‘No bailouts for municipalities.’ Mkhize wants VBS money back

Cogta minister Zweli Mkhize. Picture: Ihsaan Haffejee
Cogta minister Zweli Mkhize. Picture: Ihsaan Haffejee

Heads are set to roll as Cooperative Governance Minister Zweli Mkhize looks to recover the R1.57 billion that 14 municipalities across the country invested in VBS.

Briefing Parliament’s portfolio committee on cooperative governance and traditional affairs this morning, Mkhize announced a forensic investigation to supplement the Reserve Bank report on VBS.

“The report that has come from the Reserve Bank has indicated the very crude abuse of finances that were destined for poor communities and in this case it creates an impression that not only were we dealing with a situation where the investments were taken to a mutual bank – which was illegal and unprocedural – but we also have a second issue that inside that institution was a systematic structured fraudulent process that was siphoning money out of the municipalities,” Mkhize said.

“We have briefed senior counsel to consider combining various provincial departments of cooperative governance and traditional affairs as well as municipalities to launch a lawsuit on this matter so that we can chase and try and recover some of the money.

"We realise that the report that comes from the Reserve Bank on its own is not helpful for us to deal with things from the side of the municipalities.

"Hence we believe it was correct for us to institute a forensic process that will help us to uncover the genesis of the decision that led to the money going to VBS.

“We believe that this report, on our side, is going to be a lot more specific in being able to find out what actually happened and who is responsible and take it from there to institute the necessary criminal proceedings.

"At the same time we hope that it will be clear where internal disciplinary processes have to be undertaken.”

Some of the municipalities that illegally invested in VBS are so embattled they are unable to deliver basic services to residents.

Projects have been suspended in municipalities such as Dr Ruth Mompate, Mahikeng, Madibeng, Giyani and the West Rand.

Mkhize painted a bleak picture of the current state of the municipalities, many of which are unable to service their debt.

The minister was at pains to emphasise that the investments with VBS were in contravention of Treasury’s Municipal Finance Management Act.

In his closing remarks, Mkhize ruled out any possibility of bailouts for the municipalities that find themselves in the red.

“There will be no bailouts to the municipalities; however, support is provided to the affected municipalities to strengthen their internal controls, reporting, revenue raising measures, capacity building and service delivery.”

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