The resignation of the board of directors of Ithala State-Owned Company (SOC) Limited, a subsidiary of the Ithala Development Finance Corporation, has prompted KwaZulu-Natal Premier Thami Ntuli to call for consequence management over alleged governance failures and the entity’s inability to secure a banking licence. The former board has rejected the implication of wrongdoing, instead attributing the situation to political interference.
Image: DOCTOR NGCOBO Independent Newspapers
Some former board members of Ithala SOC Limited have challenged tacit assertions by KwaZulu-Natal Premier Thami Ntuli that governance failures were responsible for the institution’s inability to secure a banking licence.
The pushback follows the resignation of the entire board earlier this week, with Ntuli calling for consequence management against those responsible for governance lapses, including the failure to obtain a licence.
However, one board member, speaking to the Sunday Tribune, disputed this characterisation, pointing instead to a complex history of regulatory intervention and political involvement that, they argue, ultimately constrained the board’s role.
The source acknowledged that the institution had faced profitability challenges, particularly during the COVID-19 period, the SOC (state-owned company) which is a subsidiary of the Ithala Development Finance Corporation Limited (IDFC) later returned to profitability. On governance, the board maintains it acted within its fiduciary obligations.
“We weren’t perfect, we had governance issues but when it comes to compliance, we are confident we did everything by the book,” the board member said, adding that silence would risk being interpreted as acceptance of sole responsibility.
A key point of contention is that the board was sidelined during crucial negotiations involving provincial and national stakeholders, including the premier, MEC of Economic Development and Environmental Affairs (EDTEA) Musa Zondi, MEC of Finance Francois Rodgers, President Cyril Ramaphosa and the National Treasury. According to the source, this limited the board’s influence over decisions that shaped Ithala’s future.
Ithala’s regulatory challenges date back several years. The South African Reserve Bank’s Prudential Authority (PA) imposed restrictions that prevented the institution from taking new deposits and clients, while allowing it to operate under a series of temporary exemption notices despite not holding a full banking licence.
Tensions escalated in 2022 when a delay in issuing an exemption notice prompted legal action by the board. A stricter exemption regime followed, limiting operations further and restricting Ithala’s ability to grow its deposit base.
In December 2023, the PA declined to grant a new exemption and instead appointed a repayment administrator, Johan Kruger. This marked a turning point, with legal action resulting in the attachment of Ithala’s accounts, leaving the entity unable to meet certain financial obligations.
The board member described this phase as unexpected and disruptive, particularly given the impact on clients, including stokvel groups and employees reliant on timely payments.
Efforts to reposition Ithala included exploring structural options such as becoming a commercial, mutual, or alliance bank. Each option required compliance with revised legislative frameworks, including registration as a national entity. Attempts to secure a banking partner under the alliance model were unsuccessful, with approached institutions declining involvement.
Meanwhile, political attention around Ithala intensified following the formation of the provincial government of unity, with the institution becoming a focal point in broader debates about economic development and financial inclusion in KwaZulu-Natal.
The PAs intervention ultimately escalated to provisional liquidation in December 2024, deepening uncertainty around the institution’s future.
KwaZulu-Natal legislature economic development and tourism portfolio committee chairperson Mafika Mndebele said the committee would assess the circumstances surrounding the resignations and broader governance implications.
“The committee emphasises the importance of ensuring that all actions taken are consistent with principles of good governance, accountability and transparency,” he said.
KZN member of the legislature Hannah Lidgett, who is a member of the economic development committe and Democratic Alliance spokesperson on economic development called for a full probe, raising concerns about how the institution deteriorated.
“KZN’s people deserve answers. How did Ithala get to this crisis point? What failures in governance, oversight and accountability led to this situation?” she said.
The premier has reiterated government’s commitment to stabilising the institution, describing the goal as transforming Ithala into a “sustainable developmental entity” capable of supporting economic growth and financial inclusion.
Economist Dawie Roodt said stabilisation efforts would need to be accompanied by difficult structural decisions, including the possibility of privatisation. However, he noted that political considerations could complicate such a path.
The premier's office and EDTEA, had not responded at the time of publication.
Additional reporting by Thami Magubane