The VBS Mutual Bank mess is simply getting bigger and bigger as the stories of what had happened unfolds each week. Last week, it was described by the registrar of banks as “probably … the biggest bank heist in South Africa by bankers.” Amidst all this, the central figures in the scandal are trying to leave the space “with our heads held high”, but the Johannesburg High Court was clearly not convinced and allowed provisional sequestration orders against at least three of them as well as against Vele Investments, VBS’s main shareholder.

R1,5 billion bank heist

Kuben Naidoo, the registrar of banks and a deputy governor of the central bank, is quoted in national media as saying that this is the biggest bank fraud seen in South Africa. He described VBS as a Ponzi scheme.

The alleged large-scale fraud at VBS is currently under investigation, but much of what had happened is already evident in court papers. The bank’s records, also attached to the court papers, have revealed how companies were used to siphon off R1.5-billion invested by municipalities, the Public Investment Corporation (PIC) and other entities.

The biggest losers in this ordeal will probably be the ordinary taxpayers. Acting against National Treasury’s instructions, local municipalities continued to invest millions of rands in the mutual bank. The estimate is that 13 (already-cash-strapped) municipalities made deposits totalling R1,65 billion with the bank. The local municipalities that ignored National Treasury’s instructions not to invest in VBS Mutual Bank include the Vhembe District Municipality (R311,5 million), Collins Chabane Municipality (R122,4 million) and Makhado Municipality (R61,7 million).

A long wait for maybe 10%

Whereas ordinary depositors who invested less than R100 000 with the bank will probably get all their money back, the same cannot be said for municipalities. Government has stated that it would not bail out the municipalities.

In a response to a parliamentary question posed to the Minister of Cooperative Governance of Housing and Traditional Affairs, it was stated that the preliminary reports received from the SA Reserve Bank indicated that VBS Mutual Bank’s available equity could not cover the deposits. In simple terms it means that the bank does not have the money to pay its creditors and even if all the assets were sold, the proceeds would still not cover the debt.

“Where possible they could receive about 10% of their deposits once the process is concluded in about five to seven years’ time,” the minister said.

Last week, the Democratic Alliance in Limpopo wrote letters to the provincial MECs, urging them to institute disciplinary measures against the municipal officials and mayors responsible for placing the deposits with VBS.

“The Provincial Treasury displayed a lackadaisical approach bordering on incompetence by letting municipalities in the province invest with VBS mutual bank from as far back as 2014, despite Treasury regulations that prohibited them from doing so,” said Jacques Smalle, provincial leader of the DA.

Going after the main players

On Tuesday, provisional sequestration orders were granted against three businessmen involved in the VBS Bank saga. The bank’s main shareholder, Vele Investments, has also been liquidated. The request to have two other businessmen provisionally sequestrated, continued in the Johannesburg High Court on Wednesday. One of them is Robert Madzonga, VBS’s former chief operations officer and the group executive officer of Vele Investments. The other man is Andile Ramavhunga, former chief executive officer of VBS Mutual Bank.

Provisional sequestration orders have been granted against Tshifhiwa Calvin Matodzi, the former chairman of VBS’s board of directors and also the director and chairperson of Vele Investments, as well as against Philip Truter, the bank’s chief financial officer, and Phophi Mukhodobwane, VBS’s general head of treasury and capital management.

But not all are happy

The curator appointed by the SA Reserve Bank to take control of matters at VBS, SizweNtsalubaGobodo Advisory Services, announced last month that retail depositors can make use of Nedbank branches to withdraw their money. This step was taken to counteract the problem of predominantly pensioners sleeping in long queues in front of VBS branches in the hope of getting some of their money back.

The step to allow Nedbank to take over the individual retail depositors of VBS was not welcomed by all sectors of the community. The Thulamela Business Forum openly voiced their dissatisfaction with this move and vowed to protest in front of Nedbank branches. The forum believes that VBS can still be saved and that this step will open up the avenue for another bank to usurp the existing customers of VBS.

TBF chairperson Mr Mbulungeni Ntsieni said that the curator should have dealt with the officials who had allegedly stolen from the bank and should not have moved the business away. He also said that the forum believed that the curator’s decision to appoint Nedbank to take over the retail depositors’ accounts had been influenced by other factors. “We want to put pressure on the bank, so that we can find the truth of who benefited from the transaction,” he said.

Nedbank Bank’s Divisional Executive: Retail and Business Banking, Mr Dave Schwegmann, denied that any suspicious dealings had taken place. “The forum needs to direct their concerns to the curator because we were not the ones who took the decision. All the depositors are guaranteed to get their money back, and the bank will continue to support and supply resources as appointed by the curator,” said Schwegmann.