The Vhembe municipalities that have lost hundreds of millions in the VBS Bank saga received some compensation from the bank's liquidator the past week. The amounts received are, however, dismal compared to what was lost. The liquidator also seems to have only moderate successes in recovering the squandered money.
The local municipality that lost the most in the process is the Vhembe District Municipality (VDM). The VDM invested a total of R1,07 billion of its ratepayers' money in the fraud-ridden bank. When what many described as nothing other than a Ponzi scheme collapsed, the VDM was R300 million out of pocket.
The bank's liquidator, Mr Anoosh Rooplal, announced last week that a first liquidation dividend of 7 cents in the rand is being paid to all proven concurrent creditors. This would mean that VDM will receive a payment of R21 million.
In a press statement, Rooplal says that preferential creditors and concurrent creditors will each get their share of the approximately R159 million that could thus far be recovered. "Preferential creditors include ex-employees of VBS Mutual Bank. Those employees have received payment of both their preferent claims and a portion of their concurrent claims. All 26 employees have received a final settlement up to R28 000 for their preferent claims as stipulated by the Insolvency Act. Employees' claims that are over R28 000 in value rank equally with other concurrent creditors," he explained.
Rooplal said that approximately R110 million would be paid to the relevant municipalities that had invested in the bank.
In total, 13 municipalities invested in VBS, which include four Vhembe-based municipalities, namely VDM, Makhado Municipality, Collins Chabane Municipality and Thulamela Municipality. Thulamela Municipality invested R30 million in the bank, but recovered the money before the bank folded.
Collins Chabane Municipality still had an investment of R120 million in VBS when the bank was liquidated. This municipality will receive R8,4 million. Makhado Municipality invested R155 million in VBS but called in part of the deposits before the scam became evident. When the bank folded, Makhado was still owed R53,53 million. This municipality can expect to recover just more than R3,74 million of its losses.
The effective losses of the various municipalities are, however, much more than what is reflected. If the VDM had invested the funds in a fairly conservative portfolio, the municipality could have received in excess of R1,5 million in interest per month. The VBS fraud started becoming evident in mid-2018, and the bank was liquidated in November that year. Over a period of three and a half years, the municipality lost well in excess of R70 million in interest. Had the people involved acted in a legal and responsible manner, the municipality would not only still have the R300 million but also the interest.
When VBS Mutual Bank imploded, not only municipalities suffered huge losses. Hundreds of individuals and stokvels had their savings tied up in the bank. The SA Reserve Bank guarantee assisted the small depositors in getting their savings, but those who had invested more than R100 000 had to stand in line and wait.
"Notwithstanding the fact that massive fraud and theft of some R2.3 billion was perpetrated against this bank, we believe we have made good inroads to recover monies owed to the creditors of the bank. A first dividend distribution of 7 cents in the rand is therefore a great outcome, given the many challenges that the bank faced," said Rooplal.
The liquidator also warned clients who still owe the bank money that the debt must still be repaid. "The liquidation team continues to collect monies due to it from loan account holders," he said.
Rooplal concluded: "My team and I continue to trace and recover the assets of the bank in anticipation of making additional dividend payments to creditors in the future."
One of the prominent people who is alleged to owe the bank millions is the Vhavenda traditional leader, Toni Mphephu Ramabulana. In the Motau report commissioned by the SA Reserve Bank, titled "The Great Bank Heist", to establish how the bank was plundered, Ramabulana is mentioned as one of the 53 "people of interest". He allegedly benefited to the tune of tens of millions of rands that flowed into his accounts or those of people and organisations associated with him.
"To the best of my knowledge, no amount of R17 million was paid to me‚ gratuitous or otherwise‚" Ramabulana responded in an open letter on 14 October 2018. "Most significantly‚ the (Motau) report does not find that I was part of any criminal enterprise. The report describes the payment as a gratuitous payment," the letter reads.
In August last year, VBS's liquidator applied for a writ of execution in the Johannesburg High Court, trying to recoup more than R10 million that was allegedly channelled to a trust used to pay the expenses of Ramabulana.
The liquidators, SNG Grant Thornton, filed court papers in which they state that the Dzata Trust had failed to repay "loans" it had received from VBS Mutual Bank between February 2016 and February 2017. The outstanding amount, according to the court documents, is at least R10 610 912,32.
The court was informed that the Dzata Trust had ignored attempts to remedy the breach through letters of demand addressed to it by Werksmans Attorneys on behalf of VBS.
The outcome of this application is uncertain. Questions were sent to the liquidator, asking whether the debt had been settled or whether an agreement was in place for the debt to be settled. Ramabulana previously stated that he would have no problem settling any such debt, provided he be given an exact breakdown of the money he was supposed to owe.
At the time of our going to press, the liquidator's spokesperson could not yet provide any clarity.