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VBS Mutual Bank

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VBS Mutual Bank was a South African mutual bank. In 2018 it was declared insolvent and bankrupt and placed under curatorship, with South African citizens and taxpayers defrauded out of roughly R2 billion.

VBS Mutual Bank
Company typePublic
IndustryBanking
Founded1982
Defunct2018
FateBankruptcy
HeadquartersRivonia, Johannesburg, South Africa
Area served
Limpopo, South Africa
Key people
ProductsPrivate banking
Consumer banking
RevenueR47 million (2016)[1]
R4.7 million (2016)[1]
Total assetsR1,018,036,301 (2016)[1]
Total equityR144 million (2016)[1]
Number of employees
87 (2016)[1]
Websitevbsmutualbank.co.za

It was formed as Venda Building Society in 1982, and became a mutual bank in 1992.[2] By 2016 the bank reportedly had around 30,000 depositors with all deposits in the bank totalling R800 million. In 2017 the bank planned to list on the Johannesburg Stock Exchange; however, this never materialized.[3] Most of its branches and clients were located in Limpopo province.

History

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Prior to 2014 the bank was relatively small and primarily involved in retail banking with many of its depositors consisting of burial societies and stokvels. The bank in turn issued mortgages and short-term loans to its clients allowing them to use their property or banking deposits as collateral.[4] The South African Public Investment Corporation inherited its shares in VBS bank when it succeeded the pension fund of the Venda bantustan government[4] thereby giving it a 25% ownership stake in the bank.[5] Largest shareholder in the bank was Dyambeu Investments which owned 26% of the bank, 51% of Dyambeu Investments was owned by the Venda Royal family.[4]

Prior to coming under curatorship in 2018 the bank gained notoriety in 2016 when it gave a R7.8 million loan to then President Jacob Zuma when he was ordered to repay the state for controversial improvements to his personal homestead at Nkandla.[6]

In mid-2018 the South African Reserve Bank (SARB) instructed municipalities to withdraw their deposits in the bank as the Municipal Finance Management Act prevented them from depositing public funds in mutual banks. This, along with mismanagement and corruption within the bank, created a liquidity crisis for the bank.[7] The prudential authority filed for VBS bankruptcy at the North Gauteng High Court on 30 October 2018.[8] On 13 November 2018 the North Gauteng High Court issued a final order to liquidate VBS mutual bank.[9]

Curatorship

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Following liquidity problems, VBS Bank was placed under curatorship on 11 March 2018 in terms of the South African Banks Act, Act 94 of 1990, by the South African Reserve Bank.

The collapse of the bank had a large negative impact on the funeral industry in Limpopo Province as the bank was unable to honour insurance and burial society obligations backed by the bank.[10] It also had a devastating impact on stokvel and saving societies held by poor, predominantly black, South Africans in the Limpopo Province.[11]

In October 2018 the national government announced that it would not bail out South African municipalities that had irregularly deposited R1.57 billion with the bank before it collapsed.[10][12] After the bank's collapse it was found that the bank held R372 million in negative equity.[13]

Corruption

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A 2018 report released by the SARB in October found evidence of wide-scale looting, fraud and corruption.[4] It recommended that bank leadership, public officials and auditors be criminally charged and held liable in civil proceedings.[14] The report found that R1,894,923,674 was transferred from the Bank to fifty three individuals between 15 March 2015 and 17 June 2018.[4] According to the report, R16,148,569[15] of that money went to Brian Shivambu, younger brother of the former Economic Freedom Fighter senior politician and now UMkhonto weSizwe (political party) member Floyd Shivambu.[16][17][18][19] The report also implicated the African National Congress's deputy chairperson for Limpopo, Florence Radzilani, and treasurer, Danny Msiza.[20]

EFF leader Julius Malema sued a former EFF senior member of his party for alleging that Malema had admitted to him that he benefitted from corruption at VBS. Malema later withdrew the lawsuit.[21] By June 2021 Brian Shivambu paid back R4.55 million and admitted that he received VBS money.[22] Jacob Zuma defaulted on a R7.8 million loan that he obtained to finance his Nkandla homestead.[23]

