Municipal managers to face charges for illegal investments in VBS


The North West standing committee on public accounts (Scopa) is pressing for punitive action, including criminal charges, against the errant municipal managers behind the illegal investments of service delivery funds into the embattled VBS Mutual Bank.

On Wednesday, the provincial public accounts committee told their counterparts in Mahikeng Local Municipality and Dr Ruth Segomotsi Mompati District Municipality in Vryburg to “go to the nearest police station and lay criminal charges” against the respective municipal heads.

Three councils, including Moretele Local Municipality, appeared before Scopa to explain the unlawful VBS transactions. Scopa also wanted all three councils to stop dragging their feet and swiftly implement Cooperative Governance and Traditional Affairs (Cogta) Minister Zweli Mkhize’s instruction that disciplinary steps be taken against those implicated.

“We are not requesting them to do it. We were telling them to go do it,” Scopa chairperson Mahlakeng Mahlakeng told City Press.

“We expect that they will be suspended, charged internally and criminal cases opened.”

Mahlakeng said it was baffling that the municipal managers “appeared ignorant in terms of the law when it is very clearly written that there are certain types of banks where municipalities could not invest”.

Municipalities are restricted from putting money into mutual banks, but a total of 15 municipalities countrywide pumped millions of public funds into VBS bank at the risk of collapsing service delivery.

In March, the SA Reserve Bank placed VBS bank under curatorship owing to a high risk that depositors could lose the money. Treasury said then that “the rationale for restricting municipalities and their entities from placing funds into mutual banks is consistent with the objective of ensuring that funds meant for service delivery are managed as responsibly as possible”.

Mahlakeng told City Press that in terms of the evidence put before the committee on Wednesday, municipal councils were kept in the dark about the shady investments, with officials hiding behind the explanation that decisions on investments were an administrative function and should not involve politicians.

“It was more surprising that the municipal managers did all of that without telling anybody, including council. All of them – the council – were not aware of that arrangement. They claimed it was administrative, so there is nothing that was done through the resolution of council,” he said.

The worst case was in Mahikeng, where the municipal manager also treated his councillors with “utter disrespect”.

“He spoke to them like subordinates when they are his employers. He was so arrogant that we ended up chasing him out of the meeting,” Mahlakeng said.

He said Mahikeng had “fraudulently” invested some R60 million of funds belonging to Cogta into VBS bank, which had somehow made deposits into the municipality’s account without explanation.

“He knowingly and deliberately took that money and invested into VBS. We told him that it is fraud and that the [municipal public accounts committee] must go lay a criminal charge of fraud against him.”

Mahlakeng said members of the committee were part of the hearing and had committed to comply with Scopa’s instructions.

Dr Ruth Segomotsi Mompati District Municipality stands to lose R150 million that was put into VBS, part of which was meant for toilets. The Mahikeng and Moretele municipalities were exposed to the risk of losing R83 million and R30 million, respectively.

Mahlakeng said the committee could not get clear answers on how the interest for VBS investments spread in the province.

“We were specific on whether or not this appetite of working with VBS was determined by the pronouncement of the former premier [Supra Mahumapelo] about having a black bank during a state of the province address.”

But none of them were explicit, he said. However, he said, it was odd that more often than not, only VBS had made a presentation while competitors were not invited.

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