Unions representing more than 400 Ithala Bank employees and 257,000 depositors are pleading for an urgent political solution to the crisis engulfing the KwaZulu-Natal state-backed institution.
Workers have not received their August salaries and depositors have been locked out of their accounts since January — with no clear timeline for relief.
Thule Ngwane, a 39-year-old unemployed mother from Estcourt, had been saving with Ithala since 2015 — hoping to send her 18-year-old daughter and other children to school and university. But when she went to withdraw the money in January, she was told her account was frozen. Months later, her daughter remains at home, unable to study.
“We trusted the bank to keep our savings safe,” Ngwane told the Sunday Times this week. “Now we have nothing. We’re appealing to President Ramaphosa to intervene.”
She recalls an elderly neighbour who sold all his cattle and deposited the proceeds into his Ithala account. “He’s despondent. He has nothing left to live off,” she said, adding that many depositors have accrued debt from loan sharks while waiting for their deposits.
Inside Ithala’s offices, the mood is grim. Employees say they’ve been receiving salaries irregularly. Morale is low, and fear of retrenchment is growing.
Prince Mthalane, Nehawu’s regional secretary, said anxiety among staff is at an all-time high.
“Salaries have been paid irregularly. Provident funds, third-party payments, children’s education, and medical aids have not been paid — affecting chronic employees and their families,” he said.
Nehawu is demanding urgent intervention from the National Treasury and threatening legal action if workers’ rights are not protected.
This week, Ithala CEO Thulani Vilakazi sent a voice message to customers, assuring them their savings were safe — but could not be accessed until litigation was resolved or a formal agreement reached between Ithala, the provincial government, the Treasury, the Prudential Authority (PA), and the Repayment Administrator (RA).
We trusted the bank to keep our savings safe. Now we have nothing
— Thule Ngwane, a 39-year-old unemployed mother from Estcourt
Legal experts warn that unless a solution is found soon, the matter could be drawn out through years of complex litigation.
Ithala’s exemption from the Banks Act expired in December 2023, triggering a cascade of lawsuits, oversight failures and unfulfilled political promises.
Despite receiving more than R464m in bailouts since 2018 — and a further R150m allocated this year — the bank failed to secure a full banking licence. Its operations remain frozen, leaving livelihoods in jeopardy and trust in tatters.
Founded in 1958, Ithala was created to serve communities excluded from mainstream banking. For decades, it offered loans and financial services where few others would.
But cracks began to show in the early 2000s, as allegations of mismanagement, risky lending and political interference surfaced. Its dual structure — operating as both a lender (Ithala SOC Ltd) and a deposit-taking institution (Ithala Ltd) — blurred lines of governance and accountability. Without the oversight of a licensed bank, Ithala became vulnerable to abuse.
The RA, appointed by the Reserve Bank’s PA, has accused Ithala of obstructing oversight — denying access to its full loan book, withholding data and relying on outdated systems.
According to the administrator’s solvency report:
- R2.1bn is tied up in loans and advances, of which R800m may be unrecoverable;
- 10% of loans were issued to employees — several allegedly without proper procedure;
- R140m went to management, with R86m still in arrears; and
- these revelations have fuelled allegations that Ithala was used as a piggy bank by KwaZulu-Natal political elites.
In January, the PA filed for provisional liquidation, citing unlawful deposit-taking and insolvency. Ithala, backed by the provincial government, is fighting back — arguing that liquidation would devastate communities and workers.
In May, the Pietermaritzburg high court ruled Ithala could continue limited operations — excluding deposit-taking — and ordered it to co-operate with the RA to develop a repayment plan. However, the administrator maintains Ithala is insolvent, with liabilities exceeding assets by more than R1.6bn.
On August 15, a full bench clarified that the administrator’s powers are limited to preserving and repaying deposits — and do not extend to interfering with non-deposit-taking operations. This opens the door for Ithala to resume payroll and social grant disbursements, provided it co-operates.
The PA and Kruger have appealed against the ruling to the Supreme Court of Appeal, seeking broader control over more than Ithala’s assets. Legal experts caution that if all litigation — including a possible Constitutional Court review — is exhausted, resolution could take up to three years.
Amid mounting pressure, the ANC announced in June that finance minister Enoch Godongwana had “in principle” agreed to guarantee depositors’ funds. But weeks later, provincial officials admitted they had received no formal confirmation, and the promised R2bn remains unallocated.
The finance minister’s spokesperson, Mfuneko Toyana, clarified that the minister had not committed to keeping Ithala “afloat”, but rather to protect depositors and their money.
“The indicative size of the liability for all depositor accounts is [about] R2.2bn. To facilitate the transaction, the guarantee would need to match this exposure,” Toyana said.
The National Treasury and the KwaZulu-Natal government remain in discussions, but he emphasised that the provincial government held primary responsibility for Ithala’s operations.
“The department is working with the KwaZulu-Natal government to ensure that financial obligations emanating from any guarantee are appropriately addressed.”
KwaZulu-Natal finance MEC Francois Rodgers confirmed the province had not received any written commitment from the National Treasury. He criticised the administrator for freezing accounts before the courts had ruled on liquidation, saying this had “a big effect on the poorest of the poor and small businesses”.
“We assure you that with the minister’s commitment of the guarantee, their funds are secure,” Rodgers said. “But the province will not accept any transaction that affects the fiscus without thorough interrogation. Ithala has sufficient assets to provide the required securities without exposing the provincial fiscus to financial risk.”
Rodgers also dismissed allegations that Ithala was used as a political slush fund. “I have invited anyone to provide evidence of these claims, and to date, I have not received any.”
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