Court backs Ithala, but customers say ‘Nothing has changed'

Ithala Bank users remain in limbo despite a recent High Court ruling in favour of Ithala SOC Limited.
Customers say little has changed on the ground as they cannot access their funds or resume normal business operations.
The Pietermaritzburg High Court ruling, handed down on May 9, interdicted the South African Reserve Bank's appointed repayment administrator, Johannes Kruger, from interfering in the operational management of Ithala.
The ruling confirmed that the Ithala board retains full operational authority and that Ithala may carry out all legally permissible transactions, excluding deposit-taking. ABSA Bank was also interdicted from blocking transactions related to salaries and operational expenses.
However, for many Ithala clients, the judgment has yet to translate into practical relief.
Groutville farmer Zodwa Mthembu said she was devastated to find that she still could not access her accounts even days after the court ruling.
'I went to the Ithala branch in Stanger, and they told me they haven't received the go-ahead to process withdrawals,' said Mthembu.
Mthembu, who operates several small businesses through her Ithala accounts, said the shutdown has dealt her a triple blow.
'Since the bank closed shop in January, I've had to survive on personal loans to keep things going. I, too, need rescuing,' she said.
Hydroponic farmer and Vella Villa Project founder Mhlengi Ngcobo echoed her concerns, saying that while the legal victory is welcome, the financial damage done over the past few months has been severe.
'We're still in crisis mode. The road to recovery is going to be long and hard. Many of us are small-scale farmers who rely on every cent,' said Ngcobo.
Mthembu and Ngcobo are among the 257 000 Ithala depositors left in limbo after the provincial state-owned bank ceased operations in January, after failing to meet banking regulations and financial stability requirements. At least five other farms across iLembe are also affected.
Despite operating under special exemptions from the South African Reserve Bank, Ithala never obtained a banking licence and primarily served KwaZulu-Natal residents. A repayment administrator was appointed to manage withdrawals, but legal battles have caused delays, leaving depositors uncertain about how much they will recover and when.
KwaZulu-Natal Finance MEC Francois Rodger reiterated his commitment to ensuring the institution is not only protected but restored to full functionality.
'Ithala serves a niche market of mainly rural residents. Attempts to systematically shut it down are short-sighted and demonstrate a total disregard for rural livelihoods,' he said.
Rodgers said the Government of Provincial Unity (GPU) will continue engaging with legal counsel to enforce the ruling and support affected communities.
Stay in the loop with The North Coast Courier on Facebook, X, Instagram & YouTube for the latest news.
Mobile users can join our WhatsApp Broadcast Service here or if you're on desktop, scan the QR code below.
At Caxton, we employ humans to generate daily fresh news, not AI intervention. Happy reading!

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

IOL News

16 hours ago

• IOL News

South African consumers to face financial strain amidst Israel-Iran conflict

Rocket trails in the sky after Iran struck Israel with barrages of missiles, following a massive onslaught targeted the Islamic republic's nuclear and military facilities. The ongoing conflict between Israel and Iran is causing significant fluctuations in global oil prices, which could have dire economic implications for South African consumers. Image: Ayad Baba / AFP The escalating conflict between Israel and Iran is sending ripples through global markets, raising concerns over potential economic repercussions especially closer to home in South Africa and the impact on consumers in the country. Frank Blackmore, the Lead Economist at KPMG, said that the overall impact will hinge on two pivotal factors: the scale and duration of the conflict. Since the onset of the conflict, oil prices have already begun to rise, and Blackmore stressed the significance of this surge. 'An increase in oil prices traditionally translates to higher costs for transportation and goods, which the consumer ultimately endures,' he said. In South Africa, where the economy relies heavily on oil imports, subsequent price increases could put further strain on inflation rates, potentially leading the South African Reserve Bank (Sarb) to maintain elevated interest rates for an extended period. Blackmore further said, "If the conflict intensifies beyond what we are currently witnessing, the impact will be far more significant. If it is resolved swiftly, the effects on the markets will likely be limited. There are two avenues through which the impact will be felt. Firstly through the oil price. We have already seen an increase since the onset of the conflict. Secondly, through the exchange rate. The Rand has depreciated due to heightened uncertainty, which could lead to inflationary pressure on the local economy and the possibility of interest rates remaining higher for longer. Given that both oil and the exchange rate affect the impact of the cost of transporting people and goods around the economy, the inflationary impact will be shifted down onto the consumer in the form of higher inflation. The Reserve Bank may be forced to maintain elevated interest rates for an extended period." Nigel Green, CEO of independent financial advisory deVere Group, said the risks to global energy markets were growing, adding that even the threat of closure or interference would 'likely push oil well beyond $100 per barrel, reigniting inflation and altering the current trajectory of interest rate policy in developed economies.' 'Investors are clinging to a framework shaped by central bank support, solid earnings, and disinflation. But if energy prices rise sharply from here, that disinflation story evaporates. Rate cuts could stall. Market momentum could reverse,' Green said. Adding to the woes regarding interest rates, the US Federal Reserve held interest rates steady for a fourth consecutive meeting this past week. The possibility of interest rates remaining elevated along with the prospect of fuel prices increasing will leave South African consumers in a tough space. According to a survey conducted by Debt Rescue, two-thirds of South Africa's credit-worthy consumers stated that they cannot repay their debt due to macroeconomic pressures beyond their control. CEO of Debt Rescue Neil Roets, said that disturbing insights from the survey show that 41% of people have indicated that they have defaulted on their credit cards over the past year, while 30% have missed payments on retail store accounts. 'These are the two most commonly used forms of credit for day-to-day expenses because they are existing facilities which they have access to, which are now becoming increasingly unaffordable – while providing the only lifeline for many consumers,' Roets said. In addition, survey outcomes show that 24% of those polled cited defaults on personal loans, with 31% attributing this to unexpected expenses and 21% to loss of employment. 'This points to the widespread financial distress many South African households find themselves in, due to economic pressures which have seen living costs skyrocket over the past few years while there has been very little in the way of financial relief in terms of interest rates, cost of living and tax reductions,' Roets added. '65% of those surveyed said current economic conditions are significantly affecting their ability to repay debt,' he said. BUSINESS REPORT Visit:

