Ithala bank clients welcome court ruling

THOUSANDS of Ithala Bank clients are breathing a sigh of financial relief following the decision by the Pietermaritzburg High Court's Friday ruling, which set aside the Prudential Authority’s (PA) decision to freeze the bank’s accounts.

The judgment was in response to the urgent application brought by Ithala on January 28 to unfreeze the accounts, where Judge Muzi Ncube ruled that Johannes Kruger, the PA’s appointed repayment administrator, had no right to take over the operational and day-to-day management of Ithala.

The PA's main application to have Ithala liquidated on alleged compliance indiscretions was a matter that is still pending. 

In the interim, Ithala clients and others have expressed relief at last week's court outcome.

One of the bank’s clients, Sibongile Ngcongo, 59, from Port Shepstone, said: “I am happy that I will be able to access my money after many months of struggles. This was a horrific experience for us who had money with Ithala,” said the self-employed Ngcongo. 

“My experience after the bank’s accounts were frozen was very difficult for me and my family. I know many people who were frustrated by what happened,” said Ngcongo.

Another Ithala client, Themba Njilo from uMlazi, said: “What I experienced with Ithala was very painful. I am currently deep in debt. I hope this is resolved and the bank is back to its full operations because we rely on Ithala's cheap charges, unlike other banks,” said Njilo, who has been with Ithala for more than 10 years.

The KwaZulu-Natal Economic Development and Tourism MEC Reverend Musa Zondi has assured Ithala customers that they will soon be able to access their money.

Ithala Bank was expected to resume its full operations today following the Pietermaritzburg High Court's ruling on Friday, which set aside the Prudential Authority’s (PA) decision to freeze the bank’s accounts. 

On Sunday, Zondi described the ruling as vindication of the provincial government’s view, which had argued that the PA was wrong in freezing the bank accounts despite the bank agreeing to stop deposits in compliance with the non-renewal of the exemption. 

Zondi said that due to the decision to disable the bank’s systems, especially the chips in the customers’ bank cards, the RA, together with ABSA Bank, will restore the system for the clients to start accessing their funds.

“Firstly, we welcome the ruling and want to assure the bank’s distraught customers that their money will be available at the ATMs once the system has been restored, which will happen before the end of the week,” said Zondi.

He said that even the PA’s reason for barring the bank from taking deposits was based on the incorrect assumption that the non-renewal of the exemption applied to Ithala, a public financial institution rather than a commercial bank. He said that requiring Ithala to apply for a banking licence meant privatising the bank, as the Banks Act was created for commercial banks.

In the judgment, Judge Muzi Ncube ruled that Kruger had no right to take over the operational and day-to-day management of Ithala and further clarified that Kruger was prohibited from taking over the human resources, treasury, marketing, finance, and any other operational functions of Ithala. 

In November 2024, Judge Ncube ruled against the RA's application to stop operations which were not deposit-taking, however, the RA appealed the decision, which paved the way for the halting of all operations, including the freezing of funds.

This also prevented the bank’s debtors from making payments to the bank.

This prompted the bank to lodge an urgent application in a bid to access the frozen funds to pay staff salaries after the PA's actions in January. The matter was heard in March, and the judgment was reserved.

Friday's judgement was also welcomed by other stakeholders, including political parties that had thrown their weight behind the bank’s survival.

The bank was founded by the late Inkosi Mangosuthu Buthelezi to assist with economic development and empowerment in the province.

KwaZulu-Natal Premier Thamsanqa Ntuli said: “On behalf of the provincial government of KwaZulu-Natal, I wish to welcome the judgement to allow Ithala Bank to continue operating. This decision will bring great relief to the thousands of Ithala clients, employees and suppliers, who could not be paid by the bank following the instruction of the current administrator to stop all incoming and outgoing payments.  

He added: “Ithala is very important to our provincial economy, having serviced largely people from townships and rural areas since its formation in the 70s. As the provincial government, we will move heaven and earth to make sure that Ithala does not die and is resuscitated to continue servicing the people of KwaZulu-Natal as a fully-fledged development bank.”

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