How Ithala bank’s liquidation affects SASSA grant recipients

The impending liquidation of Ithala Bank has raised concerns for its 257,000 depositors, including 76,000 South African Social Security Agency (SASSA) grant recipients. However, South African Finance Minister Enoch Godongwana has assured the public that measures are in place to safeguard their funds.

Speaking to the SABC News early this week, Godongwana confirmed that a R2 billion guarantee has been allocated to safeguard depositors, particularly those with balances of R100,000 or less.

The Prudential Authority of the Reserve Bank has filed for the provisional liquidation of Ithala Bank in the Pietermaritzburg High Court. The decision follows the authority’s assessment that the bank to is both technically and legally insolvent, putting the savings of its 257,000 depositors at risk. This includes 76,000 South African Social Security Agency (SASSA) grant recipients, of which 10,000 are SRD beneficiaries, he stated, while the remaining the 67, 000 comprise other SASSA clients — notably the older persons SASSA recipients.

How will this impact SASSA recipients?

The liquidation process requires Ithala Bank accounts to be closed to facilitate court proceedings. This development raised concerns for SASSA beneficiaries, who rely on the bank to access their social grants. However, the government has stepped in with measures to minimise disruption:

• Funds guarantee: the R2 billion set aside by the government ensures that depositors’ savings, including social grants, are protected and will not be lost.
• Alternative banking arrangements: a new bank has been enlisted to handle the transfer of SASSA recipients’ accounts. This ensures uninterrupted access to their grants during and after the liquidation process.
• Evaluation of accounts: The government is working to evaluate all accounts held with Ithala Bank, a process expected to take approximately four weeks.

Why is Ithala Bank being liquidated?

The Prudential Authority’s investigation revealed that Ithala Bank was unable to meet its solvency requirements. Attempts to secure the necessary funds to restore the bank’s financial health were unsuccessful, leaving liquidation as the only viable option.

Finance Minister Godongwana emphasised that the decision to liquidate was not taken lightly. He stated: “What the Prudential Authority has done is to apply for liquidation. The implications of that liquidation, it may wipe out the savings of poor savers who have done that with Ithala. Precisely because the prudential authority, through its agents, couldn’t find money to fund the solvency of Ithala Bank,” Godongwana said. “And in these circumstances, they’ve got no alternative but to file for a liquidation.”

As custodian of depositors’ interests, as prescribed by the Bank Act, Godongwana says he’s taken the view to “protect particularly those who have made savings which are between R100k and lower and made available a guarantee of R2 billion; to ensure that whatever happens, their savings are guaranteed and protected.”

What happens next?

National Treasury has assured Ithala Bank clients that their money is safe and will likely be transferred to another bank. For SASSA grant recipients, this means their funds will remain accessible during the transition period.

The government’s intervention highlights its commitment to protecting the financial stability of vulnerable citizens amid the ongoing process to wind up Ithala Bank.

While the situation may cause temporary disruptions, the government’s guarantees aim to provide peace of mind to depositors and ensure their funds remain secure. Further updates on the account migration process are expected in the coming weeks.