Bongani Hans

Ithala SOC Limited CEO, Dr. Thulani Vilakazi on Thursday made a passionate plea to KwaZulu-Natal policymakers to save the bank from the South African Reserve Bank’s Prudential Authority (PA) campaign to liquidate it.

Vilakazi together with the bank’s CFO Mohamed Gafoor appeared before the provincial Standing Committee on Public Accounts (Scopa) to explain the situation that led to the bank facing challenges that led to the PA applying for a liquidation order and also for it failing to secure an operating license.

In January the PA stated that it believed its intervention was in the best interests of Ithala’s approximately 257 000 depositors.

Vilakazi told Scopa that several attempts to get Minister of Finance Enoch Godongwana, to intervene to help the bank obtain a banking license so that it could continue to operate, fell flat.

He said his team approached Godongwana to secure an application under Section two of the Bank’s Act, which grants institutions the capability to function.

“When we approached the Minister we wanted to find an instrument that would replace the exemption notice framework because the PA would not entertain a further granting of the exemption, which was why we then explored Section two of the Bank’s Act.

“The minister expressed reservation in the sense that those institutions that are there (Section two of the Bank’s Act) are not deposit-taking institutions but are institutions of development finance and therefore he said he could not assist us,” said Vilakazi.

Tensions ran high as Vilakazi refused to answer certain questions from Scopa chairperson Tim Brauteseth. Other MPLs backed Vilakazi, saying that answering Brauteseth’s question would jeopardise Ithala’s defence in the PA’s upcoming liquidation matter at the Pietermaritzburg High Court.

Most of Brauteseth’s questions, which Vilakazi refused to answer, were around the insolvency of the bank and why the institution still referred to itself as a bank when its operation exemption expired in 2023.

It was the first time the bank, which falls under the provincial Economic Development, Tourism and Environmental Affairs, appeared before the parliament since the PA announced the provisional liquidation last month.

Last month Ithala’s transactions were frozen, leading to employees not getting their December salaries, services providers not being paid and depositors not being able to withdraw their funds.

Vilakazi said his team also asked Godongwana to facilitate a discussion between Ithala and the PA to find a solution “outside of the court forum” so that the bank could obtain a banking license.

“We have tried to engage with the minister out of court, we tried to engage with the PA in 2021 and 2022.

“However, it became pretty obvious that in terms of the status and the constitutionality, the Reserve Bank and the PA felt that they could not be part of the integrated government framework, where we could sit and negotiate,” he said.

Vilakazi said since the PA and Ithala were both state institutions, they should not take each other to court but they should negotiate to find solutions.

“They (PA) declined to participate and therefore that road was closed,” he said.

Vilakazi said Ithala was given conditions of exemption in July 2022, which were not pragmatic to deliver on.

He said the bank approached the regulator to raise concerns about the impracticality of the conditions.

“We have written thousands and thousands of pages (letters) to the regulator to ask them to be reasonable and rational about some of these things.

“We ended up where we are because they could not listen to us,” he said.

The bank had previously approached the court to force the PA to be reasonable when it comes to the conditions of the exemptions.

“We understand that the court is not a means to an end, and we went there because we ran out of ways to engage with our regulator,” he said.

He said when the National Assembly passed a law that stated that only national financial institutions could obtain a banking license, the provincial policy makers did not do anything while it was their duty to deal with policy frameworks.

He said Ithala was not the first black institution formed before 1995 to become a victim of the new dispensation.

“There was the Bank of Transkei, it went the same route.”

Vilakazi said he had worked in other countries that had various development banks.

He said while he was in America he was taught that if the banking industry is concentrated, the country’s economy becomes stagnated.

“That is where we are as a country,” said Vilakazi.

He said despite the challenges, Ithala remains adamant that it is solvent.

bongani.hans@inl.co.za