Tiisetso Makhele: Liquidation of Ithala Bank Undermines Rural Economic Stability

Tiisetso Makhele

by centra
0 comments
TIISETSO MAKHELE

Tiisetso Makhele on Ithala Bank

Tiisetso Makhele, an economics practitioner and independent social commentator, has criticised the South African Reserve Bank’s (SARB) Prudential Authority for initiating legal proceedings to liquidate Ithala SOC Limited. He described the decision as a “step backwards in the agenda to transform the economy and rid it of the monopoly by the finance capital brigade.” Makhele warned that the move would have devastating consequences for rural communities in KwaZulu-Natal, where Ithala Bank has been a cornerstone of economic empowerment and financial inclusion.

Ithala Faces Liquidation: 257,000 Depositors Impacted by Prudential Authority Decision
Ithala Faces Liquidation: 257,000 Depositors Impacted by Prudential Authority Decision

The Role of Ithala Bank in Rural Development

Ithala Bank, a state-owned financial institution, was created to address financial exclusion in KwaZulu-Natal. Over decades, it has served as the only financial services provider in many rural areas, offering small business financing, rural development support, and banking services to marginalised communities. Makhele highlighted Ithala’s critical role, stating, “During a time when commercial banks are closing branches, especially in townships and rural areas, Ithala was proving to be a financial services provider of choice.”

However, Ithala’s failure to secure a formal banking licence and ongoing financial challenges have led the Prudential Authority to file for its provisional liquidation. This decision has sparked public outcry, with critics accusing the SARB of prioritising shareholder interests over its developmental mandate.

Regulatory Concerns and Prudential Authority’s Decision

The Prudential Authority, under the SARB, justified its move by citing Ithala’s failure to meet critical regulatory requirements. The bank operated under a ministerial exemption that allowed it to accept deposits temporarily, but this exemption expired on 15 December 2023. The authority argued that liquidation was necessary to protect the interests of Ithala’s 257,000 depositors.

In its statement, the Prudential Authority said: “The appointed liquidator will be able to utilise insolvency legislation to recover and distribute funds to the extent possible. This measure will avoid a run on the institution and allow for a fair and orderly distribution of available funds.”

Makhele Criticises the Reserve Bank’s Approach

Makhele has raised serious concerns about the SARB’s handling of Ithala’s challenges. He argued that the Reserve Bank failed in its developmental mandate by not supporting Ithala’s efforts to secure a banking licence. “The role of a central bank is to aid economic development, rather than curtail it to achieve selfish ends,” he said.

Makhele further criticised the SARB’s dual role as a regulator and a private institution with shareholders, including major commercial banks. “The Reserve Bank has placed itself right at the centre of a conflict of interest, in that it has proven to be more loyal to its shareholders rather than its mandate to open financial market operations,” Makhele asserted.

The Impact on Rural Communities

The liquidation of Ithala Bank is expected to have severe consequences for KwaZulu-Natal’s rural economy:

1. Loss of Banking Access: Ithala serves as the only financial institution with a physical presence in many rural areas. Its closure will leave thousands without access to essential banking services.

2. Job Losses: Hundreds of employees, many of whom are primary breadwinners, will lose their jobs.

3. Collapse of Small Businesses: Small enterprises reliant on Ithala for credit and financing may face closure, further destabilising local economies.

4. Disruption to Development Projects: Rural development initiatives funded by Ithala could come to an abrupt halt, undermining economic progress in marginalised areas.

Broader Implications for Economic Transformation

Makhele has positioned the Prudential Authority’s decision as emblematic of the challenges facing South Africa’s transformation agenda. “The financial industry remains highly monopolised, with white-owned conglomerates dominating the market. This is an anomaly that the central bank must address using the tools at its disposal,” he said.

He noted that other central banks in developing economies are actively supporting developmental finance institutions to drive inclusive growth. In contrast, the SARB’s actions appear to undermine these goals, favouring commercial banks over state-owned institutions.

Government and Treasury’s Response

The National Treasury has attempted to reassure depositors, confirming that government guarantees will protect their funds. In a joint statement with the Ministry of Finance, Treasury stated: “This includes providing a government guarantee to one or more banking institutions to ensure the accounts of depositors can be migrated timeously and funds can be made available.”

Despite these assurances, critics argue that the liquidation of Ithala represents a failure of regulatory oversight and a lack of commitment to financial inclusion.

Parliamentary and Civil Society Reactions

In September 2024, Parliament’s Standing Committee on Finance visited Ithala to address its challenges. Chairperson Dr Joe Maswanganyi acknowledged the bank’s importance, stating, “Our visit here is to ensure that a bank with the developmental mandate, such as Ithala, does not die on our watch.”

The Public Servants Association (PSA) has also condemned the Prudential Authority’s actions, describing them as “a betrayal of the working class and historically disadvantaged communities.” The PSA has called on the Minister of Finance to intervene decisively to save Ithala and prioritise solutions such as recapitalisation or restructuring.

🔴Central News Special Edition 088🔴 Download the Latest Edition | Top Story: “Gayton McKenzie: South Africa’s Best Minister in 2024”

Download Here:

Read all our publications on magzter:

https://www.magzter.com/ZA/Central-News-Pty-Ltd/Central-News/Newspaper/All-Issues

_________

 Central News also offers Sponsored Editorial Content,  Podcasts , Radio / Social Media Simulcast, Video Production , Live Streaming Services, Press Conferences, and Paid Interviews (Video/Audio) etc.

We guarantee exceptional exposure, reach, and engagement, with an excellent return on investment.

Advertisement:

To place your advert on our platforms (Print Newspaper or Digital Platforms) : Please email : sales@centralnews.co.za

For Business Related:

business@centralnews.co.za

Newsroom:

Send your Stories / Media Statements To: newsroom@centralnews.co.za

General Info:

info@centralnews.co.za

Office Administrator:

admin@centralnews.co.za

Whatsapp / Call: 081 495 5487

Website: https://www.centralnews.co.za

Social Media Platforms (@centralnewsza) : Linkedin, Facebook, Tiktok, Twitter, Instagram, Youtube

#centralnewsza  #news #politics #business 

Related Articles

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept