Municipalities that invested hundreds of millions into the VBS Mutual Bank are now ‘technically insolvent’ and some have had to postpone service delivery projects because they are broke.
This was one of the revelations during a visit by the members of the parliamentary portfolio committee on co-operative governance and traditional affairs who grilled municipal officials implicated in the saga.
“This is a serious matter. That’s why we were given permission [by parliament] to come here,” committee chairperson Faith Muthambi said at the end of a grilling of officials that started on Thursday night and went on well after midnight in Thohoyandou.
The committee was visiting municipalities in the province ‘to ascertain the state of service delivery’ but its major focus was on municipalities that invested in VBS and those that have received repeated disclaimer
audit opinions.
The committee summoned the Mopani, Vhembe, Collins Chabane, Greater Giyani and Makhado municipalities to hearings in Giyani and Thohoyandou.
Muthambi said some of the municipalities now can’t pay creditors on time and are struggling to meet their financial obligations because they invested part of their equitable share money which has resulted in a failure to fill vacancies.
She said in some areas people are forced to continue drinking water from the same sources with donkeys and municipalities can’t refurbish infrastructure or complete projects because they lost their investment in
VBS.
Muthambi refuted suggestions that the hearings would not lead to any repercussions against those implicated in the saga dubbed ‘The Great Bank Heist,‘ saying they will report back to parliament and make follow ups and that they are also working with law enforcement agencies.
Some of the municipalities were given until Tuesday by the committee which continues its work in the province next week to submit reports they failed to produce during the hearings on Thursday.
Shocked committee members were treated to a horror show by stammering municipal officials struggling to account for some of their decisions and failing to provide satisfactory answers to questions put to them
by committee members.
Committee members wanted to know what measures had been taken to recover the millions lost in the VBS saga and also asked repeatedly why implicated staff were allowed to resign and walk away with their
pensions.
The committee heard that a municipal manager who was in the employ of the Vhembe District Municipality when the VBS deposits were made walked away with a payment exceeding R900 000.
However municipal officials could not explain why this was the case and did not give a satisfactory answer on how they were planning to recover this money.
A shocked committee member dissatisfied with an answer to a similar matter involving the Makhado municipality remarked that the municipality had turned into ‘kwa nkunz’ edlemini,’ a place where officials could just walk away with funds in broad daylight.
Among some of the shocking revelations was how Makhado Municipality, which lost R62mn after investing R155mn in VBS also spent millions on consultants to prepare financial statements which were later found to be inadequate by the Auditor General.
The committee also enquired why money was spent on consultants when the municipalities had municipal managers and chief financial officers.
Muthambi asked why the Collins Chabane municipal officials took documents authorising the investment of funds into VBS to be signed by a sick municipal manager who was bedridden in hospital when there was someone acting in that capacity in the municipality.
Collins Chabane municipality officials told the committee they had invested R120mn into VBS on 23 October 2017. They expected to earn an interest of R4mn. However the municipality lost its entire investment.
The decision to invest had been taken without any council resolution. The municipal chief financial officer resigned while disciplinary processes were still underway and the municipal manager, although suspended, continues to draw a salary from the cash strapped municipality.
Officials also put the blame on the accounting systems when asked about the shocking state of their books. But Muthambi was having none of it.
“You want to blame the system when you don’t give it documents?” she fired at one official.
“That one is a difficult one chair,” the official responded. “It can’t be difficult you are an accounting officer,” said Muthambi who was taking no prisoners from those called to account.
The committee will conduct similar visits in Mogalakwena, Nkumpi-Lepelle and Fetakgomo Tubatse municipalities next week.
The committee’s visit comes during the month that marks exactly a year after the VBS Mutual Bank report titled ‘The Great Bank Heist’ was released by Advocate Terry Motau SC.
Motau’s report revealed how VBS was looted through “a detailed analysis of cash flows which gives a far clearer and more accurate picture of the extent of the looting.”
“It emerges from the forensic accountants’ report that the amount of R1 894 923 674 was gratuitously received from VBS by some fifty three [53] persons of interest, both natural and juristic, over the period 1 March 2015 to 17 June 2018,” stated Motau.
The Auditor General of South Africa (AGSA)‘s consolidated general report on the local government audit outcomes financial year 2017/2018 further revealed that 16 municipalities invested money with VBS Mutual Bank in the 2016-17 and 2017-18 financial years.
“The bulk of the losses, 72 percent, involved investments made by eight municipalities in Limpopo: Makhado, Greater Giyani, Collins Chabane, Elias Motsoaledi, Vhembe District, Ephraim Mogale, Fetakgomo Tubatse and Lepelle-Nkumpi,” said the AG Kimi Makwetu.
VBS Mutual Bank was established in 1982 and was then known as the Venda Building Society. It only became a mutual bank in the 90s and its customers were mostly from burial societies, stokvel groups and elderly people.
The bank came into the spotlight when it allegedly loaned former state president Jacob Zuma over R7mn which was used to upgrade his Nkandla homestead.
It was placed under curatorship after it ran out of funds following the looting of R2bn by politically connected individuals. It was finally liquidated in November 2018.
The Vhembe District Municipality invested R300mn in the bank. Its then mayor Florence Radzilani, who is also a senior ANC provincial executive member, was forced to resign in the wake of the scandal.
Two SA Municipal Workers Union (Samwu) leaders, Ronald Mani and Tshililo Timson Musetsho were gunned down in separate incidents earlier this year amid allegations they were in favour for the removal of some prominent politicians from the municipality linked to the scandal.
Mani and Musetsho, both employees at the municipality, received deaths threats days before they were killed.
