KwaZulu-Natal government rejects Finance Minister's R2 billion Ithala bank rescue plan

The KwaZulu-Natal government has defied Finance Minister Enoch Godongwana’s orders to fork out R2 billion to save the embattled Ithala bank.

In a twist, Godongwana, instead of giving Ithala a guarantee threw that responsibility back to provincial Treasury and ordered it to find the R2 billion that will pay the depositors whose funds are stuck in the bank since the SA Reserve Bank’s Prudential Authority (PA) froze them in January this year. The PA cited non-compliance with the financial regulations including operating without a banking licence as a reason.

In a statement issued by the provincial Finance MEC Francois Rogers, the provincial government said it was not supporting the Minister’s announcement, arguing that the Minister did not consult with the province before making it.

“On behalf of the Government of Provincial Unity,  I wish to state at the onset that the actions of Godongwana are not supported by the province. It is worth reiterating that Mr. Godongwana’s actions were never discussed with the GPU, but they have dire consequences for the provincial fiscus,” read the statement.

The MEC said he has written back to the Finance Minister to seek clarification about his instructions that the guarantee must be paid by the province. He said he learned that the Minister had addressed a letter to the Reserve Bank governor Lesetja Kganyago informing him that he was giving Ithala Bank a guarantee which would be borne by the province.

MEC Rodgers further said that the Minister has asked Kganyago to appoint a financial institution that will facilitate payments to 223 166 Ithala retail depositors.

The MEC said he was shocked by the Minister’s actions since he, together with his team at KZN Treasury, have always engaged in good faith with the Minister  and National Treasury on the inherited challenges pertaining to Ithala. 

“It is disappointing to note that numerous attempts to meet with Minister Godongwana on this matter have not been met with a response. I remain open to meeting with Minister Godongwana and other relevant stakeholders for the establishment of a mutually beneficial solution to this crisis,” concludes Rogers.

The bank which was founded by the late inkosi Mangosuthu Buthelezi during the times of the KwaZulu government 60 years ago is facing closure after the Prudential Authority applied for provisional liquidation in Pietermaritzburg High Court.

willem.phungula@inl.co.za