National Treasury has refrained from commenting on the fallout that followed the Prudential Authority’s application to liquidate Ithala Limited, with the exception of a lone media statement issued more than two months ago. However, Minister of Finance Enoch Godongwana (pictured) addressed the issue last week, saying the government has secured “a R2-billion guarantee” to safeguard depositors of Ithala.
Delivering the keynote address at last week’s FSCA Industry Conference, the finance minister touched on a range of topics, including the role of market conduct regulation, South Africa’s G20 presidency, the political battle over the 2025 Budget, the need to grow the country’s economy, and “some small bank” with “too many political pressure [sic] about it” – Ithala.
The PA announced on 16 January that it had applied to the High Court to liquidate Ithala, saying the move was in the best interests of its roughly 257 000 depositors. Ithala holds deposits totalling R2.47bn.
On the same day, National Treasury released a statement assuring depositors that their funds would be protected by a government guarantee, “subject to the completion of necessary technical work”. This involved providing a guarantee to one or more banking institutions to facilitate the migration of depositors’ accounts. Treasury said details on how depositors could access the guaranteed funds would be provided after the court’s ruling on the liquidation application.
In a further development, the KwaZulu-Natal Treasury announced on 4 March that it had applied for a R2.4bn loan from National Treasury to assist Ithala’s depositors.
When Moonstone sought clarity on whether the loan request was an additional measure to the earlier guarantee or part of the same arrangement, National Treasury provided a vague response. It said only that it was “considering various legal options in determining the correct approach from a governance perspective to execute on providing a government guarantee”.
Last week, Godongwana initially skirted around the issue during his address, saying he and the PA had recently discussed “some small bank”, which he preferred not to name because of political sensitivities. He recalled how the PA reminded him: “Minister, let’s stop here. Today, we’re talking about a different Act, the Banks Act. The Banks Act says you are a custodian of depositors. Put your fiscal head aside. You are a custodian of depositors.”
Godongwana acknowledged that, as a politician, he might face competing pressures, but ultimately, he could not lose sight of his responsibility to safeguard depositors’ funds.
Later, in response to a question from the audience, Godongwana was more direct, stating that every Minister of Finance, without exception, had entered agreements with Ithala and the provincial government over the years, but none of those agreements had been honoured. He pointed to litigation as Ithala’s default strategy, saying this approach has hindered efforts to help the institution comply with regulations.
“To protect depositors – remember what I said in that environment, I’m the custodian of depositors – we managed to provide a guarantee of R2bn so that any bank that takes that amount is not disadvantaged and the depositors are not disadvantaged,” he added.
The liquidation application, originally scheduled for 30 January, has been postponed, with no new hearing date confirmed. In the meantime, depositors remain unable to access their funds, because all Ithala accounts are still frozen.
On 17 March, the court heard Ithala’s application for interim relief, filed on 22 January, in which the institution is seeking permission to continue operating while the PA’s provisional liquidation application is pending. Judgment has been reserved.
Read: Legal battle over Ithala’s future heats up as liquidation looms
The role of market conduct regulation
Godongwana called on the financial sector to rise to the challenges facing South Africa and the continent, saying it is the “glue that keeps together a diverse range of economic, trading, financial, and social activities”.
He reminded delegates that the financial sector has a special responsibility to the public. “Too often, the public discourse presumes that financial institutions have their own funds, rather than being the custodian of the public’s money,” he said. “That money belongs to the public. It does not belong to you.”
He highlighted how important it is to safeguard the savings of pensioners, small businesses, and ordinary citizens. “You have got a huge responsibility to protect those investments of poor communities,” he told delegates.
On the role of regulation, Godongwana was candid: “I’m not a fan of regulations. You must regulate to the extent that is necessary.”
Using the example of spaza shop regulation, he explained how overregulation can backfire, driving people out of business instead of protecting consumers.
“We lost focus of that. What was the purpose of regulation? It was simple: that they must provide healthy and clean food to communities.”
The minister reaffirmed his support for a fit-for-purpose regulatory framework.
“Market conduct regulation is not a hindrance to the financial sector on its own,” he noted. “It is the foundation upon which a sustainable, trustworthy, and resilient financial system is built.”
South Africa’s G20 presidency
The first G20 Finance Ministers and Central Bank Governors Meeting (FMCBG) under South Africa’s presidency of the G20 was held in Cape Town on 26 and 27 February. However, the meeting ended without consensus on a communiqué.
Godongwana remarked it would be remiss of him not to say how much South Africa is enjoying its presidency of the G20.
“Much have been said in the media about failure and our successes. I want to assure you that we have heard, for instance, the track that I lead, which is the finance track – very successful. And all countries were very happy with how we have been able to manage these things.”
He downplayed the significance of a communiqué not being released, noting it is not uncommon.
“In Indonesia, in 2022, I was there. We did not issue a communiqué; we had a chairperson’s statement. In India, we had a chairperson’s statement. In Brazil, we managed to find each other and have a communiqué.”
Godongwana also dismissed speculation of strained relations with the United States. While the US Treasury Secretary was scheduled to visit South Africa, the meeting was postponed because of a clash with the first Cabinet meeting of the year.
“But moving forward, we have agreed, and we’re working together,” he said.
He confirmed that engagements with US officials are ongoing as the US prepares to take over the G20 presidency from South Africa next year.
He added that bilateral meetings with the US Treasury Secretary are scheduled for April on the sidelines of the IMF’s meetings.
“Everything is smooth on the global front,” Godongwana assured.
Political loggerheads over the Budget
Speculation has swirled over whether the postponement of the Budget Speech on 19 February – caused by disagreements within the coalition government over a proposal to raise value-added tax by two percentage points to 17% – signalled a rift in the Government of National Unity. The Budget Speech was eventually delivered on 12 March, and Parliament is now debating the proposals, with hopes that the Budget will be approved this week.
Godongwana told delegates that “on the domestic front, we’re fine”.
“I mean, in any family, there will be disagreements. What we have are family disagreements amongst political parties.”
Godongwana said such disputes are normal in coalition governments and not unique to South Africa.
“There’s going to be posturing … but eventually, all of you have got to take the interest of the country and put the interests of the country above everything else.”
He underscored that Parliament now carries the responsibility to finalise the Budget.
“The Budget at the moment is no longer Godongwana’s budget. It is the people of South Africa’s budget, because it’s before Parliament,” he said.
Godongwana added that the delay had a positive outcome: “The postponement of the Budget has … placed before South Africans the debate about trade-offs. That’s the key thing we were looking at.”
The need to grow the country’s economy
Godongwana highlighted the country’s primary challenge: economic growth.
“We’ve got a growth problem,” he said, explaining that while countries such as Italy and Japan have high debt-to-GDP ratios without concern, South Africa’s weak growth makes servicing debt more difficult.
“In a weak growth environment, the capacity to service your debt becomes weak.”
He noted that growth cannot be achieved through fiscal measures alone, calling for a broader approach and co-operation with business.
“Until we solve that problem, it is a broader number of interventions in society which are necessary to achieve that,” he added.
Addressing the Budget, Godongwana outlined two critical focus areas: structural reforms and infrastructure investment.
“Without those structural reforms, the economy is going to continue to be dysfunctional,” he warned, emphasising the importance of a functional logistics system.
He also noted that for the first time, the Budget introduces instruments requiring private sector participation, such as credit guarantees and built-operate-transfer models.
With R1 trillion earmarked for infrastructure spending over the next few years, Godongwana acknowledged the importance of ensuring its efficient use.
“The problem is going to be the efficiency of that spend,” he said, adding that efforts are under way to optimise procurement alongside the Budget process.
