The treasury in the Gauteng provincial government said on Tuesday it would launch a forensic investigation into investments made by the West Rand district municipality and the Merafong local municipality in failed VBS Mutual Bank.
The South African Reserve Bank said in March it had placed the small lender under curatorship because of liquidity issues.
On Tuesday, the Gauteng treasury said its probe was aimed at determining whether the investments into VBS breached the Municipal Finance Management Act and whether any official should be charged with misconduct as a result.
It said the decision followed confirmation from the municipalities involved that they did not have the capacity to comply with an instruction from the National Treasury to investigate and report on the circumstances surrounding their investments.
“The terms of reference of the investigation include the amounts invested in the bank since 2014, how such decisions were reached, which officials signed off on the decisions, whether any official received any commission or other incentives for facilitating the investment,” the provincial department said.
The West Rand district municipality has R81 million invested with VBS Mutual Bank while Merafong has R50 million. The curatorship means the municipalities cannot access the funds.