Ithala Bank's future: A call for transformation into a lending institution
Image: File
To ensure the lasting sustainability of Ithala Bank, the KwaZulu-Natal government must convert it into a lending financial institution, not a commercial bank.
This is the view of the University of KwaZulu-Natal-based financial expert, Dr Sanele Gumede.
The expert was reacting to the latest intervention by Finance Minister Enoch Godongwana, who has finally agreed to save the bank from liquidation by giving it a full guarantee, which secures the bank's depositors.
The guarantee was explained by the ANC provincial leadership as having taken the liquidation process off the table.
The party stated that it successfully convinced the minister to guarantee all depositors. Initially, the minister had agreed to guarantee depositors up to R100,000.
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Dr Gumede said a government's guarantee was a short-term measure of relief since it will benefit customers who will now access their frozen money from the bank; however, the bank should not celebrate the guarantee since it does not mean it must continue operating as a bank.
He said it was not possible that the Prudential Authority would issue another exemption certificate that would allow the bank to operate like commercial banks without a banking licence. The exemption was to allow Ithala to accept deposits and get new customers.
'The guarantee is only saving the bank from liquidation, it simply means a surety that if you fail to pay my creditors, I will take full responsibility and pay them. For me, it's not something to be celebrated since it does not mean that tomorrow the bank will wake up with a banking licence or exemption certificate to continue taking deposits like before. If the KwaZulu-Natal government wants to keep this institution, it must convert it into a lending institution,' said Dr Gumede.
KwaZulu-Natal provincial government spokesperson Bongani Gina said the government will continue to fight tooth and nail to get the bank to operate like before, where it was able to accept deposits.
ANC provincial Jeff Radebe on Tuesday said it was he, together with coordinator Mike Mabuyakhulu, and the collective leadership of the provincial working committee, which engaged directly with Godongwana to seek a sustainable solution.
'Our intervention was firmly aligned with the ANC's developmental agenda and our responsibility to protect institutions that uplift the people. We are pleased to report that, following these engagements, a breakthrough was reached: Ithala Bank will not be liquidated,' read an ANC statement.
To ensure the long-term viability and sustainability of Ithala, Mabuyakhulu said the ANC has proposed several practical and actionable steps, which include: Strengthening governance and internal controls within Ithala.
Enhancing compliance with national banking and regulatory frameworks, exploring strategic partnerships that preserve its developmental mandate.
Turnaround strategy focused on transparency, accountability, and performance.
Reposition Ithala as a Development Finance Institution (DFI).
The bank was in a protracted legal battle with the SA Reserve Bank's Prudential Authority (PA), which had filed for provisional liquidation in the Pietermaritzburg High Court.
The PA argued that the bank was not complying with financial regulations, which included that it was operating as a bank without a banking licence. This was after the PA had not renewed Ithala's exemption certificate, which allowed it to operate without requiring a banking licence.
willem.phungula@inl.co.za
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