The KwaZulu-Natal government has called on National Treasury director-general Dr Duncan Pieterse to make a decision on the loan application it has made to assist Ithala SOC Ltd depositors and keep the financial entity afloat amid liquidation attempts against it.
This came up on Monday at the Durban labour court which heard the application by the Repayment Authority, acting on behalf of the Reserve Bank’s Prudential Authority, to have Ithala provisionally liquidated after claims it is legally and technically insolvent.
During the arguments, representatives of the RA indicated it would be ready to withdraw its liquidation application if Ithala could present a guarantee that the depositors’ funds were safe.
Finance MEC Francois Rodgers, who attended the proceedings to support Ithala, confirmed that the provincial government has applied for an R2.4bn loan from the National Treasury to guarantee Ithala depositors’ funds.
“We had to ensure that we guarantee every rand of every depositor so the province had to put up a guarantee or a loan of R2.4bn to be able to ensure that. I’ve engaged the minister of finance and we’ve tried to assist where we can. I’ve passed on information to him on some of the accusations that came out of the PA and the RA so he has all the information at hand,” he said.
“That process is now under way. National Treasury has been given the legal brief on exactly how the loan is going to be structured and we are awaiting their response. I think the DG of National Treasury needs to tell us exactly where that process is.”
Rodgers said minister Enoch Godongwana had supported the provincial government’s efforts throughout but the “delay” from Pieterse to facilitate a meeting of the budget council to approve the terms and conditions of the loan had proved a “stumbling block”.
“We were told a month ago that they will convene a budget council, the loan/guarantee application has to go through a budget council. That budget council would meet and take a decision, it still hasn’t met.
“I think the DG of Treasury has some answering to do. He must tell the people of KZN and depositors of Ithala exactly why his Treasury is not doing what it’s supposed to do, which is to get the loans committee to meet and approve or decline our loan.”
Rodgers, however, also questioned the sincerity of the RA’s claim that it would back off if the guarantee is provided.
He said they had engaged with commercial banks last year to take over Ithala’s debtors’ books while they tried to stabilise the situation.
“We were well into negotiations when they suddenly just stonewalled and said they had been told by the PA and RA they are not to negotiate any deals with taking over Ithala’s book. So I don’t take any comfort out of what the RA said here today.”
Her insisted that Ithala had the necessary capital after a concern raised by the RA and PA that the entity would use its depositors’ money to fund its operations.
“Today what I heard was again the PA and the RA basing its entire case on protecting the depositors’ money from Ithala, saying that if it is allowed to operate then it will use the depositors’ money to fund its own operations, which I’m afraid, from my information, couldn’t be further from the truth. In fact we have R300m of the Treasury finance which is secured to support Ithala during this period.”
He said the province and National Treasury have been engaging with Ithala and provincial EDTEA to assist Ithala to continue trading, paying its salaries and creditors.
He also questioned Repayment Administrator Johannes Kruger’s motive, saying he had initiated meetings in November 2024 to try to find a way forward in this matter but Kruger never seemed to be interested in finding a solution.
“It was very clear at that stage to me that the RA wasn’t vaguely interested in finding a solution. All they were doing was telling me how corrupt Ithala is, how many politicians have loans there but when I asked for the evidence so that I can work on it, the evidence was never forthcoming.”
“I’m hearing a lot of accusations but why didn’t they appoint a curator so that if it needs to continue trading then a curator will ensure the PA and the RA that depositors’ money is not being used to fund the operations.”
Judgment on the matter was reserved.
Meanwhile, the National Education, Health and Allied Workers’ Union (Nehawu) became the latest organisation to question the impartiality of Kruger over this matter.
Protesting outside the court while proceedings were ongoing, Nehawu regional secretary Prince Mthalane said the Nehawu, which is the largest union organising within Ithala, wanted the PA to withdraw Kruger as the RA.
“The RA must be withdrawn because he is acting against Ithala. His objectivity is very questionable which is why some of the issues are now in court because he removed some of the functions from the executive without any authority or any law that allows him to do that.
“The Reserve Bank must withdraw this RA and also this matter must be resolved outside the court because the bank itself has a footprint in the province. So we think that by subjecting this thing to court might be a problem going forward.”
He added that Nehawu believed that Ithala had jumped over every hurdle in its efforts to get an operating licence but it was deliberately hamstrung by the authorities, including Kruger.
“Ithala has been trying to comply with whatever directive that has been issued to them but they have been frustrated by the authorities in trying to comply. So we do think that there is something sinister that is behind this liquidation. Ithala has no liquidity issues. Their assets far exceeds their liabilities so liquidity is not an issue on that front.”
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