MKP MP Des van Rooyen announcing MKP’s plans to defend Ithala Bank. Picture: Bongani Hans
FORMER finance minister Des van Rooyen has called on the Parliament to fix an anomaly in government policies that prevented Ithala Bank from receiving a banking licence.
Van Rooyen, who is now Umkhonto weSizwe Party MP, and KwaZulu-Natal party convenor Willies Mchunu held a media briefing on Friday to outline the party’s strategy of defending the provincial government’s state-owned bank from the Prudential Authority (PA)’s move to provisionally liquidate it.
The PA’s liquidation matter had yet to be heard at the Pietermaritzburg High Court. Various parties and the provincial government have indicated that they would oppose the application.
Since it was established by the now defunct Zulu government under late IFP leader Prince Mangosuthu Buthelezi in 1958, Ithala never had a banking licence, but it was collecting deposits and operated like a bank through being exempted by the Finance Ministry.
MKP’s campaign to save Ithala would be an addition to others that have been announced by various concerned groups, including Zulu King Misuzulu.
The democratic dispensation Parliament came up with the Financial Matters Amendment Act, which prevented provincial and municipality financial entities from being registered as banks, something, Van Rooyen described as a travesty of justice and defeat to transforming financial institutions for the benefit of the economically marginalised black people.
Van Rooyen said the Fifth Parliament identified an anomaly in the Act, and recommended that the Sixth Parliament correct it.
“It cannot be correct that when we are a developmental state, we don’t promote access to financial services at a local level where it matters most.
“How do we deny municipalities or capable metros to initiate banking services if we are in the business of promoting access to financial services?” he asked.
He said since it was started by “our elders” decades ago, Ithala has been proven to be a success in the province, which has vast rural areas with no alternative banking services.
“Ithala has developed residential settlements and businesses in areas where commercial banks are unable to support our people.
“Ithala has been the model of funding houses in a communal land,” he said.
He added that it was wrong for Parliament to, instead of supporting Ithala, bring legislation that impaired it from being supported by the government.
“The Sixth Parliament failed to execute on this mandate,” he said.
He said the Standing Committee on Finance of the Seventh Parliament was currently working on reviewing the problematic Act.
According to him, Ithala needed to be supported to deal with challenges as the commercial banks enjoyed support from the apartheid government.
“As a Parliament, we have embarked on a process of introducing amendments to the current Act,” he said.
Ithala is currently facing mountains of challenges, which led to its Final Exemption Notice lapsing on December 15, 2023.
The effectiveness of Ithala’s boards’ compliance with the exemption notice and applicable legislation and its failure to comply with banking practices was another issue that concerned the PA.
Others were: prolonged vacancies; challenges in attracting experienced and skilled banking executives; and challenges in establishing a succession planning framework, which “has contributed to the complexities faced by Ithala”.
The PA also investigated the bank for awarding a contract worth R34.7 million to a company, Tech Mahindra, to install a new information technology system, but when this did not happen, the bank was accused of maladministration. The tender was declared wasteful expenditure in 2020.
PA also found that the bank had between March 31, 2008, and March 31, 2024, lost R520 million.
Van Rooyen said the challenges facing Ithala were not unique to those of other banks.
“The challenges of the well-established institutions are well-publicised as we know that some of them were found guilty of manipulation of currency and the list is endless,” he said.
He said the demise of Ithala would violate the right of rural communities in the province to get banking services.
Outlining the party’s plan of action, he said MKP would soon mobilise masses to participate in “massive marches across all provinces targeting the SARB”.
He said other provinces would be encouraged to picket.
The party would also launch a vigorous social media campaign “to expose the injustices surrounding Ithala” to rally support from civil society, professionals, and ordinary South Africans “who believe in economic justice”.
“Through robust engagement with stakeholders, we will engage with trade unions, civil society organisations, and other political formations to build a broad coalition in defence of Ithala.
“Where necessary, we will explore legal avenues to challenge the decisions made by the SARB and to protect the rights of Ithala’s depositors and employees.”
The party would also lodge a formal complaint against the bank’s repayment administrator, Johannes Kruger, for allegedly sharing confidential client information with First National Bank.
“An illegal act which undermines the trust and integrity of our financial institutions and must be thoroughly investigated,” he said.
bongani.hans@inl.co.za