VBS Mutual Bank's woes seem to be far from over, but amidst all the latest revelations of the shenanigans at the bank, municipal deposits remain frozen, while Stokvels and burial societies have limited access to funds.
The fact that all municipal deposits at the mutual bank have been frozen is starting to impact on service delivery in the communities. Last Friday (27th), during a parliamentary portfolio committee meeting, it came to light that three of the municipalities in the Vhembe District had invested a total of just over R385,6 million at VBS. Although the municipalities did not provide specific information on which funds had been invested, it is believed to be money from the national government that was earmarked for specific development projects.
A list of 15 municipalities that invested money at VBS Mutual Bank was made available last week. These investments were done despite National Treasury's warning against such practices. A mutual bank does not have the same protection measures in place as a normal bank, and municipalities were warned that investments with these banks could be viewed as a transgression of the Municipal Finance Management Act.
By far the biggest "investor" was also the worst-performing municipality in the district, namely Vhembe District Municipality. Vhembe invested R311 514 197 at VBS, almost 35% of the municipality's annual operating revenue. The fairly new Collins Chabane Municipality, comparatively speaking, did even worse, investing R122 410 521, or 35,52% of their operating revenue. Makhado Municipality invested R61 712 340 with VBS Mutual.
The spokespersons for the Makhado and Vhembe municipalities were asked last week to provide more details on the investments done at VBS Mutual Bank and how this impacted on service delivery. At the time of our going to press they had not responded.
Curator has a tight grip
The SA Reserve Bank placed VBS under curatorship in early March this year because of the bank's severe liquidity crisis. During last week's parliamentary committee meeting it was reported that VBS was run like a pyramid scheme. Short-term deposits from municipalities were utilized to fund long-term loans. Previous reports indicated that the bank had paid brokerage commissions to entities to attract deposits, mainly from municipalities. The deputy Reserve Bank governor, Kuben Naidoo, previously described this practice as "highly unusual for banks".
The parliamentary committee further heard that the bank seemed to have targeted financially distressed municipalities with weak internal controls and poor municipal governance. Apparently, lawyers were used to "facilitate" these municipal deposits.
A representative of SizweNtsalubaGobodo, the curator appointed to take control of VBS, confirmed on Friday that the measures to curb the flow of cash out of the bank were still in place. These withdrawal limits include:
* R1 000 per day per individual customer/depositor.
* R7 000 for a burial society.
* R1 000 for a Stokvel.
* No withdrawals for municipalities.
"The curator is trying to find a solution such that he can lift these restrictions, but for now they apply," the spokesperson said.
A quick survey done in Thohoyandou last week revealed that the measures were not welcomed by all of VBS Mutual's customers. The burial societies especially are hard hit by the R7 000 limit.
One such burial society that suffered is the Nakisani Burial Society at Mvelaphanda outside Vuwani. The society was started by the community to help bereaved families. Recently they had two funerals in the community and wanted to withdraw R20 000 for the two families.
Community leader Mr Humbulani Nemakhavhani said they were only allowed to withdraw R1 000, which was far below what they wanted. "Just imagine the embarrassment we had to endure and explanations we had to give to the families who were relying on the money for burial. We are still very angry with the bank. All we wanted was our money and not a loan from them, but they have proved unreliable and we were left with no other option but to terminate our relationship with them," said Nemakhavhani.
Forensic investigation
Early in April, the SA Reserve Bank announced that it had commissioned a forensic investigation into VBS Mutual Bank. Initial findings of the curator showed that VBS had been "severely mismanaged" and that there was reason to believe that fraudulent reporting and manipulation of financial information had taken place.
Last week, City Press reported that VBS Mutual had lent out large sums of money to its own directors and municipal officials. At least five of VBS's senior executives had received mortgage loans running into millions of rands, the newspaper reported. Loans were also given to people closely related to Vele Investments, the controlling shareholder at VBS.
The City Press investigation revealed that a R6,9 million loan was given to the Maitazwitoma Trust in 2015. The trustee is Hubert Muzimba Ramagwede, a director of Dyambeu Investments. Dyambeu Investments, where Vhavenda King Toni Mphephu Ramabulana's name features prominently, holds 25,22% of the shares of VBS Mutual. Veermont, a company run by two other Dyambeu directors, Tshifhiwa Matodzi and Maanda Reuben Phalanndwa, also received a R2,2 million loan from VBS in 2015.
The problem with the "related" loans is that VBS apparently did not report these in its annual financial statements. In April, VBS curator Anoosh Rooplal withdrew VBS's annual financial statements for 2017, because they were not to be trusted.
VBS's problems also spilled over to its auditors, KPMG. In mid-April, two KPMG partners involved in auditing VBS resigned after it came to light that they were also beneficiaries of loans from VBS. Their financial interests with VBS were not fully disclosed and the auditing firm laid disciplinary charges against them.