Municipalities impacted by VBS to get R291m liquidation dividend

The concurrent creditors of Venda Building Society (VBS) will receive a second liquidation dividend of 20 cents in the rand, which amounts to R458 million.

Of that amount, R291 million will be paid to municipalities, VBS liquidator Anoosh Rooplal confirmed in a statement on Thursday.

The second dividend comprises 20% of the concurrent creditors’ claims against VBS, which was placed into liquidation by the high court on 13 November 2018.

The move to liquidate the institution was prompted by Rooplal’s findings and a forensic report by Advocate Terry Motau, which concluded that VBS Mutual Bank was “factually and commercially insolvent and unable to repay its debts against the background of massive frauds and the theft of depositor funds”.

Before the liquidation, VBS was placed under curatorship by then-finance minister Nhlanhla Nene. A subsequent investigation done on behalf of the SA Reserve Bank’s (Sarb) Prudential Authority (PA) concluded that R2 billion was looted from the bank over several years.

Fifteen municipalities from Limpopo, North West, and Gauteng deposited close to R1.5 billion in the bank.

The VBS saga was a huge blow to these municipalities, which are mainly in rural areas and struggling financially.

The Vhembe District Municipality had the largest exposure of R311 million in deposits at VBS, which was approximately a third of its annual revenue.

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Concurrent creditors

The concurrent creditors who lodged valid claims against VBS included 13 municipalities, business depositors, retail depositors, and supplier creditors, according to the statement.

Retail depositors include people who had claims of over R100 000 after they were paid out up to the first R100 000 through the Sarb guarantee via Nedbank, while 98% of depositors who had R100 000 or less were paid in full through the guarantee.

“This is a substantial dividend, and the team is currently verifying all concurrent creditors’ bank accounts,” Rooplal notes.

Payments to all verified concurrent creditors started in November, and Rooplal anticipates the process will be completed by the end of January 2025.

The first liquidation dividend – seven cents in the rand – was paid in 2022 and totalled around R159 million, of which around R110 million was paid to the relevant municipalities.

“All preferent and secured creditors were fully paid in the first liquidation dividend distribution,” Rooplal notes.

The distribution of both dividends amounts to R617 million.

Concurrent creditors have recovered 25.6% of their funds so far.

Rooplal notes that this is a “fantastic outcome”, as final recoveries are often less than 5%.

Around R400 million has been distributed to municipalities alone, which is “effectively a distribution to South African taxpayers”, he adds.

ALSO READ: Former municipal manager sentenced in R230m VBS Bank scandal

Loan account holders excluded

He emphasises that the disbursements do not extend to loan account holders (clients who still owe VBS money) whose contracts remain valid and enforceable.

The liquidation team continues to collect outstanding funds from loan account holders. They are urged to continue paying their monthly instalments to avoid recovery action.

Rooplal anticipates that an additional dividend payment may be made to creditors in future while the liquidation team continues its efforts to trace and recover VBS assets.

This article was republished from Moneyweb. Read the original here.