy for entrepreneurs in 🇿🇦 is also another blind spot that you are ignoring big time."."[Regarding] Ithala. The problem with banks or similar in this situation is lack of trust. Holding into deposits and attracting new deposits will be very difficult. As [a community member] said, they are the backbone of the rural KZN community and for small businesses unable to get conventional bank loans."This will deal a blow to sections of the KZN economy. I wonder if MK/ EFF will make political capital out of this?".Read the full statement from National Treasury.Download PDFMEDIA STATEMENT ON ITHALA LIQUIDATIONDownload.Read the full statement from Ithala.Download PDFIthala Media statement (Apprv SX) 16 Jan 2025.docxDownload.Read also:.FlySafair's claim all SA airlines overbook like them is rubbish – Miles vd MolenANC's renewal is empty rhetoric: KatzenellenbogenSean McLaughlin – A peek into SA's possible future: Parallel towns

Ithala faces imminent closure as Prudential Authority moves for liquidation, Treasury steps in to protect depositors

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