Early in February this year, the mayor and the municipal manager (MM) of Thulamela Municipality appeared in court, facing charges relating to investments made in the liquidated VBS Mutual Bank. Thulamela Municipality never lost money in the process, whereas other municipalities had lost hundreds of millions. Despite this, none of the other mayors or MMs have been charged.
Last week, the Public Protector, Busisiwe Mkhwebane, joined the group of people asking why none of the recommendations of the various reports had been implemented. The Public Protector's office directed the council Speakers of, among others, Makhado, Greater Giyani and Tubatse Fetakgomo to act on the outstanding recommendations of the Motau report and take appropriate steps against the people involved. Not much, however, has happened.
Last month, this newspaper published an article wherein we focused on the Vhembe District Municipality and the people who had been instrumental in the scandal. This week, the focus moves to Makhado Municipality, where R53,5 million was still outstanding when the bank folded. Last month, the bank's liquidator announced that municipalities would receive 7% of the money back, which meant that only roughly R3,8 million of the money could be retrieved.
In the investigations done after the collapse of what many described as nothing more than a Ponzi scheme, the role that politicians played to influence the investments came to the fore. This was especially the case in Makhado, where at least two senior officials alleged that the mayor had instructed them to invest with VBS.
A forensic report commissioned by the Limpopo Provincial Treasury provided some light on the shenanigans that played out during this "VBS feasting period".
A slow start
The municipality's first application for an investment was made on 29 April 2016, when an application form was filled in to invest R15 million for a period of 90 days at an interest rate of 7,6%. This form was signed by the CFO, Ms M Makhubela, the Manager: Revenue, Mr N Radzilani, and the Manager: Assets, Ms Lubisi.
This application was not approved by the MM and was seemingly never made. At the time, Sakkie Mutshinyali was the MM, but he later denied any knowledge of these investments. That Mutshinyali was a deterrent for the group that wanted to channel money to VBS seems quite likely.
Mutshinyali was suspended in November that year on allegations of misconduct, fraud and nepotism. "They destroyed my career and ruined my reputation," said Mutshinyali in an interview in 2018, reflecting on the period in 2016 shortly after a new mayor had come into office. He was referring to Mayor Shonisani Mildred Sinyosi and her team, who had succeeded David Mutavhatsindi in August 2016.
Mutshinyali eventually received a "golden handshake" of roughly R3,3 million and was told to go.
All set to go
On 18 January 2017, the Makhado Municipality applied to invest R40 million at VBS for a period of 180 days at an interest rate of 7,625%. This application was again approved by the CFO, Ms Makhubela, but not signed by the MM. The money was seemingly paid over to VBS even before the approval papers were signed.
A month later, Makhubela approved an investment of R50 million at an interest rate of 8,73%. Again, this was not approved by an MM.
The final investment was made on 14 August 2017, and this time the amount was R50 million for a period of 32 days at an interest rate of 7,8% and signed off by Makhubela, Radzilani and Lubisi. Still no MM signed off on the investment, as required by the council's policy on investments.
When the final investment was done, both the CFO, acting MM and mayor of the municipality should have been aware of the problems associated with banking at banks such as VBS. A year before, the Limpopo Treasury had already requested detailed reports on investments (which the municipalities seemingly did not send).
A day after the last Makhado investment was made, on 15 August 2017, the National Treasury (NT) sent an email to all municipalities, explicitly warning them that investments with VBS were contrary to the provisions of the Municipal Finance Management Act (MFMA) and Municipal Investment Regulations.
When the VBS bank folded at the end of 2017, Makhado Municipality was still left with R53 532 889,39 that could not be recovered.
A meddling mayor?
The mayor in office when all the investments were made was Shonisani Mildred Sinyosi. She told the investigators that she was aware of the relevant legislation and knew that the relevant policies regulating investments needed to be in place. Council had the responsibility to see to it that such policies were adhered to.
