A calculator and pen seen on a paper filled with numbers Ithala has provided details on its finances. Picture: Pixabay
ITHALA (SOC) Bank has revealed its financial details, insisting that it is solvent.
The details are contained in the urgent interdict application which was filed by Ithala last week. In the application, it sought to challenge the decision of the Repayment Administrator (RA) to place a hold on the bank’s activities.
When the matter was heard last week, the court did not grant the interdict and adjourned the case to a later date. This is because there is a pending provisional liquidation matter which has been brought by the SA Reserve Bank’s Prudential Authority that is set to be heard.
The authority, which appointed the RA, said last week that he had found that Ithala was “technically and legally insolvent”.
As a result of the hold on the accounts, Ithala customers are unable to transact in any way. They are also unable to receive any payments, including salaries and social grants.
In its application, Ithala listed the RA as the first respondent. The SA Reserve Bank’s Prudential Authority is the second respondent, Absa Bank is the third respondent, Direct Transact is the fourth respondent, and the Ithala Development Finance Corporation is the fifth respondent.
In an affidavit in support of the application, Ithala CEO Dr Thulani Vilakazi provides financial information about Ithala, stating that the entity is solvent as its assets exceed its liabilities.
“Ithala assets exceeds its liabilities by R316 million and is therefore solvent. The Auditor General recently completed the audit for the financial year ended March 31, 2024 and concluded that Ithala is a going concern.”
He said the hold on Ithala’s account had a severe impact on its customers. Ithala has 328 704 customers holding 398 522 accounts.
“Given that Ithala customers are, in many instances, rural people in constrained financial circumstances, the denial of access to funds would be catastrophic,” he said.
“If Ithala were to suddenly cease taking deposits, this would cause a run on Ithala and would necessarily lead to its destruction.”
“If Ithala’s Absa accounts are frozen, this will result in Ithala customers becoming unable to access their own funds. Ithala customers would also immediately become unable to receive payments or make payments. The denial of access to Ithala customers’ own funds is untenable.”
He also warned that once a run on the bank began, it would lead to high volumes of withdrawals that would exceed the cash reserves that Ithala has for honouring customer deposits.
“Like all banks, Ithala does not have sufficient cash on hand to pay the full value of deposits. If this occurs, Ithala will be unable to honour payment instructions from customers, which will lead to panic.”
Explaining the involvement of Absa and Direct Transact, Vilakazi said that to provide banking services to its customers, including the ability to receive payments, withdraw cash, and make payments, Ithala utilises bank accounts with Absa bank. Direct Transact facilitates the processing of transactions or payments in respect of Ithala’s bank accounts.
Ithala is seeking court orders to interdict Absa from refusing to process any debit or credit transactions. It also wants Direct Transact to be interdicted from refusing to facilitate or process transactions or payments.
In terms of the RA, it wants the court to interdict him from issuing any instructions to the applicant’s bankers, including Absa, to prevent debits and credits from being processed in these accounts. The bank also seeks to bar the RA from instructing Direct Transact to cease facilitating or processing any transactions or payments.
Vilakazi said the actions of the RA were unlawful as there was already a judgment stating that the RA could not take over the bank’s activities. He argued that the RA had taken similar action before, instructing another bank to freeze accounts under Ithala, which had a devastating financial impact on customers and service providers.
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