Emerging businesses and the Zulu king have pleaded with the KwaZulu-Natal government to intervene in the crisis faced by Ithala Bank and prevent the development bank from being “closed down”.
They warned that the move will have catastrophic consequences for emerging businesses and the lives of those trying to be integrated into the mainstream economy.
Ithala Bank’s licence was recently suspended.
Among the business people who have raised concerns are the members of the National School Nutrition Programme (NSNP) Service Providers Association.
The organisation said about 15% of their members are reliant on the relationship with Ithala to be able to deliver essential meals to schools.
King Misuzulu kaZwelithini said the suspension of the banking licence will have devastating consequences for the livelihood of thousands of people who depend on the bank.
The future of Ithala has come under scrutiny after the Financial Sector Conduct Authority (FSCA) suspended its banking licence.
It was reported that the FSCA said Ithala Bank failed to meet financial soundness requirements, saying solvency was a critical element for the viability of any financial services provider (FSP).
“Solvency requirements are imposed, inter alia, to ensure that an FSP is able to meet unforeseen liquidity needs and to accomplish, where necessary, the orderly resolution of the business of the FSP without prejudicing the interests of clients or other stakeholders,” the watchdog is reported to have said on Friday.
“The suspension of the licence means that Ithala is prohibited from concluding any new business as envisaged by the Fais (Financial Advisory and Intermediary Services) Act, and must, in consultation with the clients and product suppliers concerned, take reasonable steps to ensure that any outstanding business is transferred to another authorised FSP.
“Under the suspension, Ithala is permitted to continue providing financial services for existing business,” it said.
The NSNP and Ithala Bank have a special relationship whereby Ithala provides funding for the service providers to be able to deliver meals to school while waiting for the KZN Department of Education to pay. In terms of the relationship, the service provider would collect all the necessary information, such as the contract with the department to supply food and how much that contract is worth, source a quote from a food supplier and submit the information to the bank.
Ithala would then pay the food supplier and wait for the department to pay the service provider. Once the service provider was paid, Ithala would withdraw its money and what was left would go to the service provider.
“This is a serious problem for us small business as Ithala is one bank that can assist small businesses at reasonable or small interest rates. We urge the government to intervene like they did with another (troubled) different bank and prevent the closure of Ithala,” said Thabang Mncwabe, communication and stakeholders specialist NSNP Service Providers Association.
He said it had been clear for some time that the bank was facing challenges. “We learnt about three months ago from bank officials tasked with assisting NSNP suppliers that the bank is no longer granting any new loans. It has been quite clear that it is faced with some challenges.
“So it has been clear that Ithala is on the verge of being closed down. We plead with the government to prevent that. While this is a challenge, we have been working hard to ensure that the service that we offer to children does not deteriorate as a result of problems elsewhere.”
In a statement, the king described Ithala Bank as the backbone of the rural economy of KZN.
“His Majesty King Misuzulu kaZwelithini has expressed his extreme dismay on being informed that the Financial Sector Conduct Authority (FSCA) has suspended the banking licence of Ithala Bank.
“His Majesty is concerned that the suspension of the Ithala Bank licence will have devastating consequences on the livelihood of thousands of his subjects who depend on Ithala Bank to conduct their business and social enterprises,” said the statement.
It said the king strongly feels that the services of Ithala Bank as the backbone of rural and township entrepreneurs in KZN must not be disrupted.
“His Majesty views Ithala Bank as the enduring legacy of his erstwhile prime minister, Prince Mangosuthu Buthelezi – a legacy that must be honoured and defended so that future generations can also benefit from the bank.”
The king “has directed the Traditional Prime Minister of the Zulu Nation, Reverend Thulasizwe Buthelezi, to reach out to the minister of finance and the premier of KwaZulu-Natal for them to ensure that no effort is spared to reinstate the banking licence of Ithala Bank without delay,” it said.
The Mercury