Ithala saved by the bell

2012-12-13 00:00

ITHALA Bank yesterday saved its licence in the nick of time, managing to get the KwaZulu-Natal Legislature to convene a special sitting at the eleventh hour.

Had it failed to get the special sitting, the bank would have had to close shop when its licence expired at the end of this month, leaving many local businesses stranded.

“Had we missed the deadline, the bank would certainly have had to stop operating because we could not trade without it,” said Ithala CEO Yvonne Zwane.

She said this could have adversely affected a large number of businesses in KZN.

Ithala has in the past year alone disbursed more than R261 million in loans to co-operatives and small and medium enterprises.

Although it had its licence renewed, the bank lost its protection against being liquidated through the courts in the process, when the legislature amended section 30 of the Ithala Development Finance Corporation Act 1999. The amendment, proposed by Trevor Manuel in 1999 when he was still finance minister, opened the door for the bank’s depositors to apply for a court order to liquidate it to recover their money if it should face bankruptcy.

The section states that the bank cannot be wound up except by an act of parliament, giving the KZN Legislature exclusive powers to do so.

Manuel raised concerns about this legislation back in 1999 when Jacob Zuma still headed the Department of Economic Development and Tourism.

He called for the section to be amended to give the national Department of Finance equal powers to act. The department has since gone through three heads, including provincial Premier Zweli Mkhize, Roger Burrows and now Michael Mabuyakhulu.

Manuel’s concern was that the section prejudiced the bank’s clients as they had no legal recourse to recover their money should it face bankruptcy.

The matter was again raised in 2002, as the amendments had not been made, but the bank was granted a reprieve. The new amendments give the Minister of Finance equal powers as the provincial government to act if the bank should experience financial difficulties.

Zwane said the changes were meant to protect depositors. “Ithala is a deposit-taking institution. With the amendments, those deposits are now secured by the national Minister of Finance should be bank experience difficulty.”

Yesterday’s special sitting irked opposition party members, who said it was a waste of taxpayers’ money, especially since the Department of Economic Development and Tourism had been sitting on the matter for the past nine years.

The Democratic Alliance described the sitting as fruitless expenditure and said it would call for the matter to be investigated.

Johann Krog of the DA said: “The matter has dragged on for so long that today’s sitting is a crisis step to prevent Ithala from ceasing to operate. The MEC has dragged his heels abominably.”

Mntomuhle Khawula of the Inkatha Freedom Party said they supported the amendments, but were not happy with the process.

“We are, however, vehemently opposed to the process and thinking which indicates that the Department of Economic Development and Tourism has been sitting on this, doing nothing for the past nine years and 11 months until the eleventh hour.”

The bank will continue to trade for the next three years while it considers the prospect of applying for a permanent trading licence, under the new law.

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