The Public Servants Association (PSA) says it opposes the Prudential Authority's decision to file a high court application seeking the provisional liquidation of Ithala. 

“This reckless move threatens the financial security of more than 270,000 depositors, the livelihoods of employees and the broader economic stability of KwaZulu-Natal,” the PSA said on Friday.

“Ithala bank is a beacon of economic empowerment for historically marginalised communities of KwaZulu-Natal. It has for decades provided accessible banking services, small business financing and economic development initiatives in areas where major commercial banks have failed to penetrate.”

Announcing its decision on Thursday, the Prudential Authority said though commonly referred to as a bank, Ithala was never granted a banking licence. However, the finance minister granted an exemption to Ithala allowing the entity to receive deposits while it regularised its operations.

In 2022 the Prudential Authority issued a final exemption notice which afforded Ithala an opportunity to regularise its deposit-taking activities, warning that noncompliance would lead to the withdrawal of the exemption. The final exemption notice lapsed on December 15 2023, with Ithala failing to meet the conditions outlined in it. 

The PSA said Ithala had been the financial backbone of small enterprises, rural development projects and citizens who relied on its services in the absence of other banking alternatives.    

The Prudential Authority’s argument that Ithala lacked a banking licence was “disingenuous and malicious”. It said if the South African Reserve Bank was concerned about Ithala’s compliance, it should have worked towards assisting it to acquire a full banking licence instead of pushing for its destruction.    

“The PSA will not stand idle while corporate and political forces conspire to erase one of KwaZulu-Natal’s most vital financial institutions.”