Daily Maverick

4 days ago

• Daily Maverick

CPI steady at 2.8% in May, but sizzling meat prices heat up food inflation

The fact that for the third month on the trot CPI was below the South African Reserve Bank's 3% to 6% target range raises prospects that the bank could lower rates again when its Monetary Policy Committee next meets in late July. South Africa's consumer price index (CPI) was 2.8% on an annual basis in May, unchanged from April and the third consecutive month that the read was below the Reserve Bank's 3% to 6% target range. But on a worrying note, food inflation spiked in May to 4.4% year on year from 3.3% in April. 'Meat, specifically beef, is a key factor behind the rise in food inflation. The annual rate for meat jumped from 3.0% in April to 4.4% in May. In April, monthly increases for beef products ranged from 6.2% to 11.9%,' Statistics South Africa (Stats SA) said. 'A widespread outbreak of foot-and-mouth disease, combined with higher feed prices, contributed to the rise in beef inflation.' That outbreak, which has spread to the world's largest feedlot, in Gauteng, has raised concerns about domestic supplies. But agricultural economists expect beef prices to eventually moderate as a curb on exports is predicted to boost domestic supplies. 'When an outbreak occurs, red meat exports are temporarily banned, which increases local supplies. In the past, such led to a mild decline in red meat prices. This is why we have doubts about the talk of potential sharp increases in red meat prices in the coming months,' said Wandile Sihlobo, chief economist at the Agricultural Business Chamber. What this means for you If you like red meat, you have been forking out more for your braais. But beef prices are seen falling as export curbs boost domestic supplies. More broadly, inflation is slowing, which is at odds with the prevailing perception. Often, it takes a while for consumers to realise that prices are not rising at the same pace they were last year. Inflation still means that prices are rising – the opposite is deflation and that has a range of consequences, including falling profits, investment and employment. Inflationary changes Along with meat, prices for staples such as maize also remained on the boil. 'Maize meal and samp continue to record high price increases. The annual rate for cereal products was 4.5% in May, with double-digit inflation registered for maize meal (14.2%) and samp (20.6%),' Stats SA said. This will take its biggest bite out of low-income households that rely heavily on such staples. But South Africa's maize harvest this year is expected to rise significantly from last season's El Niño-scorched crop, and white maize futures have been falling – trends that should soon reflect in retail prices. One key driver of moderating CPI overall has been cooling fuel prices, which fell again in May. But the Israel-Iran conflict may rain on that parade. 'While oil supply remains unaffected, further escalation could see Iran close the Strait of Hormuz, cutting off around 20% of global supply and potentially driving prices to $120 per barrel. At that point, oil prices would be near the levels recorded when Russia invaded Ukraine, and domestic fuel prices shot up to record levels,' said Jee-A van der Linde, senior economist at Oxford Economics. More broadly, the fact that for the third month on the trot the CPI was below the South African Reserve Bank's 3% to 6% target range raises the prospects that it could lower rates again when its Monetary Policy Committee (MPC) next meets in late July. Such a move would bring further relief to South African consumers who seem to be opening their wallets as inflation slows. Other data released by Statistics South Africa (Stats SA) on Wednesday showed that retail trade sales rose a brisk 5.1% year on year in April – a signal that there are emerging demand pressures in an economy that is barely growing. DM

