Ithala accelerates plan to become a commercial bank
KwaZulu-Natal’s provincial government is moving to set up its Ithala development bank as a commercial bank by yearend – a move which will see it nominated as a state bank.
As a result, the ANC in the province is planning to move its accounts to Ithala Bank from existing banks, including Absa.
This week, KwaZulu-Natal’s economic affairs MEC and ANC chairperson Sihle Zikalala confirmed that Ithala, which falls under his portfolio, would be nominated as a state bank once it received its commercial banking licence.
Ithala already has about R600 million in deposits from municipalities and state-owned entities.
This week, the bank also sealed a revenue collection deal with eThekwini Municipality, which will allow consumers – including 563 000 households which receive posted bills – to pay their municipal accounts.
eThekwini has also indicated that it will ask Ithala to tender for its business when its agreement with Nedbank comes up for review. In 2015, the municipality signed a five-year deal with the bank to provide transactional banking services.
In his address at the launch of upgraded facilities by Ithala subsidiary Ithala SOC, held at Umlazi’s Mega City Mall, marketing manager Sandile Xolo said Ithala intended securing a full banking licence this year and “becoming a fully fledged bank”.
This would “lay the foundations for the creation of a state bank” and allow Ithala, which has 39 branches around KwaZulu-Natal, to expand its footprint beyond that province.
Zikalala said financial institutions were key drivers of radical economic transformation and that Ithala had already heeded the call to implement the policy.
Ithala was symbolic of “a new era in banking” for historically disadvantaged communities, he said.
“Let us unite behind a financial institution which is truly living the radical economic transformation ideal. “Is it not time now to facilitate the change we desire?” Zikalala said his department would push government to assist with the licensing process and confirmed that the ANC would move its accounts there once this was done.
The announcement comes against the backdrop of the Competition Commission’s finding that 17 banks had colluded to rig the exchange rate and the outrage over the Public Protector’s leaked report finding that Absa owed government R2.5 billion from an apartheid-era bailout.
The ANC Youth League in the province has also called on government to move its accounts to Ithala, with Zikalala saying this week that Ithala would be able to “compete with other banks, including managing the government accounts”.
The eThekwini deal, which will see Ithala develop the payment and billing system over three years in return for R8.8 million from the city, was approved by Durban’s executive committee this week.
Mayor Zandile Gumede said the paperless system introduced by Ithala would save the city R135 million annually. “Over the past years, Ithala has been at the forefront of the transformation of the provincial economy through wealth redistribution and the creation of entrepreneurs at the bottom of the pyramid.”
“This system will be able to create about 325 jobs for our youth and redistribute about R50 million to local businesses such as spaza shops and local supermarkets.”
Since 2009, Ithala has approved loans for small, medium and micro enterprises (SMMEs), totalling more than R478 million, for more than 465 enterprises in agriculture, manufacturing, services, construction, energy, tourism and other sectors.
Through the finance provided to SMMEs, Ithala facilitated the creation of more than 3 500 jobs.