Kickbacks, dodgy investments: How VBS crippled Limpopo services

VBS Bank
VBS Bank

A new provincial report identifies R1m in vehicle finance kickbacks and dodgy investments that have left implicated municipalities bankrupt and without water

A damning new report has revealed that Tsakani Ngobeni, the manager of Collins Chabane Local Municipality in Limpopo, bought a top-of-the-range Range Rover Velar for more than R1 million.

The purchase was financed by VBS Mutual Bank a month after the municipality invested R120 million with the now-defunct bank.

This is contained in the 167-page report, which identified role players who were involved in the VBS scandal and allegedly benefited from kickbacks they received from the bank.

The report was compiled by Limpopo’s provincial treasury and is dated November 30 2018.

It has not been made public.

This is the latest report to lay bare the financial damage inflicted by the VBS scandal.

The report, which City Press has in its possession, shows that Ngobeni obtained vehicle finance from VBS after the municipality made an investment with the bank.

“After the interviews it was also found that the municipal manager is the holder of a vehicle finance account with VBS Mutual Bank in the amount of approximately R1 300 000,” the report reads.

“It was also found that the vehicle finance agreement was obtained from VBS Mutual Bank after the investment of the municipal funds with VBS Mutual Bank.”

Ngobeni told City Press on Friday that she applied for vehicle finance a month after the municipality invested with VBS.

“I did not obtain vehicle finance. I applied for vehicle finance with VBS in June 2017.”

She said she was hospitalised between September and November 2017 and had to wait for the car because it was not in South Africa at the time.

“When the investment was concluded, I was on sick leave. VBS is not new to us. I had a relationship with VBS long before the scandal. I am still paying for the car. I am just not sure where the money is going,” Ngobeni said.

Ngobeni’s approval of R120 million for her municipality to invest in VBS landed her in hot water.

The Pretoria High Court ordered the liquidation of VBS after the SA Reserve Bank’s Prudential Authority applied for the final liquidation of the bank.

The provincial treasury’s report has recommended that disciplinary action be considered against Ngobeni for making, permitting or instructing another official of the municipality to make an irregular expenditure.

“The municipality did not receive its capital amount of R120 million at the end of the investment period, nor did the municipality receive any of the accrued interest on the investment with VBS Mutual Bank,” it says.

Another worst-case scenario in Limpopo, the report states, concerns Given Ratau, the former chief financial officer of Fetakgomo Tubatse Local Municipality.

He invested R100 million with VBS instead of R100 000. According to the report, this was done without the approval of now suspended municipal manager Nontuthuko Busane.

“She was not aware, at the time of granting approval, that the investment was already made in the amount of R100 million or that funds were already invested with VBS Mutual Bank,” the report states.

The investigation found that Ratau committed fraud in making investments with VBS prior to such investments being approved by Busane.

“A R100 million investment was made with VBS Mutual Bank before any approval was sought from the municipal manager. The municipal manager only approved an investment of R100 000.”

Fetakgomo Tubatse municipality spokesperson Kubane Tolo said Ratau resigned last year.

He said the council debated the provincial treasury’s report last week.

“Council will take a resolution next week on whether those implicated in the VBS saga must be prosecuted, and what needs to be done to recover the monies,” he said.

City Press understands that Vhembe’s municipal manager, Reuben Rambado, resigned over the VBS scandal last week.

However, municipal spokesperson Matodzi Ralushai said: “The municipality has not yet received the resignation letter.”

Rambado declined to comment.

Municipal insiders said Rambado and the municipality were at loggerheads over a settlement agreement for him to vacate office.

Ralushai said discussions between the municipality and Rambado were not finalised.

The provincial treasury’s report indicates that the R100 million investment that Vhembe made into VBS was recommended by then deputy financial officer Ramadiga Marutha and approved by the now suspended chief financial officer, Nyiko Mchavi, who signed off as the “municipal manager”.

“The same situation occurred with the R150 million investment on August 7 2017 and the R200 million investment on September 12,” the report says.

This happened when former ANC deputy provincial chairperson Florence Radzilani – who is among individuals implicated in the VBS scandal – was still the mayor of Vhembe.

Radzilani was said to be “crying” because she received only R300 000 for ensuring that millions deposited by Vhembe into VBS were not withdrawn.

As a result of all the money lost, the Limpopo provincial government is considering placing municipalities which invested hundreds of millions of rands in the now-defunct VBS bank under administration because they cannot deliver services such as water.

This comes as the Hawks prepare to brief Parliament on its investigation on the VBS fraud this week.

A total of 15 municipalities countrywide made dodgy investments into VBS at the risk of collapsing service delivery.

This was despite the National Treasury directive which restricted municipalities and their entities from placing funds into mutual banks.

In Limpopo, municipalities which invested with VBS were Vhembe, Collins Chabane, Ephraim Mogale, Fetakgomo Tubatse, Lepelle Nkumpi, Greater Giyani, Elias Motsoaledi, Makhuduthamaga and Makhado.

Kenny Mathivha, the spokesperson for Limpopo premier Stanley Mathabatha, said on Friday that these municipalities were bleeding financially.

“Almost all the municipalities that invested money with VBS are now bleeding. There is no money. Who is going to bail them out?” Mathivha asked.

He said the rule of the province was that “if they come to us and say: ‘We need R100 million in order to provide services’, the government has an obligation to give them money”.

But Mathivha said the rule has been that the provincial government takes over the administration after bailing out a municipality.

“We place them under section 139 of the Constitution. We will send a person, who will see that our money is being used adequately.”

Last year, the provincial government placed the DA-led Modimolle/Mookgophong municipality under administration as it was technically bankrupt.

Mathivha said money that was meant for service delivery had been lost in VBS.

“People need water and people need roads. Whoever transgressed the rule of law, ideally, must pay back the money.”

The province wants all those implicated in the looting of almost R2 billion of poor people’s money invested in VBS to be prosecuted. Senior government officials have already met with the Hawks and other law enforcement agencies.

Mathivha said most mayors were “smart” and did not sign anything related to investments that their municipalities made with VBS.

“They are politicians. You will not find [their names] anywhere. But it does not mean that they are not guilty. That is why most of them were set aside and some of them resigned, which, to us, is an admission that ‘I will not be able to succeed’,” said Mathiva, adding that municipal officials who had resigned were not off the hook.

Hawks spokesperson Brigadier Hangwani Mulaudzi said the unit would not give a blow-by-blow account of its investigations but was continuing with its probe.

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