Daily Maverick

6 days ago

• Daily Maverick

Gen Z's digital takeover of SA's payments industry

A wallet filled with cash and loyalty cards feels about as relevant as a phone booth for Gen Z shoppers. They're swapping physical payments for smartphones, buy-now-pay-later options, and loyalty apps. Gen Z has a low tolerance for obstacles. The moment a checkout process starts to drag– a form to fill, a password to remember – their patience runs out and their shopping cart is abandoned. According to the Online Retail in South Africa Report for 2024, online shopping is most prevalent among 25 to 34-year olds, closely followed by the 15 to 24 age group. Future trends of payment offerings seem to be dictated by the younger generation, and by 2030, they will be the greatest spending force across sub-Saharan Africa. Goodbye wallet The leather wallet your dad carries and your mom's heavy handbag filled with loyalty cards are quickly becoming artefacts of a different era. 'Today, everything's on your phone, your cards are on your phone,' Jonathan Spencer, brand head at OneDayOnly, said. 'All of your buy-now-pay-later options are also on your phone. You can check everything on your banking apps on your phone.' OneDayOnly, the South African daily deal site, has lived through this shift first-hand. Launched in 2010, the platform made its name by offering discounts on a number of different products each day. Spencer said that the way the site has kept up with evolving payment technology – by adding methods, removing friction and keeping data secure – keeps younger shoppers clicking. South African Reserve Bank data shows that digital payments (such as mobile wallets, tap-and-go and QR codes) are used by 53% of the youth in the country. Checkers has also kept its digital payment ecosystem a step ahead. When ordering online through the Sixty60 app, users are redirected directly to their banking apps for verification. 'Today's retail environment is defined by increasingly diverse customer needs and preferences. Convenience, flexibility and accessibility are central to what customers expect,' the retailer said. Breaking big payments into bite-sized chunks Many young customers also prefer using buy-now-pay-later (BNPL) payment options as it offers a budget-friendly option for a generation who are keeping a tighter grip on their purse strings. Gen Zs are more cognisant of the fact that credit comes with a lot of interest, Spencer said, adding OneDayOnly's BNPL option, Payflex, has grown a lot over the past year, along with instant EFT platforms such as Ozow, one of the retail site's biggest partners. In South Africa, BNPL is projected to become a $1.3-billion (R23-million) industry by 2030, growing roughly 13.6% annually. On Takealot's platform, the BNPL model is experiencing 'significant growth' among young consumers using Payflex, particularly in the 23–29 age demographic, the online retailer said. Its revolving credit service lets shoppers pay in instalments and earn 1% back on purchases, which offers a flexible solution for those with irregular income or limited savings. Providing options at a cost Adding more payment methods come at a price which merchants need to absorb. Spencer said that transaction fees associated with these platforms are a convenience charge but can become costly. 'The general public don't really understand that when we take on these payment partners, there's a fee per transaction that's involved in it for us as a company and those fees vary per partner,' he said. The future is (still) mobile-first In future, payments will become even more flexible. 'I think we'll start seeing some sort of cryptocurrency coming in,' Spencer said. 'That's something people are starting to think about and how we would start working that into our business and start taking it as payment.' South African retailers such as Takealot and Pick n Pay already accept crypto payments and according to the South African Revenue Service, more than 5.8 million South Africans hold a crypto asset. Loyalty programmes, such as banking rewards and student discounts, remain a powerful way to attract and retain young shoppers. An example is Varsity Vibe, a discount app that can be used only by students and offers special promotions and discounts when shopping at stores such as H&M. Takealot's loyalty service, TakealotMORE, plays directly into this preference. With plans starting at R39 a month, members can get free delivery across Takealot, Mr D, Takealot and in-store Pick n Pay orders. The online retailer said young shoppers appreciate services that integrate smoothly into their lifestyle. Quick and convenient Gen Zs expect their smartphones to do it all: carry their payments and loyalty points without needless complexity. To better serve a younger demographic, Takealot advocates integrating shopping directly into social media platforms, where young people already spend so much of their time, and adding user review and content from their peers to aid purchasing decisions. 'We know that the world is leading mobile first,' Spencer said. 'Businesses need to start thinking through that lens: How can I get this quickly and conveniently through my phone?' DM