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The crisis-ridden VBS Mutual Bank lent out large sums of money to its own directors, municipal officials and the SA Municipal Workers’ Union (Samwu) to finance a building the union already owned. At least five of VBS’s senior executives received mortgage loans running into millions of rands between 2015 and last year.
The October 2017 mortgage deal worth R11.8 million, which VBS signed for the Samwu headquarters in Johannesburg, is now shrouded in mystery. This week, Samwu denied that it ever mortgaged its headquarters, Samwu House in Marshalltown, downtown Johannesburg, with VBS last year.
It instead claimed that it owned the building outright and had done so since 2007. However, a copy of the mortgage deal filed at the Johannesburg deeds office is dated October 4 2007 and signed by Samwu’s president Pule Molalenyane.
The union’s general secretary Simon Mathe, however, insists that the mortgage bond held at the deeds office is a fake. “We own the building. We bought it nine years ago for R6 million. We are not paying anything on it. That information is false,” he told City Press by phone from Cuba this week.
Mathe claimed Samwu is the victim of a disinformation campaign by people who have “intercepted our documents on our IT system” – insinuating that the bond held at the Johannesburg deeds office may be a forgery. The union partnered with VBS last year to launch a series of low-cost financial products targeting Samwu members, which is not unusual for unions which often team up with insurers and medical schemes.
Mathe, however, says rumours about Samwu’s further support for VBS are lies.
The SA Reserve Bank (Sarb) placed VBS under curatorship last month when it ran out of cash after relying on large, illegal, and short-term municipal deposits to fund long-term loans. The cash crunch at the bank has left a number of municipalities in the lurch as hundreds of millions of rands remain stuck at VBS. The bank has R1.5 billion in municipal deposits, of which R1.1 billion is from eight Limpopo municipalities.
An analysis of bond records City Press has conducted over the past two weeks shows that a large proportion of VBS’s mortgage lending went to government and municipal officials, and to people closely related to Vele Investments, the controlling shareholder in VBS. This portion of the VBS loan book is visible through public records, in which some of the largest loans are recorded.
Those who benefited from loans with VBS included at least two officials from a Gauteng municipality. They received their mortgages, totalling R2.4 million, in the same month that the municipality transferred a significant portion of its funds into the bank.
VBS curator Anoosh Rooplal earlier this month withdrew VBS’s annual financial statements for 2017 because they were not to be trusted. One respect in which these statements are almost certainly incorrect is in the misreporting of related-party loans – or loans to its own employees and shareholders.
The 2017 annual report does declare a big spike in “related-party” loans to its own directors. These jump from only R800 000 in 2015 to around R14 million by March 2017. This is still only half of the loans City Press found which VBS extended to indirect shareholders and companies owned by Vele Investments. The loans to people close to the company include:
- A R6.9 million loan to Maitazwitoma Trust in 2015. The trustee is Hubert Muzimba Ramagwede, a director of Dyambeu Investments, a 25% shareholder in VBS;
- A R2.2 million loan, also in 2015, to Venmont, another company run by Dyambeu directors Tshifhiwa Matodzi and Maanda Reuben Phalanndwa;
- A R4.5 million bond issued to VBS spokesperson Ndivhuwo Khangale last year. His partner in communications firm Gogoro, Mmuso Pelesa, obtained a R5 million mortgage from VBS last year as well;
- VBS risk officer Takani Madzhadzhi has two VBS mortgages dated 2015 and 2016: for R1 million and R1.5 million respectively;
- A R2.1 million mortgage issued to VBS chief executive Andile Ramavhunga;
- A R3 million mortgage issued to staffer Tsumba Matambella in 2015. Matambella has been referred to as another spokesperson for the bank; and
- A R1 million loan which VBS’s human resources manager Qalinge Mkhuseli was given last year.
What makes these kinds of mortgages at VBS remarkable is the bank’s tiny size. As of February this year, VBS’s entire mortgage book was worth R450 million, a number that relies on its official filings with the Sarb.
VBS became famous for the R7.8 million mortgage it gave to former president Jacob Zuma in 2017, to repay the state for his portion of the R246 million upgrades to his private home in Nkandla. He did so, after a lengthy court battle, to comply with former Public Protector Thuli Madonsela’s recommendations.
In his affidavit defending the decision to put VBS under curatorship last month, registrar of banks at Sars, Kuben Naidoo, explained how VBS grew mostly by extending loans to fund tenders, especially ones with Eskom. Unlike mortgages, these loans are not publicly traceable.
Naidoo revealed how the bank tended to not pursue repayment from “prominent” borrowers, but he mentioned no names. He said the bank allegedly paid “inducements” to secure deposits from municipalities.
VBS lent money to the KPMG auditors checking its books, which led to the auditing giant firing them. The two KPMG partners responsible for auditing VBS failed to disclose the full extent of their financial interests in the bank. KPMG’s chief executive, Nhlamu Dlomu, confirmed two weeks ago that Sipho Malaba, her firm’s lead auditor responsible for signing off the bank’s financials, was given loans by VBS, the full extent of which he had not declared.
An internal investigation then threw up similar concerns about another partner, Dumi Tshuma. Both resigned before disciplinary charges were laid against them.
Other clients have now found themselves caught up in the mess. These include ANC Limpopo treasurer Daniel Msiza who, in December 2016, obtained a R9.5 million loan from VBS to buy a conference centre in downtown Polokwane through his and his wife’s company, Mojovax.
Msiza said on Saturday that the loan was on strictly commercial terms and that he had applied to three different banks for financing to buy the property out of business rescue. “VBS simply responded first. It is a purely commercial loan and I am paying it.” He said there was no wrongdoing involved.
Another is deputy director-general of home affairs Thulani Mavuso, who obtained a R2.88 million mortgage from VBS in March 2017.
Mavuso told City Press he took the loan to build a house on his property in the northern Johannesburg suburb of Sundowner. “When the construction is complete I will start to service that loan,” he said. He had shopped around for a loan and settled on VBS, although he also wanted to support “what they were doing” at the time.
