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Not long after Tshifiwa Matodzi bought shares in VBS Mutual Bank through Dyambeu Investments, he spent a day at the branch in Thohoyandou to get a sense of what needed to be changed. Only one person walked into the bank every hour. In contrast, the bigger bank next door was full.
Now things have changed, according to Matodzi’s business associates. Customers use the bigger bank next door for shade as they snake into the VBS branch.
As a high school pupil in Thohoyandou, Matodzi used to walk past VBS on the way to school. It was a short cut to school. He often tells stories about how the bank used to have long queues. But years down the line, there was not even a single person. His urge to reclaim the bank’s former glory grew bigger.
By then Matodzi had studied at the Rand Afrikaanse Universiteit, now knows as the University of Johannesburg, and graduated as a chartered accountant. It was also at university where Matodzi, now the bank’s chairperson, met VBS chief executive Andile Ramavhunga. They not only shared the common VhaVenda roots, but also the passion to one day own VBS.
Insiders describe Matodzi as “a humble, approachable and hands-on manager”, whose main focus has been to recruit only the best in the country to serve VBS.
Ramavhunga, whose twin brother has an MBA and honours in mathematics, is “the quintessential chartered accountant”. He is also the former chief financial officer at the Small Enterprise Finance Agency.
“He is the numbers guy; he puts in the hard work. This is the best of the best,” says an associate.
Thus the R7.8-million Nkandla home loan agreement that VBS crafted for President Jacob Zuma took some even in the South African Reserve Bank long to understand. It did not immediately make sense to invest so much money in rural hinterland. The risk also seemed higher.
But the advantage VBS had was that it already had experience funding home loans in rural Venda in Limpopo, where it was founded in 1982.
“We understand the market because we are operating within the market. We live that life. We do not need anyone to translate it for us. That is what makes it easier for us to come up with solution,” says a bank insider.
Key to its success is a well-researched market, he says.
“We live in the market and we know the existential reality.”
One of the bank’s operating mottos is: “We do business with people who are our neighbours and friends.”
Thus the bank prefers to call itself a specialist in “black markets and black groups”.
On the home loan side, VBS is the best performing bank in terms of the books. This has been attributed to the observation that “the sentimental value of houses that we build on tribal lands is higher”.
“In the urban areas people have houses but in rural areas it is called a home.”
It is for this reason that 99.9% of VBS’s home loan customers pay the monthly instalments on time – “the best in the industry,” according to a high-ranking shareholder. On average the bank handles loan applications of up to R30 million a month, he says, meaning that the home loan book grows by up to R400 million every year.
Nkandla is probably not the bank’s biggest home loan and it is nothing unusual at VBS, he says.
He says the bank funded properties as far as Cape Town. At least 30% of the houses in Polokwane’s lush and popular “Tender Park” – formally known as Flora Park – are funded by VBS.
But its unique selling point is the focus on transforming rural areas.
“As a bank you can only survive when you are innovative. VBS is innovative in the sense that it went into a rural market, which is largely untapped. That is its unique selling point,” says an insider.
Matodzi founded Dyambeu investments in 2013, and bought the majority shares at VBS. At the time when he bought shares into the bank, the South African Reserve Bank had been on the verge of shutting it down. He told them that he had a strategy to turn it around. A part of that included bringing Ramavhunga on board.
The bank’s turnaround into a profit-making entity has been attributed to the new focus on funding small enterprises. These entities now account for up to 53% of the money that the bank gives out as loans. They funded some small companies taking part in government’s black industrialist programme and several independent power producers.
The late VhaVenda chief Patrick Mphephu copied the model of VBS from Bophuthatswana Building Society, which was created by former homeland leader Lucas Mangope. Mphephu also copied the stadiums, the malls and many other development initiatives, according to VBS insiders.
“Whatever happened that side he will copy it and bring it there,” said an insider
“The mistake that Mangope did was that he partnered with Standard Bank. The [major banks] knew that after 1994 all black banks are going to be famous and they started killing them.”
VBS survived because it had a white board staffed by Afrikaners and they did not see it as a threat.
But those close to the bank were also quick to say that VBS has always enjoyed good relations with the mainstream banks. For example, the VBS bank cards work in the ATMs of all other banks.
For a bank that is still small it would only mean that there is space to grow.
It could be compared with Capitec, which was a late entrant into market and its growth has consequently been exponential.
Future plans for VBS include building more branches in the “black markets”, like townships.
