Ithala Bank’s sudden liquidation move, which is being sought by the SA Reserve Bank’s Prudential Authority, has left the Ingwavuma community in northern KwaZulu-Natal reeling, as residents struggle to access their funds and the area faces economic uncertainty.
The future of this small town hangs in the balance, as Ithala is the only bank in the community and the lifeblood of Ingwavuma town, under the Jozini Municipality.
The bank has been under strain for the past few months after a repayment administrator was appointed by the Prudential Authority to oversee the issue of customer deposits in the bank.
The matter came to a head on Thursday when it was announced that the Prudential Authority had decided to bring a court application to liquidate the bank. As a result the bank was ordered to cease its deposit and withdrawal functions. This occurred without any public warning, meaning the bank’s customers found out about the decision when they tried to use their bank cards and the transactions were declined.
Money for stokvels, funeral clubs, and co-operatives is now trapped in the bank, with depositors of those funds unable to access them.
Sandile Nkosi, a councillor in the Ingwavuma area, described the situation as “tense”.
“There is a lot of anger and frustration; the community feels like they have been robbed of their money.
“This situation went off like a bomb. The customers were not informed about it; their funds are trapped there and they cannot withdraw their money. The customers should at least have been informed that they must move their money to other banks.”
Nkosi said Ithala was the only bank in the community and, without it, the town could die.
“The shops and everything in this town rely on this bank to function. With this decision, it means that people will now have to travel to Jozini to access other banks to withdraw their money once they have access to it. Jozini is about 50km away, and the transport fare is almost R50 by bus and close to R100 by taxi.”
Nkosi said even the payment of social grants relied on the bank and he was worried about what would happen with the February grants.
“I have had calls from business people complaining that they have R50 000 stuck inside the Ithala Bank accounts and cannot access it. The bank is closed, and the customers do not have anyone they can go to for help.”
A customer of the bank, who works at a local crèche, said they were told by bank officials that many customers might have access to their money by the end of the month.
Another customer said: “This has traumatised us. There was no thought given to us as a community in this issue because this is the only bank that we have here.
“We received a message at midnight on Thursday that Ithala was closing its doors. We rushed there on Friday morning only to find that the place was now closed,” she said.
Thembeni Msweli, a businesswoman, said the Ithala saga had caused friction between her and her workers.
“I was supposed to pay my employees on Friday. When I inserted the card to withdraw money, it was declined. I later got a message saying everything has been frozen.”
Mfananaye Mathe, mayor of the Jozini Local Municipality, said thousands of people were dependent on Ithala.
“This decision is going to push people and businesses out of that area. If people have to travel to Jozini to access a bank, they will buy whatever they need there, which means the shops in Ingwavuma will go out of business.”