KZN Economic Development, Tourism and Environmental Affairs MEC Musa Zondi, Ithala bank chairman Siphesihle Mkhize and Ithala Development Finance Corporation (IDFC) Group CEO Pearl Bengu at the media briefing yesterday. Picture: Boitumelo Pakkies/ANA
Durban — Ithala Bank has assured its customers that their money is safe and would not be affected by the suspension of its operating licence.
Speaking at the media briefing on Monday, the bank’s CEO, Dr Thulani Vilakazi, allayed fears and panic that had gripped the public, especially account holders, following the announcement by the Financial Sector Conduct Authority (FSCA) that it was suspending Ithala’s banking licence.
The Public Servants Association (PSA) in KwaZulu-Natal called for immediate intervention.
“The preservation of Ithala is paramount to avoiding a repeat of the VBS disaster, which had severe repercussions for stakeholders. Ithala’s stability is crucial for KwaZulu-Natal communities that rely on its services,” said PSA’s provincial manager, Mlungisi Ndlovu, in a statement.
Vilakazi said the announcement did not mean that the bank was shutting down with customers’ funds and assured them they would continue with their normal services.
“We want to correct the confusion created in the public, especially by the media, which did not clearly specify that customers’ savings and their money were not affected by the suspension of the licence. It’s business as usual and we urge our customers to be calm as they will continue to access all services,” said Vilakazi.
He added that the only service that would be affected by the suspension was the insurance policies, but the bank has since written a letter to the FSCA requesting it to move the service to its mother body, Ithala Development and Finance Corporation because the financial service provider licence for that was not affected.
Explaining the reasons for the suspension of the licence, Vilakazi dismissed the suggestion that it was the management’s failure to meet certain requirements that led to the suspension.
He said the only reason for the suspension was the Prudential Authority’s decision not to extend the exemption which the bank has been operating under since its inception.
He was referring to the Financial Matters Amendment Act of 2023, which stipulates that only the national government has a right to establish the state bank, not provinces. The act therefore meant that Ithala would no longer conduct services of a commercial nature in terms of the Bank Act, which requires a licence.
Before the Financial Matters and Amendment Act came into force, Ithala Bank was granted an exemption from the Bank Act since the government was not allowed to own a commercial bank.
After the act, Ithala continued with exemption until December last year, when the Prudential Authority informed it that the exemption would not be renewed, which led to the suspension of the licence on Friday.
Weighing in on the matter, the KwaZulu-Natal Economic Development, Tourism and Environmental Affairs MEC, Reverend Musa Zondi, blamed politics for the bank’s problem, saying there was an urgent need for Parliament to review the section of the act that excludes provinces from having their own banking institutions.
He said the act is a man-made thing which can be corrected. Ithala as a public entity falls under Zondi’s department. He warned that if the decision leads to the closure of the bank, the poor will suffer the most as the decision would push poor people back to commercial banks which do not easily fund them because they categorise them as high risk.
Zondi said it is only Ithala that gives housing loans to rural people where there are no title deeds which commercial banks demand so that they repossess the house if a customer is failing to pay.
He announced that KZN premier Thamsanqa Ntuli was seized with the matter and would soon meet with Finance Minister Enoch Godongwana and eventually President Cyril Ramaphosa with the aim of saving the bank.
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