Ithala Bank is planning to take its fight to “continue to exist” all the way to the office of the Presidency.
MEC for Economic Development, Tourism and Environmental Affairs Musa Zondi said they are engaging with KwaZulu-Natal premier Thami Ntuli to raise the matter with President Cyril Ramaphosa.
Ithala SOC Ltd and its parent company Ithala Development Finance Corporation fall under the department.
Zondi held a press briefing on Monday to allay fears that Ithala SOC Ltd could be teetering on the brink of collapse following the licence suspension of its Financial Services Provider (FSP) licence by the Financial Sector Conduct Authority (FSCA).
The bank said it was working hard to comply with the directives issued as a result and to rectify this issue.
Its leaders attributed the recent crisis at government policy which they argue does not accommodate this “unique bank”.
The MEC and the Ithala leadership stressed on Monday that customers should not be fearful, saying the bank continues to operate as normal and it was not closing down or facing any such threat.
Zondi urged members of the media to report carefully on the subject, saying the bank faces many external threats from many other financial institutions who would like to see it fail and pick off its carcass.
“We are going to be engaging with the premier to take the matter up with the president because this is a matter of policy that needs to be addressed,” he said.
He said Ithala leadership had presented new developments to the premier and cabinet. He said within the next week, the premier and cabinet would receive further updates from Ithala, after which the premier will announce the way forward.
Zondi said, “It is important to emphasise that this crisis is being addressed with the utmost urgency.
“Ithala SOC Ltd, a financial institution established by the government to mobilise financial resources and provide supportive services, particularly in rural areas, finds itself at a crossroads following the suspension of its FSP licence by the FSCA.
“For over two decades, Ithala has been a pillar of strength in building an inclusive economy, creating wealth, and improving the lives of our people. It has served as a beacon of hope, especially for those who have historically been excluded from the financial mainstream,” he said.
Zondi said Ithala is central to the lives of rural people. “Some big banks do not go to rural areas, in fact many of them are retreating from these areas to the extent that some people in rural areas will spend R150 to travel to areas where these banks are to withdraw R50 from an ATM.
“Ithala is found in these rural areas, and some of these banks look at its customer book and realise there are thousands of customers in Ithala, and if Ithala were to collapse, these customers would go to them,” he said.
Dr Thulani Vilakazi, the CEO of Ithala Bank, said to address the challenges, there have to be policy changes to accommodate a “unique bank like Ithala”.
“Right now the law stipulates that if you want to start a bank, you must have R250 million, which means you will fall under the commercial banks or top tier bank, or you need R10m to be a mutual bank.
“There is a gap between these two positions, a mutual bank has limitations, you can’t bank for municipalities. The policy issue in our country is that it does not create space for competition within the industry,” Vilakazi said.
He said other countries in Africa had commercial banks, specialised lending banks, payment and construction banks, which creates competition.
“I have raised this before, that in our country you can only be a co-operative or a mutual bank or commercial, there is no other space.”
He said as a result, regulations that are being imposed came after the bank was formed. Ithala was founded years ago and it is ahead of the policy and regulation of the country.
“Remember that the mandate of the Ithala SOC limited is a mandate to develop, you develop rural areas. They (policymakers) should create an exemption and give us the exemption that we already have and give us time to get our affairs in order.
“Ithala exists and plays a major role in our economy, create a space for it.
In the legislation there is nothing that could cater for it, they could amend the Banks Act to say there is a specialised lending institution,” he said.
The Mercury