Pietermaritzburg High Court allows Ithala Bank to resume operations

In giving the Ithala bank green light to resume its operations, the Pietermaritzburg High Court took into consideration the irreparable damage that the bank, its employees, and the public would suffer. 

The day-to-day running of Ithala effectively stopped on January 16, 2025, after the Repayment Administrator (RA) Johannes Kruger instructed Absa Bank Limited to freeze all the accounts of Ithala. 

Ithala had been conducting the business of a bank and accepting deposits from members of the public in terms of the exemption granted to it in terms of section 1(e)(cc) of the Banks Act. That exemption expired on December 15, 2023, but Ithala continued to accept deposits and failed to assure the Prudential Authority (PA) that it will cease its deposit-taking activities. 

On December 18, 2023, the PA appointed Kruger as the RA. His appointment related to the repayment management of deposits collected unlawfully by Ithala. 

When Judge Muzikawakhelwana Ncube handed down his ruling on the matter, he said if Ithala were forced to close its doors, its customers, who are members of the public, would not be able to access their funds and those who are the South African Social Security Agency (SASSA) recipients will not be able to access their grants. 

He said the employees of the bank would be forced to resign as their salaries were not being paid, resulting in them failing to honour their monthly obligations. 

“Unpaid service providers might sue Ithala for failing to pay them for services rendered. Due to non-payment of rent, Ithala stands to be evicted from leased premises,” he said. 

Judge Ncube found that there was no irreparable harm to the RA and PA. He said that as Absa was instructed to freeze Ithala funds, it did not participate in these proceedings, and it indicated that it would abide by the order of the court. 

“Absa Bank Limited is interdicted and restrained from refusing to process any debit transactions in any of Ithala’s bank accounts relating specifically to employees' payroll, pensions, medical aid, UIF, and any other operational expenses relating to the business of Ithala,” he said. 

Additionally, Kruger in his capacity as RA was granted leave to appeal against this court’s judgment and order of November 2024 to the Supreme Court of Appeal.  However, he interdicted and restrained Kruger from issuing any instructions. 

Additionally, Absa was interdicted and restrained from refusing to accept instructions from Ithala’s authorised signatories to its bank accounts in respect of payments in relation to the expenditure.

“It is declared that pending the final outcome of the liquidation application, Ithala is entitled to continue conducting its business in the ordinary course (excluding prohibited deposits as defined in section 1 of the Banks Act) and to pay expenditure relating to its employees and other operational expenditure in the ordinary course of business,” Judge Ncube added. 

He reminded that in the order he had issued in November 2024, Kruger does not have operational and management control over the day-to-day operations of Ithala, which do not amount to the business of a bank or constitute deposit-taking activities. 

Following the judgment, KZN Premier Thami Ntuli said: “This judgment provides KwaZulu-Natal with just the breathing space we require to pursue the matter of Ithala with all the relevant authorities as we want it to continue operating.” 

nomonde.zondi@inl.co.za