Musa Langa is at his wit’s end. “How do they expect us to survive,” the Ladysmith small business owner asked as depositors were turned away in droves this week by Ithala Bank in KwaZulu-Natal.
The past few months have been a nightmare for Ithala depositors who cannot withdraw their money or get answers for their questions.
“This crisis has turned my life upside down. My business is on the brink because I can’t access my funds, and my family is suffering. My child’s school fees are due, but the money is stuck in Ithala,” said Langa, 27, who has a business account and fixed deposits with Ithala.
Customers have been unable to access their money since January 16 due to a freeze imposed by the South African Reserve Bank’s Prudential Authority (PA). Johannes Kruger was appointed as an administrator of the bank.
In a ruling that raised the hopes of thousands of customers last week Pietermaritzburg high court judge Muzi Ncube ruled the bank could continue operating while the PA’s application to liquidate it was under way. Kruger was ordered to continue in his role but not interfere with the day-to-day running of the bank.
The ruling raised hopes among thousands of frustrated clients, many of whom flocked to branches this week, expecting to make withdrawals.
But their optimism was short-lived. Their accounts remained frozen and they were told to call Ithala’s toll-free number for more information.
Ithala officials advised Langa to open an account with a different bank as an alternative but that got him into worse trouble.
“Now I’m already deep in debt. [The new bank] has charged me R700 in business account fees, something I never had to worry about at Ithala because it was affordable. It feels like we are being abandoned,” he added.
We are being left in the dark. No-one is telling us the truth
— Bank customer Nkosikhona Shabalala
Nkosikhona Shabalala, a 62-year-old resident of Clermont, arrived at an Ithala branch on Friday morning only to be turned away. An apparent lack of transparency has fuelled uncertainty among depositors.
Shabalala said: “We are being left in the dark. No-one is telling us the truth. People are saying we will lose our money just like those customers of VBS Bank. Are we next? Are politicians going to benefit while we suffer?”
VBS Mutual in Limpopo collapsed in 2018 under a cloud of scandal, leaving depositors — including pensioners — high and dry.
KwaZulu-Natal premier Thami Ntuli — a vocal defender of Ithala along with a coterie of others including political parties, the Zulu monarch, trade unions and civic organisations — insists the institution remains solvent. Ntuli urged municipalities, businesses, and political parties to support it once it had secured a full banking licence.
Some Ithala defenders accused the Reserve Bank of sabotage.
“We are giving assurance that the people’s money is safe and they will get their money from Ithala. It has an excess of cash of more than R300m,” Ntuli said this week.
But if Ithala is truly solvent, why does it require the R2bn guarantee now under consideration by the Treasury?
“This matter is too technical,” Ntuli responded. “When you talk about the guarantee, you talk about something much more complex on the side of other aspects of the bank. We engaged the Treasury so that we, in fact, appealed for the guarantee and we were in agreement, but we’ve seen a letter suggesting otherwise.”
The Treasury previously indicated it was working on the guarantee for Ithala’s depositors, contingent on a technical approval process yet to be finalised.
Ntuli insisted the provincial government was prepared to take the Reserve Bank to the Constitutional Court, if necessary, to save Ithala.
“This bank has 38 branches in rural and township communities. If we fail to preserve it, it means the people living there may be deprived of the opportunity to see their economy grow,” he warned.
The PA firmly opposes the bank’s continued operations, saying it is technically insolvent and does not comply with banking regulations.
The PA has appealed against the high court ruling, arguing that Ithala did not properly separate its deposit-taking activities from its lending operations, as required under its long-standing exemptions.
Additionally, the Reserve Bank instructed Absa, which acts as Ithala’s facilitator, to freeze all deposit-taking accounts, blocking withdrawals and deposits since January. Officials said this was to protect depositors and prevent financial collapse of the bank.
Ithala was founded in 1958 to support small businesses, rural entrepreneurs and marginalised communities — specifically black South Africans excluded from mainstream banking during apartheid. It was supposed to be a development institution, providing affordable credit for those needing it most.
But in recent decades, critics claim it became a feeding trough for politically connected elites, who secured loans with no obligation to repay them. Ithala has increasingly prioritised lending to high-profile figures, many of whom defaulted without consequence.
Former health minister Zweli Mkhize’s family was awarded a multimillion-rand loan.
Businessman Eugene Desele — husband of Nelson Mandela’s granddaughter, Nandi — allegedly took a R10m loan to purchase a company that was written off.
Convicted fraudster Sipho Shabalala, former head of the provincial treasury when Mkhize was premier of KwaZulu-Natal, allegedly approved questionable loans.
ANC MP and businesswoman Sizani Dlamini-Dubazana allegedly received loans without proper risk assessments.
Other politically connected individuals were allegedly awarded loans to buy farms, businesses, houses and vehicles with loans that were allegedly written off.
The Special Investigating Unit (SIU) has launched a probe into Ithala’s financial dealings, focusing on allegations of maladministration, irregular procurement and unauthorised expenditure.
Attempts to get details from SIU spokesperson Kaizer Kganyago were unsuccessful.
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