Water money diverted to VBS by North West municipality

A North West municipality could have contravened Treasury regulations by diverting R50 million from a grant meant for water infrastructure to bank it with troubled VBS Mutual Bank.

The Moretele Local Municipality confirmed this during a meeting, said chairperson of the local government portfolio committee in the provincial legislature, Motlalepule Rosho.

Last month, the SA Reserve Bank placed VBS into curatorship due to a liquidity crisis, after Treasury instructed municipalities to stop banking with it.

Moretele made news headlines when a resident of Ngobi village wrote an email to former president Jacob Zuma, in which she pleaded with him to intervene so her area could get water.

Large parts of this municipality, which has its seat in Mathibestad, northern Pretoria, have been marred by violent protests over water provision.

Said Rosho: “The municipality is on record as confirming that they took R50 million meant for nothing else but water and invested it with VBS. There would be nothing wrong if they invested money from their reserves but, in terms of Treasury regulations, they can’t invest money from a grant.” She said Treasury had asked the municipality to explain this.

Early last year, Treasury instructed municipalities to stop banking with VBS. They were doing so in violation of the Municipal Finance Management Act, which prohibits them from putting their money with mutual banks.

Meanwhile, there have been reports that Premier Supra Mahumapelo was considering cutting ties with ABSA and moving state money to VBS.

VBS was opening a branch in Mahikeng when its cash flow problems started because some municipalities withdrew their deposits.

The branch in the Mahikeng CBD is branded, furnished and looks ready for business, but the question now is whether it will ever open its doors.

Mahumapelo said in his state of the province address last year: “The province is in discussions with VBS Bank on the role they can play in strengthening VTSD [villages, townships and small dorpies].”

He did not specify the role VBS would play in VTSD, an initiative for formal and informal businesses to form chambers of commerce.

Meanwhile, Rosho said that while it had been confirmed that Moretele invested with VBS, several other municipalities in the province were known to have done the same.

City Press has seen a document showing that the Dr Ruth Segomotsi Mompati District Municipality, based in Vryburg, allegedly banked more than R82 million with VBS.

Another document shows that this municipality paid a contractor a R10 million advance in the last financial year, for the company to “purchase specialised equipment that was required for a project”.

This has raised questions about whether the tender was awarded to a company with the capacity to do the work.

Meanwhile, the Naledi Local Municipality, which falls under the Dr Ruth District Municipality, has denied ever banking with VBS.

Both municipalities did not respond to questions sent by City Press this week.

VBS spokesperson Ndivhuwo Khangale said the branch in Mahikeng would be operational as soon as they had sorted out their problems. He said he could not comment on other issues because VBS was under curatorship.

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