Photo: Mhlengi Ngcobo
Ithala Bank’s unforeseen collapse, and its inability to disburse funds or honour outstanding transactions, has left agricultural businesses stranded at the start of a crucial planting season.
According to the Black Farmers’ Association of South Africa (BFASA), for many of the province’s more than 4 000 emerging black farmers, Ithala Bank was the only institution willing to back their aspirations with real capital.
“Commercial banks want income statements and collateral; most black farmers don’t have either,” said BFASA president, Dr Xolile Mtshagi.
Now, with Ithala Bank’s accounts frozen since January 2025, these producers have no access to the credit they need for inputs, salaries, or irrigation.
Real-life impact
The effects of the Ithala Bank freeze are widespread, and reports indicate that a number of farms in the iLembe District alone have been severely impacted. Input purchases, mechanisation, planting, harvesting and insurance coverage have all stalled.
One of the impacted farmers is Mhlengi Ngcobo in KwaDukuza, a hydroponics farmer whom produces tomatoes, cucumbers, and sweet peppers.
Prior to the freeze, the farm employed 10 permanent workers, 15 seasonal workers and 20 interns, but Ngcobo has since had to retrench five employees and shut down half of his greenhouse tunnels.
“We cannot pay our suppliers on time, which has led them to cut off services. We have 30-day accounts that are now behind and have since been suspended. [Making the situation worse,], we cannot get any production inputs (fertiliser and agro-chemicals) to continue growing our sweet pepper plants.”
He added that the situation has also crippled his relationships with his clients, whom expect a certain volume of produce to be delivered as per their agreed-upon off-take agreements.
“We have not been able to pay our workers their full salaries. The 10 permanent employment opportunities we created within our community is one way of curbing the mounting issues we are facing in our underprivileged areas with its socio-economic challenges, [but] we have been left with no choice but to release them as it seems there are no [avenues] left [open] to rescue the farm.”
Unravelling Ithala Bank’s finances
The crisis stems from a steady unravelling of Ithala Bank’s financial position. In late 2023, the state-owned institution lost its long-standing exemption from banking licence rules. The Financial Sector Conduct Authority (FSCA) suspended its operations in July 2024 after finding that Ithala Bank had “failed to prove its financial stability”.
The South African Reserve Bank’s (SARB) Prudential Authority then moved for liquidation in January 2025, freezing all accounts and transactions.
In March, Ithala Bank approached the court seeking an order to compel the SARB-appointed Repayment Administrator (RA), Johannes Kruger, to release R863 million in frozen funds to pay staff salaries.
In a judgment delivered on 9 May, Pietermaritzburg High Court Judge Muzi Ncube reaffirmed that Kruger did not have the authority or jurisdiction to manage Ithala Bank’s day-to-day operations.
The judge further ordered that Ithala Bank must be allowed to process transactions for salaries and other necessary expenses, and ruled that the bank is entitled to continue operating its business.
Although the court interdict temporarily blocked full liquidation, allowing for Ithala Bank to continue operations, clients say that nothing has changed, despite assurances that they would be able to access their funds from 12 May.
The bank’s customer base (estimated at over 257 000 depositors) is composed largely of rural residents, township-based enterprises, and subsistence or emerging farmers.
In the absence of Ithala Bank, farmers are desperately seeking alternatives, but few are available. Personal loans, family savings, or informal lenders offer stop-gap relief, but often at exorbitant interest rates.
Meanwhile, the KwaZulu-Natal provincial treasury has requested a R2,4 billion loan guarantee from National Treasury to cover depositor funds and stabilise the bank. It is also looking for a commercial partner to absorb stranded clients.
Farmer unions and community leaders have called the shutdown a betrayal of rural South Africa.
Cosatu leader in KwaZulu-Natal, Edwin Mkhize, said: “While the judgment has restored our faith in the judiciary, we hope that the Repayment Administrator and the Prudential Authority take it to heart and use it to assist Ithala [Bank], rather than close it.”
He expressed concern about the situation, saying that the union is “deeply troubled by the uncertainty facing workers whose futures now hang in the balance, and equally worried about the impact on the bank’s customers, many of whom come from the most disadvantaged communities.”
KwaZulu-Natal Premier Thamsanqa Ntuli has called on all stakeholders, depositors, and the broader public not to panic or engage in a “run on the bank.”
He said the provincial government was working around the clock to ensure that Ithala Bank’s operations are protected and that it continues to serve the people of KwaZulu-Natal.
“We urge the public to stand in solidarity with us as we fight to preserve an institution that represents economic dignity, inclusion, and empowerment for millions.”
