More than three months after the Prudential Authority (PA) moved to liquidate Ithala SOC Limited, no court date has been set for the hearing – leaving about R2.47 billion in deposits frozen and the future of 257 000 customers in limbo.
The dispute took a sharp turn on 16 January, when the PA filed an application to liquidate the institution, alleging it was unlawfully accepting deposits and was technically insolvent after its Banks Act exemption expired in December 2023. Soon afterwards, repayment administrator Johann Kruger froze Ithala’s Absa accounts, ostensibly to prevent a run on deposits.
The freeze has crippled Ithala’s operations. Depositors have been unable to access their funds, service providers remain unpaid, and the institution cannot collect from its debtors. Backed by the KwaZulu-Natal government, Ithala has vigorously opposed the freeze, arguing during urgent court proceedings in March that it was a calculated effort to cripple the bank before the liquidation case could be heard.
Ithala is seeking an interdict to lift the freeze, arguing that operational accounts should not have been targeted. However, the PA has defended its actions as necessary to protect depositors, cautioning that unfreezing the accounts could allow funds to be improperly withdrawn. It also raised concerns about the validity of government guarantees backing Ithala, noting that no legally binding commitments had been issued.
Read: Legal battle over Ithala’s future heats up as liquidation looms
While the KwaZulu-Natal Treasury has applied for a R2.4 billion loan from National Treasury to secure depositor funds, judgment on Ithala’s application to lift the freeze and Kruger’s appeal to expand his powers has been reserved. The judge indicated that judgment could take three to six months, and meanwhile, the parties continue exchanging pleadings in the liquidation matter.
Ithala seeks access to provincial funds to cover expenses
In the interim, The Witness reported last week that Ithala, battling to cover its monthly R30 million expenses amid the ongoing court proceedings, is seeking access to a R300m fund established by the KZN provincial government to safeguard clients’ deposits.
The funds were initially ringfenced to ensure depositors did not lose their savings if Ithala failed. Now, the management of the institution is requesting that these funds be “repurposed” for operational expenses. Speaking before the KZN Legislature’s finance portfolio committee on 22 April, Ithala’s chief financial officer, Mohamed Gafoor, explained the dire financial situation.
“We are expecting a huge deficit for the 2026 financial year, which is about R308m,” Gafoor said. He noted that the PA’s court application in January had effectively halted trading, leaving Ithala without access to its revenue streams.
“Our key focus this financial year is to try and reduce losses,” Gafoor added, warning that even if Ithala resumes operations, it faces a significant challenge in retaining its customer base due to reputational damage.
“We are expecting clients to walk away once the operations begin,” he said.
Tim Brauteseth, the chairperson of the provincial Standing Committee on Public Accounts (Scopa), urged Ithala to focus on its “legitimate developmental side of the business”. But Gafoor said the freeze made it impossible for Ithala to continue its developmental mandate.
“The requirement is that small businesses must have bank accounts with Ithala bank,” he pointed out.
Search for strategic partnerships
Ithala is exploring strategic partnerships with banks to reduce losses and stay afloat, TimesLIVE reported. This development also emerged during Ithala’s presentation of its 2025/26 budget to the KZN Legislature’s Finance Committee.
Chief executive Dr Thulani Vilakazi painted a grim picture of Ithala’s future, stating that operational constraints were expected to continue into the 2026 financial year.
“This financial year, because we are conscious of the fact we need to regularise our existence, we are embarking on finalising a strategic bank alliance, which is quite important because this deals with the issue of how Ithala continues to operate within the available strategic framework,” Vilakazi said.
National Treasury open to assisting with banking licence
Meanwhile, National Treasury has indicated its willingness to assist Ithala in obtaining a banking licence, according to BusinessLIVE.
Finance Minister Enoch Godongwana said Treasury would work closely with the KZN government and Ithala “to assist Ithala in meeting the licensing requirements in terms of the applicable legislation, so that Ithala can be in a position to successfully apply for registration with the Prudential Authority”.
However, Godongwana cautioned that neither Treasury nor the Minister of Finance could legally intervene in licensing decisions, which fall under the PA. He also made it clear that any assistance would depend on the resolution of the ongoing legal battle between Ithala and the PA.
The move follows Parliament’s Standing Committee on Finance urging solutions to be found to prevent Ithala’s collapse – a recommendation adopted by the National Assembly in December 2024.
Dispute over guarantee deepens
In a separate but related development, IOL reported that a dispute has erupted over a proposed guarantee meant to assist Ithala. National Treasury has emphasised that its primary duty is to protect depositors, not bail out financial institutions.
Senior Ithala officials recently told members of the provincial legislature that although negotiations over a guarantee took place, National Treasury decided to provide the guarantee to the South African Reserve Bank (SARB) – not to the province. The guarantee would help a commercial bank take over Ithala’s deposits, but the province had hoped it would be directed to them instead.
Francois Rodgers, KZN’s Finance MEC, expressed his concern over the shifting arrangements.
“As Treasury, we are not happy. The national ministry has continually changed the goalposts. Every day that passes, the people who have money with Ithala are the victims,” Rodgers said.
He added that the province initially proposed that the guarantee take the form of a loan to secure the deposits, allowing Ithala and a commercial partner to work together to ensure customers could access their funds.
Premier Thami Ntuli noted that although the SARB was better placed to comment on the guarantee’s specifics, the province found aspects of the arrangement unsettling.
“We are in the process of writing to the minister asking for clarity on some of the things that we saw in that letter,” he said.
For now, the court battle looms large, with Rodgers insisting that the liquidation process should proceed. He remains confident, arguing that “the bank’s assets exceed its liabilities, which means that the bank cannot be liquidated”.
When will we get our money
Our lives are on stand still
We need this issue resolved ASAP
Please put customers first and release our money everything is stuck.
I want my money, my kids and family depends on it. It’s so unfair especially to us a poor community. Now it’s taking extremely long to unfreeze the funds. Why don’t they move accounts to another banks, for us to get money. The system is let us down
Please release our money and continue with that issue