Finance Minister Enock Godongwana has asked South Africa’s big banks to open accounts for social grant recipients who are currently banking with Ithala Bank so they could continue to get paid while the historic KwaZulu-Natal state owned institution tries to fend off a liquidation application by the Prudential Authority (PA).
This is according to Godongwana’s letter to Mary Vilakazi, the chairperson of the Banking Association South Africa, dated 17 January 2025 and seen by African Times.
The letter was written a day after the PA, an entity of the South African Reserve Bank (SARB) tasked with overseeing operations of banks and insurance companies, launched an application in the Pietermaritzburg High Court to have Ithala Bank provisionally liquidated.
Currently, Ithala’s clients are unable to transact as the bank cannot take deposits and depositors are unable to withdraw their money.
“The closure of Ithala’s depositor accounts will likely severely affect social grant recipients who
kept their depositor accounts at Ithala. Most critically, and of particular concern, is the impact
of this action on a subset of Ithala clients who rely on grants as a critical source of funds in
support of children under their care, income in retirement, and people who live with disabilities,” Godongwana said in his letter.
He added that urgent action was needed to “avert social distress” of the affected social grant recipients.
“The hardship that will be experienced by social grant recipients, if access to these funds is
denied because of the accounts’ closure, therefore necessitates the taking of urgent action to
avert social distress of the affected grant recipients, which may mutate into a social unrest.
In this respect, I would like to request BASA to urgently engage with your members to identify
if any banks are able to assist in making alternative arrangements for the affected grant Recipients,” Godongwana added.
The finance minister said it was crucial to open the new bank accounts before the next run of social grants payments come into effect.
“It is vital that the continued payment of grants is facilitated through another financial institution,
for those grant recipients who opt for this. It is critical that a new payment solution is automatically provided for these grant recipients to minimise any administrative burden for this vulnerable cohort.
“Social grant recipients also have the option to open bank accounts with other banks should they wish to. All this will need to be facilitated within a matter of days before the next payment of grants,” he pleaded to Vilakazi.
Meanwhile, the KwaZulu-Natal Treasury has filed its papers to oppose the closure of Ithala Bank, saying it is not true that the institution is facing solvency and liquidity challenges.
It said as of 31 October 2024, Ithala’s total assets amounted to R3,25 billion while total liabilities amounted to R2,93 billion. This meant that Ithala’s assets exceeded its liabilities by R316 million, the Provincial Treasury argued.
Furthermore, KwaZulu-Natal Treasury MEC Francois Rodgers said they are aggrieved to learn that Repayment Administrator (RA) Johannes Kruger, who has been appointed by the PA, does not want the entity to pay the February salaries of Ithala staff members.
“This demonstrates a lack of care for people’s livelihoods,” Rodgers said.
The case will be heard by the court tomorrow, 28 January 2025.
