The ambitions of Ithala SOC Limited to be a “fully-fledged bank” have been dealt a heavy blow after it was ordered to stop taking deposits.
This is in terms of a court order that was granted by the Gauteng High Court, Pretoria, in December.
The order states that an exemption notice that was granted to Ithala SOC Limited lapsed on December 15, 2023.
It is understood that the exemption notice had allowed Ithala to take deposits. The order stated that due to the lapsing of the exemption notice, “Ithala is not entitled to continue any deposit-taking activities and to deal with any deposits already received otherwise than under the direction of a repayment administrator appointed by the South African Reserve Bank Prudential Authority and any repayment plan put in place”.
The order further stated that the repayment administrator is empowered to recover and take possession of all deposits taken by Ithala from depositors or under its control in terms of the Banks Act. It also said Ithala must devise a repayment plan with the repayment administrator for the repayment of deposits to depositors.
According to Business Day, the Reserve Bank has appointed Johan Kruger as Ithala’s repayment administrator.
Asked about the matter, the Reserve Bank said: “We generally do not comment on individual institutions; however, the Prudential Authority is not in discussion to renew the exemption.
Ithala may thus not take any deposits from 16 December 2023.”
The news came as a surprise to members of the provincial economic development, tourism and environmental affairs (Edtea) portfolio committee, which oversees Ithala, because they were not informed of this development, which occurred more than a month ago.
IFP committee member Otto Kunene said the development was shocking.
“We will be writing to the Edtea MEC Siboniso Duma to explain to us what is happening there and why the committee has not been informed about this critical step. In fact, in the last portfolio committee meeting last year we were told that the bank is now applying to the Reserve Bank to become a fully-fledged bank. It’s clear that (becoming a bank) is now a pipe dream. We are failing to manage this small business (Ithala); imagine how this would go if this is a fully-fledged bank,” he said.
He said the fact that the Reserve Bank had taken such a step was an indication that something could be wrong with the running of the entity.
Heinz de Boer, the DA spokesperson on Edtea, said the developments were troubling. He said if the court ordered that deposits be repaid, then they must be returned, adding that this development spoke to the general bad management of entities under Edtea.
He said it was troubling that the portfolio committee was kept in the dark about this.
Chairperson of the Edtea committee, Nhlakanipho Ntombela, said he was not aware of the action by the Reserve Bank.
“This is the first time I am hearing of this. We know that they have had challenges (dating back years), which is why they haven’t been able to secure a banking licence, and they are nowhere near resolving those challenges,” he said.
Ithala, the Edtea Department and the KwaZulu-Natal premier’s office had all promised to respond to requests for comment but had not done so by the time of publication.
The Mercury