The South African Federation of Trade Unions is outraged at the report “The Great Bank Heist”, which proves that almost R2 billion was looted from the Venda Building Society (VBS) mutual bank.
Even in a country in which so much corruption has already been exposed, the scale and audacity of this “heist’ is staggering.
VBS had at one time appeared to be a runaway success. Its financial report for 2017 revealed a big growth in total assets which almost trebled from just R337m In 2015, to R1bn in 2016 and then doubled to R2bn in 2017. Net profits rose from R1m in 2015 to R5.9m in 2017 while operating profit increased to R87m in 2017 from R28m in 2015.
But on 11 March 2018 SA Reserve Bank governor Lesetja Kganyago suddenly placed the bank under curatorship, after it experienced a severe liquidity crisis, which meant it could not repay deposits by municipalities, amounting to R1.6 billIon, which the VBS had lobbied them to entrust it with.
It was alleged that it had been engaging in fraudulent transactions that benefited certain key individuals and companies connected to the bank, and arranging loans to its own directors and shareholders, a serious malpractice in banking.
The curator who took over the company, Anoosh Rooplal, discovered far greater problems – including R900 million, which could not properly be accounted for. Much of VBS’s loan book was rotten to the core, with a much higher proportion of non-performing loans than the bank ever disclosed in its monthly returns to the banking regulator.
So the Reserve Bank appointed a team of forensic investigators led by Werksmans Attorneys and advocate Terry Motau, to establish what exactly had precipitated the bank’s failure.
This forensic report into fraud and reckless business practices at VBS is devastating. It details how 53 persons of interest were unjustifiably paid R1.89-billion between 2015 and 2018 and calls for them to be criminally charged, the money recovered and that VBS be closed.
“It is corrupt and rotten to the core,” says the report. “Indeed, there is hardly a person in its employ in any position of authority who is not, in some way or other, complicit”. It identified the VBS chairperson, Tshifhiwa Matodzi, as the kingpin of the fraudulent and theftuous [sic] conduct of VBS’ business”.
Bank executives established a network of looting, primarily facilitated by Matodzi’s company Vele Investments, and created a fictitious image of the bank’s finances. “The captors and their associates went on a massive spending spree at the expense of VBS’ depositors,” said Motau. Large sums were paid to perpetrators of the scheme, while VBS directors were bribed, and Vele made fictitious deposits to prop up the bank’s apparent finances.
Those who the report says received over R30-million in gratuitous payments include: former ANCYL Limpopo leader and businessman Kabelo Matsepe, former KPMG partner Sipho Malaba, former VBS treasurer Phophi Mukhodobwane, the Venda king’s attorney Paul Makhavu, and Vele CEO Robert Madzonga.
The report also says that VhaVenda King Toni Mphephu Ramabulana received R17.7-million, and Brian Shivambu, Floyd Shivambu’s brother, is listed as having received R16.1-million
SAFTU demands that both the ANC and EFF come clean and reveal all its sources of income and take urgent action against any members found to have acquired any of this money by illegal means.
For SAFTU the most despicable revelation in the report made by Phophi Mukhodobwane, a key witness in the investigation, who testified that VBS had attempted to solicit R1-billion from Prasa in late 2017 in the hope of keeping the bank running.
Mukhodobwane testified and the report found, that to achieve this, a “commission” – read “bribe” – of R1.5-million was paid to a group of union officials from the South African Transport and Allied Workers Union, who claimed to be able to facilitate such a large deposit from Prasa. “VBS paid that amount to the Satawu officials, through a front, in anticipation of the deposit being made. In the end the plan was stymied thanks to an unrelated (yet connected) investigation into Prasa itself.
Mukhodobwane himself stole R30-million from the bank. He further testified against Danny Msiza, Provincial Treasurer of the ANC in Limpopo, whom he described as a “kingpin” in a scheme where municipalities were connected with VBS while the middle man would be paid a “commission” – a fee that classifies as a “bribe” and is illegal under South African law.
The report also includes an extremely serious, though as yet unproven, allegation in Mukhodobwane’s testimony that the Public Investment Corporation (PIC) CEO, Dan Matjila, may have received R5-million in cash from the VBS.
The PIC has denied the allegation but also announced that it has taken important steps against its two delegated Directors on the Board of VBS, Ernest Nesane and Paul Magula. Motau and Werksmans found Nesane received R16.6-million and Magula received R14.8-million in incongruous payments from VBS. Magula was dismissed for incompetence in April 2018 and Nesane resigned two days after testifying before Motau.
Another feature of the report is, yet again, the disgraceful role of auditors KPMG, who audited VSB yet failed to report what must have been glaringly obvious accounting discrepancies, and one of whose partners, Sipho Malaba, is on the list of the looters.
This is the same firm which audited Gupta-liinked Linkway Trading, yet failed to comment on the R30m earmarked for an agricultural development project in the Free State, which was diverted to pay for the Gupta wedding at Sun City, at which former KPMG chief executive Moses Kgosana and other partners were present!
KPMG also played a key role in the capturing and destruction of SARS, by producing a false report on a “rogue unit”, which caused individuals to be kicked out of SARS and helped Tom Moyani overhaul of the institution in the interests of his corrupt cronies.
The worst feature of all these shocking revelations is that by far the biggest victims are those least able to withstand the consequences. The majority of the funds deposited in VBS were from stokvels, the elderly and municipalities in one of the poorest provinces, Limpopo, who will now have to reduce already low budgets and cut even more spending on schools, health services, houses, roads and sanitation.
Co-operative Governance and Traditional Affairs Minister Zweli Mkhize earlier warned these municipalities that their best hope is to receive back only about 10% of their VBS deposits after five to seven years. Even that may now be very optimistic after these latest findings.
This shocking report proves beyond any doubt SAFTU’s constant warnings that corruption in South Africa has never been limited to a small group centered around the Gupta and Zuma families, but is a far wider network in both the state and private business.
The State Capture Inquiry must now be extended to cover the VBS and other corruption scandals which will surely follow. Meanwhile, in the many cases where this report provides clear evidence of illegality those implicated must be arresyed, prosecuted and tried and the stolen money recovered.
In addition we urgently need an investigation into economic crime as a whole. PwC’s biennial Global Economic Crime Survey, made the shocking revelation that “Criminality is rife in South Africa across all forms of economic crime. It revealed that “the number of South African organisations that have experienced economic crime, it says, is now at a “staggering” 77%‚ well above the global average rate of 49%”.
While SAFTU is adamantly opposed to corruption in the public sector, it is just as bad when committed in the private, sector, or in collusion between public and private entities. What makes it even worse in private companies is that is systemic, built into a capitalist system, which is based on the theft of the wealth created by the workers.
It is not a free market system but a monopoly system in which a super-rich elite swindle and cheat to maximize their profits, collude to fix prices to crush rival capitalists, dodge taxes, and take their wealth overseas, all at the expense of their workers, consumers and the people of South Africa.