Illegal municipal deposits and irregular financing provisions

VBS went from a bank that relied on small-scale retail deposits to huge deposits from municipalities. This money was provided to VBS’s associates, politicians, the Venda King, and many others in the form of high-value loans, overdrafts and other financing opportunities. VBS tried to make it seem like the financing was provided at arm’s length, but there was no intention to follow up with the beneficeries to pay back what they had borrowed. By the time VBS went into liquidation in 2018, the municipal and retailers’ money was lost with little hope of recovery.

Everyday people lost their life savings and pensions. Until 2014, VBS was a small mutual bank and most of its deposits came from retail depositors, stokvels and burial societies. In 2015 Tshifhiwa Matodzi – the kingpin of corruption at VBS – and university buddy, Andile Ramavhunga, decided to make VBS’s business model more lucrative by shifting from relying on small deposits to large short-term municipal deposits. This was facilitated by bribing municipal employees to ignore laws that govern how municipalities should invest their money, and financially rewarding middlemen who put VBS in contact with municipal employees. The large deposits made by municipalities into VBS became a bottomless well of cash for corrupt individuals to drink from. The bribes offered to municipal employees and middlemen took the form of payments made directly into bank accounts of front companies, and the provision of inappropriate financing opportunities. VBS tried to make it seem as though financing was granted at arm’s length, but it clearly was not. A blind eye was turned when payments were not made on loans. The beneficiaries used the money to finance frivolous, luxury purchases, such as expensive vehicles.

Skills

Posted on

October 19, 2023