Sinyosi said, however, that she did not know whether any background checks had been done on VBS Bank to ascertain that the bank qualified to receive investments. She denied that any of the investments had been discussed with her or that she had had any input in the investment decisions made.
Her version of the truth was disputed by the testimony of two of the municipality's officials. Mr Johannes Kanwendo, the acting MM during the time that the investments were made, said that he had received a direct instruction from the mayor that investments should be made with VBS. The Manager: Revenue at the municipality, Mr Ruben Radzilani, also said during his interview that he had been informed that investments "were a political issue" and that he had to sign the investment documents.
The forensic investigation found that Sinyosi had failed to comply with her duties as mayor, in that she had failed to monitor and oversee the exercising of responsibilities assigned in terms of the relevant legislation. Corrective action against her was recommended.
Sinyosi refused to let go of power and only at the end of 2018, when the ANC's national body issued strict instructions, was she removed.
The untouchables?
The one name that features prominently is that of the CFO, Ms Mikateko Palesa Makhubela. She was the CFO for the municipality from October 2012 to April 2018, the period in which all the investments were made.
When questioned by the forensic investigators, Makhubela admitted that various regulations had not been adhered to. No background checks were done on VBS, the MM did not sign off on any of the investments and no documentation spelling out what commissions were payable was in place. She ascribed her failure to do this to "an oversight" and "a misinterpretation". She said she was under the impression that it was in order to invest in a mutual bank.
Reference is made to the role Makhubela played in the VBS looting in the original Motau report. Motau filed transcripts in court of WhatsApp messages to indicate that prominent ANC leader Danny Msiza had played a central role in the looting of the bank. In one of these conversations, Makhubela is seemingly involved in an argument with Kabelo Matsepe, who is described as "a politically connected fixer" in Motau's original report. Matsepe became a very well-remunerated middleman and acted as a gatekeeper between VBS and the municipalities, according to Motau. Makhubela allegedly negotiated for more commission for her and the three other officials involved.
In spite of what other officials testified, Makhubela denied during questioning that any political pressure had been exerted on her to make investments. Makhubela was "redeployed" in 2018 to the Greater Tzaneen Municipality, where she became CFO with an effective salary of around R1,5 million per year.
Off you go
Johannes Kanwendo, the acting MM from 10 November 2016 to end November 2017, refused to take the fall for the fiasco and blamed it on political pressure. He told the forensic investigators that he had been summoned by Mayor Sinyosi and instructed to invest with VBS. He believed that the instruction to do so had come from the provincial office of the ANC. The mayor had also told him that the Municipal Infrastructure Grants (MIG) should be invested at the mutual bank. Sinyosi had also demanded that he report back to her on the investments at VBS.
Kanwendo did not sign off or approve any of the investments. He believed that the procedures followed to invest in VBS were wrong and that no proper due diligence had been done. In November 2018, Kanwendo was provisionally suspended by the Makhado Council because of the VBS scandal. During the same meeting, a motion to remove Mayor Sinyosi failed.
Council never officially announced what had happened to Johannes Kanwendo, but he is believed to have remained on suspension and his contract never renewed. In the 2018/19 Draft Annual Report of the municipality, mention is made that his contract had expired on 31 May 2019.
Just sign the forms
Another person who told investigators that political pressure had been exerted on officials to simply sign documents and get on with things was the Manager: Revenue, Ruben Radzilani. At times he acted as MM in the municipality. He said that he was brought "application-to-invest" forms and told to sign these.
Radzilani said that he had not been happy with the way the investments had been made and had even discussed the matter with the CFO, Makhubela. He thought that investments at VBS were risky, as the bank was a small one without the necessary reserves. When he raised these concerns with the CFO, he was told that the decision to bank with VBS was politically driven.
Radzilani also told investigators that he had been asked to sign off on investments when the money had already been paid over to VBS. In one instance he signed off on an investment on 14 August 2017 when the investment had already been made on 20 July 2017. He said he had felt he had had no choice but to sign the forms.
Radzilani seems to have missed the radar and he is still working at the municipality.