In June 2020 eight people associated with VBS and the bank's auditor, KPMG, were charged by the NPA on 47 counts of theft, fraud, corruption and contraventions of the Prevention of Organised Crime Act.[24] Chairperson Tshifhiwa Matodzi, CEO Andile Ramavhunga and CFO Philip Truter were among those arrested and charged.[25]

As part of ongoing investigations, the Hawks arrested three additional individuals suspected of fraud on 16 November 2021.[26] In October 2023 the Parliamentary Ethics Committee found that former EFF deputy leader and now MK party member Floyd Shivambu had received VBS money through transfers from Sgameka Projects Pty Ltd. totaling R180,000 but that no evidence could be found that EFF leader Julius Malema had received any of the VBS Bank missing funds.[27]

In July 2024 former chairperson Tshifhiwa Matodzi was sentenced to an effective 15 years in prison on multiple counts of fraud, racketeering, money laundering and theft.[28]

Thembi Simelane is set to appear before the ANC integrity committee on the 02 September 2024 to answer for the money she received from VBS. Simelane allegedly received a R586,000 loan from VBS Mutual Bank through a company that provided the loan .[29] On the 6th September 2024 embattled Justice Minister Thembi Simelane on Friday told MPs she took a loan from a financial entity that served as a fixer for VBS Mutual Bank at an interest rate of nearly 50% because she was unable to borrow money from a commercial bank on better terms.[30]

Lawsuits

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In February 2021, the liquidators for the bank sued their auditor, KPMG, for 863.5 million rand (~US$59 million) over its audit opinion on the now defunct bank.[31] It was reported in February 2024 that KPMG had settled the lawsuit in a confidential out-of-court settlement for Rand 500 million (~$27 million).[32]

In July 2021, South Africa's largest asset manager, the Public Investment Corporation (PIC) sued KPMG for 144 million rand (around US$9.5 million) it lost when the VBS Mutual Bank went bankrupt as a result of fraud. Its claim is centred on the rights issue and a revolving credit facility it participated in at VBS relying on financial statements audited by KPMG and its former senior partner, Sipho Malaba.[33]

