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MEC Rodgers claims the proposal was made without consulting the government of provincial unity, which has rejected the minister’s approach.
KwaZulu-Natal (KZN) Finance MEC Francois Rodgers. Picture: Gallo Images/Eliah July
Finance Minister Enoch Godongwana has issued a R2 billion guarantee to the clients of state-owned Ithala Bank, much to the displeasure of the KwaZulu-Natal (KZN) government.
According to KZN Finance MEC Francois Rodgers, the minister informed South African Reserve Bank (SARB) Governor Lesetja Kganyago that a government guarantee exceeding R2 billion would be issued to facilitate payments to more than 220 000 Ithala retail depositors.
It is also alleged that Godongwana instructed Kganyago to appoint a private sector financial institution to oversee the repayment of funds.
Rodgers expressed his dissatisfaction with the development, particularly the suggestion that the KZN provincial government, as Ithala’s shareholder, would bear the financial responsibility for the R2 billion.
The MEC claimed this proposal was made without any consultation with the government of provincial unity (GPU), which rejects the minister’s approach.
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He revealed that he had written to Godongwana seeking clarity on the matter.
“I, together with my team at KZN Treasury, have always engaged in good faith with Minister Godongwana and the National Treasury on the inherited challenges pertaining to Ithala.
“We have complied with all requests for information.
“We have also supplied detailed information of the liquidity of the entity and preferred action plans to address the inherited challenges,” the MEC said in a statement on Friday.
Rodgers explained that the provincial Treasury had indicated its intention to secure a separate guarantee for safeguarding the accounts of Ithala retail depositors.
This would involve appointing a private sector financial institution to enable depositors to access and trade on their accounts.
He also raised concerns over the status of the depositors’ accounts, claiming they had been “illegally frozen” by the repayment administrator.
READ MORE: KZN Treasury at loggerheads with Sarb over Ithala
“It is worth reiterating that Mr Godongwana’s actions were never discussed with the GPU, but they have dire consequences for the provincial fiscus,” the statement further reads.
Despite this, KZN Treasury affirmed Rodgers’ willingness to engage in dialogue with Godongwana and other relevant parties to reach a resolution.
“It is disappointing to note that numerous attempts by MEC Rodgers to meet with Minister Godongwana on this matter have not been met with a response.”
This latest move by Godongwana comes in the wake of the Prudential Authority’s application to the KZN High Court in Pietermaritzburg for the provisional liquidation of Ithala Bank earlier this year.
The authority claims Ithala was accepting deposits unlawfully.
Repayment administrator Johan Kruger, appointed after Ithala’s banking licence exemption lapsed in December 2023, declared the institution both technically and legally insolvent.
Ithala had historically operated as a bank through several exemption notices issued under the Banks Act, despite never having been granted a formal banking licence.
The Financial Sector Conduct Authority (FSCA) suspended Ithala’s licence in August 2024 due to concerns over the institution’s liquidity.
The bank’s liquidation could affect at least 257 000 clients.
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