KWAZULU-Natal Premier Thamsanqa Ntuli has described the more than two weeks of non-payment of salaries of hundreds for Ithala Bank employees this month as the most difficult challenge his provincial government ever faced.
Ntuli said the difficulty was that the freezing of salaries and depositors’ accounts was out of his hands, as it was solely handled by the Prudential Authority (PA).
“It is a process to solve a situation that has become so complicated as no one, including the government, had expected.
“As a result, one of the things to be discussed during the cabinet meeting tomorrow (Wednesday) would be a report about all these circumstances so that we could pave the way forward,” said Ntuli.
Ntuli spoke to the media on Tuesday after his meeting with the community policing forums in Pietermaritzburg.
The more than 400 employees of the bank were shocked on January 20, their pay date, when they found their salaries not reflected in their bank accounts.
They later discovered that Johannes Kruger, the repayment administrator for Ithala appointed by the PA, had frozen all the transactions as part of the investigation process.
The bank’s service providers were also not paid and social grants from the South African Social Security Agency (Sassa) were also not paid to beneficiaries, including children from poor families, people living with disabilities and elderly people.
Ntuli also commended the announcement that President Cyril Ramaphosa has authorized the Special Investigating Unit (SIU) to probe possible criminal activities and maladministration that led to the bank’s trouble.
The SIU would also investigate a controversial tender worth more than R34 million awarded to Tech Mahindra in 2020 to modernise its banking system.
Ntuli believed that the investigation into the tender awarded to Mahindra would reveal what might have led to the bank’s downfall.
“This investigation must bring transparency and help restore confidence in the institution,” he said.
The Prudential Authority declared the amount a wasteful expenditure after its investigation found that the bank did not lift a finger to recover it from the company that failed to perform as per the contract.
“We accept the president’s investigation because we are also concerned as the process to liquidate shows that something went wrong in Ithala.
“This investigation is long overdue and it sends a message to the employees of the government and its entities that crime does not pay,” said Ntuli.
He hoped that the investigation would identify wrongdoers.
He said his government still has hope that Ithala would survive the liquidation.
“My intervention and that of the president, which are the highest offices in the country, were meant to protect and support Ithala, and we should not fail,” he said.
For many years, Ithala has been operating under the exemption from the Ministry of Finance since it did not have a banking license.
Ntuli said this exemption allowed the bank to improve the economic conditions of many black people who became small, medium, and micro enterprises (SMMEs) in the province.
“Right now we are concerned about a weak economy therefore there is no way we can allow a situation that would take us back,” he said.
He said the provincial government would work on making sure that Ithala complied with the South African Reserve Bank conditions to be issued with a banking license.
According to the PA, the bank’s operational systems had been weakened because of instability at the executive management level.
The PA had found that the bank had committed reckless lending and not complied with anti-money laundering and combating the financing of terrorism policies.
The PA found that irregularities could not be dealt with without the bank significantly investing into a new information technology system.
The PA investigated Ithala for the alleged mismanagement in relation to its failed initiative to modernise its core banking system.
Ntuli said in a statement released on Tuesday that the provincial government will fully cooperate with the SIU investigation and looks forward to its findings, which will be instrumental in reinforcing accountability and good governance.
An application filed at the Pietermaritzburg High Court for the liquidation, which the provincial government is opposing, is yet to be heard.