References

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  1. ^ a b c d e "VBS Mutual Bank Annual Report 2016" (PDF). VBS Mutual Bank. 2016. Retrieved 12 October 2018.
  2. ^ Masondo, Sipho (23 September 2016). "What is VBS Mutual Bank? Everything you need to know". City Press.
  3. ^ "VBS Mutual Bank, which lent Jacob Zuma R7.8m, will list on the JSE". Business Day. 2 February 2017. Retrieved 12 October 2018.
  4. ^ a b c d e Motau, Terry (10 October 2018). "The Great Bank Heist: Investigator's Report to the Prudential Authority" (PDF). South African Reserve Bank. pp. 19, 134. Retrieved 11 October 2018.
  5. ^ "VBS Mutual Bank, which lent Jacob Zuma R7.8m, will list on the JSE". Business Day. 2 February 2017. Retrieved 12 October 2018.
  6. ^ "VBS Mutual Bank explains how 74-year old Zuma can afford R7.8m home loan". 14 September 2016. Retrieved 12 October 2018.
  7. ^ Masondo, Sipho (1 July 2018). "What happened at VBS Bank?". Fin24. Retrieved 30 November 2018.
  8. ^ "Banking authority files for liquidation of VBS". News24. Retrieved 11 November 2018.
  9. ^ "UPDATE: Court orders VBS Bank to be liquidated". Fin24. Retrieved 13 November 2018.
  10. ^ a b "Funeral industry left for dead in VBS saga". Retrieved 26 October 2018.
  11. ^ Makana, Chester (16 March 2018). "Stokvels reel from VBS bank's collapse". The M&G Online. Retrieved 30 November 2018.
  12. ^ Makinana, Andisiwe (23 October 2018). "No bailout for municipalities who ploughed cash into VBS Mutual Bank". TimesLive. Retrieved 28 October 2018.
  13. ^ "VBS Bank has R372m negative equity | IOL Business Report". 7 November 2018. Retrieved 30 November 2018.
  14. ^ Cowan, Kyle (10 October 2018). "Explosive report into VBS Mutual Bank reveals large-scale 'looting'". News24.
  15. ^ Motau, Terry (10 October 2018). "The Great Bank Heist: Investigator's Report to the Prudential Authority" (PDF). South African Reserve Bank. p. 135. Retrieved 11 October 2018.
  16. ^ Wyk, Marianne Thamm and Pauli Van. "Analysis: Old scores, new threats – what is really behind the EFF's anti-Indian rhetoric". Daily Maverick. Retrieved 11 October 2018.
  17. ^ Van Wyk, Pauli (11 October 2018). "The Shivambu Brothers and the Great VBS Heist". Daily Maverick. Retrieved 11 October 2018.
  18. ^ "The Chronicles of Grand Azania, Part Two: Floyd Shivamb..." dailymaverick.co.za. 13 October 2019. Retrieved 26 November 2021.
  19. ^ "VBS Theft, Money Laundering & Life's Little Luxuries:..." dailymaverick.co.za. 8 September 2019. Retrieved 26 November 2021.
  20. ^ Madia, Tshidi (11 October 2018). "ANC Limpopo to hold emergency meeting over VBS". News24.
  21. ^ Maughan, Karyn. "Malema drops R1m damages claim against ex-EFF MP who said he confessed to getting VBS loot". News24. Retrieved 26 February 2021.
  22. ^ Wyk, Pauli Van (6 June 2021). "SCORPIO: Floyd Shivambu's brother quietly pays back R4.55m, admits he received the VBS money gratuitously". Daily Maverick. Retrieved 7 June 2021.
  23. ^ Redaksiespan (30 August 2022). "VBS Mutual Bank kry beslagleggingsbevel vir R6,5 miljoen teen Jacob Zuma". afrinuus.com. Afrinuus. Retrieved 1 September 2022.
  24. ^ Wyk, Kyle Cowan for News24 and Pauli van (18 June 2020). "VBS BANK HEIST: Charges against VBS eight detail theft of R2.2bn – and fraud for trying to cover it all up". Daily Maverick. Retrieved 22 June 2020.{{cite web}}: CS1 maint: numeric names: authors list (link)
  25. ^ "More than 100 people have now been arrested in SA's recent corruption blitz – here's the list". Business Insider South Africa. 11 November 2020. Retrieved 24 December 2020.
  26. ^ Ngqakamba, Sesona (16 November 2021). "VBS Mutual Bank looting: Hawks arrest 3 more suspects". News24. Retrieved 16 November 2021.
  27. ^ Maliti, Jason Felix and Soyiso. "Parliament closes Malema's VBS Bank file due to lack of evidence". News24. Retrieved 3 October 2023.
  28. ^ "Calls To Probe S.Africa Opposition Chief In Collapsed Bank Scandal". Agence France-Presse. 12 July 2024. Retrieved 17 July 2024 – via Barron's.
  29. ^ Mokwena, Tebogo (2 September 2024). ""What a waste": SA wary of ANC calling Simelane to face Integrity Commission". Briefly. Retrieved 2 September 2024.
  30. ^ Maziya, Kabelo (6 September 2024). "Simelane says VBS fixer offered better loan terms than a bank". The Mail & Guardian. Retrieved 6 September 2024.
  31. ^ "KPMG Sued in South Africa for $59.3m Over VBS Audit, BD Says". Bloomberg Tax. 24 February 2021. Retrieved 11 February 2021.
  32. ^ Mantshantsha, Sikonathi (1 February 2024). "KPMG agrees to cough up R500 million to quash lawsuit for flawed VBS Mutual Bank audit". News24.com. Retrieved 20 March 2024.
  33. ^ Khumalo, Kabelo (5 July 2021). "PIC sues KPMG for R144m as VBS looting saga continues". Sunday World South Africa. Retrieved 11 February 2022.

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