Ithala Bank Resumes Operations
By Thobeka Makume
The KwaZulu-Natal High Court in Pietermaritzburg has ruled that beleaguered Ithala Bank can resume operations. This comes after the bank’s fight to survive liquidation by the South African Reserve Bank’s (SARB) Prudential Authority (PA).
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Court Ruling Restores Ithala’s Operational Autonomy
In a decisive judgment delivered on Friday, Judge Muzi Ncube ruled that Johannes Kruger, the SARB-appointed Repayment Administrator (RA), has no authority over Ithala’s day-to-day operations. This includes human resources, treasury, marketing, finance, and other operational functions. The court also prohibited Kruger from interfering with Ithala’s authorised signatories and instructed Absa Bank to process the institution’s payroll and supplier payments without obstruction . 
This ruling follows a series of legal battles that began in November 2024 when Judge Ncube first limited the RA’s powers. Despite an appeal by the RA, which led to the freezing of Ithala’s accounts and halted its operations, the bank lodged an urgent application to access funds to pay staff salaries. The latest judgment reinforces Ithala’s right to conduct all legally permissible transactions, excluding deposit-taking activities .
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Provincial Government Welcomes the Decision
KwaZulu-Natal Finance MEC Francois Rodgers expressed relief at the court’s decision, stating that Ithala can now continue serving its clients. He criticised Kruger’s actions, noting that they have caused significant harm to residents, jeopardised small businesses, and limited the bank’s functionality. Rodgers emphasised that Ithala serves a niche market of mainly rural residents who are not easily assisted by large commercial banks, and attempts to shut down the entity demonstrate a disregard for indigent residents . 
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Ithala’s Role in Financial Inclusion
Founded in 1958 by the late Inkosi Mangosuthu Buthelezi, Ithala Bank has been instrumental in promoting economic development and empowerment in KwaZulu-Natal. Serving over 257,000 depositors through 38 branches, the bank offers savings accounts, loans, and insurance to rural and underserved communities often ignored by larger banks. It supports small businesses, cooperatives, and social grant recipients, making it a critical player in the province’s economy . 
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Legal and Financial Challenges
The SARB’s Prudential Authority has argued that Ithala is technically and legally insolvent, citing liabilities of R2.79 billion against assets of R2.35 billion, resulting in a shortfall of R441.63 million. The PA appointed a repayment administrator to manage the process, but this move has drawn sharp criticism from the provincial government and other stakeholders . 
Despite these challenges, recent figures from the KwaZulu-Natal provincial treasury show Ithala’s economic weight. As of October 2024, its assets total R3.25 billion against liabilities of R2.93 billion, leaving a surplus of R316 million. The bank also earned a clean audit for the 2023/2024 financial year, raising questions about the PA’s insolvency claims . 
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National Support and Future Prospects
The National Council of Provinces (NCOP) has issued an urgent plea to save Ithala Bank from liquidation, warning that the institution must not become another VBS Bank, which collapsed due to poor management. With 5,000 jobs at risk and the bank’s vital role in supporting rural communities, NCOP members debated in Parliament to ensure its continued existence .
The Inkatha Freedom Party (IFP) has also called for the preservation of Ithala Bank, highlighting its importance to local communities and beneficiaries. IFP President Velenkosini Hlabisa emphasised the bank’s role in supporting small businesses and providing financial services to areas where commercial banks are absent . 
In a move to protect depositors, Finance Minister Enoch Godongwana approved a R2 billion guarantee to safeguard the funds of Ithala’s depositors. However, the guarantee’s implementation has been a point of contention between the provincial and national governments, with differing views on its utilisation . 
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Conclusion
The KwaZulu-Natal High Court’s ruling marks a significant victory for Ithala Bank, allowing it to resume operations and continue serving its clients. While legal and financial challenges remain, the support from provincial and national stakeholders underscores the bank’s importance in promoting financial inclusion and economic development in underserved communities.
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