Game-Changer for Ithala SOC Ltd: Proposed Litigation Hold Opens Door to Survival as R2.2bn Lifeline Comes Into Play

Months of negotiations between National Treasury of South Africa and the KwaZulu-Natal (KZN) provincial government to save Ithala SOC Ltd appear to be bearing fruit, with a proposed withdrawal of litigation linked to Ithala’s liquidation now in the pipeline.

This follows ongoing engagements between KZN Finance MEC Francois Rodgers and Finance Minister Enoch Godongwana, resulting in the proposal being announced last week.

The South African Reserve Bank’s Prudential Authority — the regulator for financial institutions — applied for Ithala’s provisional liquidation in December last year after the bank was found to be insolvent and non-compliant.

The move resulted in the freezing of about 250,000 depositor accounts, triggering legal and political backlash.

During earlier court proceedings, the Reserve Bank body told the court that the liquidation could be withdrawn if depositors’ funds were secured.

National Treasury has since released a R2.2 billion guarantee to help stabilise the bank — funding that could not be accessed while liquidation proceedings were under way.

KZN Premier Thami Ntuli said the focus was now on stabilising Ithala as a fully compliant and sustainable institution, adding that the provincial government would work with regulators and National Treasury to protect depositors.

He said it was vital for Ithala to be fully operational, given its critical role in supporting rural communities, small businesses and marginalised groups who rely on it for financial services.

Ntuli added that the matter had been elevated to national leadership, including discussions with Cyril Ramaphosa, as part of efforts to secure a sustainable and lawful resolution.

While welcoming the potential withdrawal of the liquidation application as a positive and encouraging step, Ntuli cautioned that it did not mark the end of the process.

“There is still a substantial amount of work that lies ahead. Our focus now shifts decisively to revitalising and stabilising Ithala so that it can stand firmly on its feet again and operate as a well-oiled, fully compliant and sustainable financial institution,” he said.

Rodgers described the development as a critical step towards protecting depositors and restoring financial stability.

During his engagements with Godongwana, Rodgers raised concerns about the impact of ongoing legal proceedings on Ithala and the province’s financial obligations.

He warned that continued litigation threatened KZN’s ability to meet conditions attached to the R2.2 billion loan agreement, as Ithala’s assets cannot be ceded while the matter remains before the courts.

Rodgers said the provincial treasury had consistently opposed prolonged legal action, particularly given that depositors are already protected under a government guarantee.

“I am particularly pleased that logic has prevailed. At every stage, our concern has been the protection of depositors and the avoidance of further harm caused by unnecessary and protracted litigation,” he said.

Rodgers also criticised continued litigation pursued by repayment administrator Johan Kruger, who was appointed by the Prudential Authority of the Reserve Bank, saying it had caused unnecessary hardship for depositors.

He described the legal costs linked to the case as potentially fruitless and wasteful expenditure, and called on the Prudential Authority to account for these expenses.

DAILY NEWS