South Africa 9.11.2018 11:16 am

Supra to blame for selling North West on VBS Bank pyramid scheme – report

Supra Mahumapelo speaks at a press conference at Luthuli House, 23 May 2018, where he announced that he would be going on early retirement, thus leaving his post as premier of the North West Province. Picture: Michel Bega

Supra Mahumapelo speaks at a press conference at Luthuli House, 23 May 2018, where he announced that he would be going on early retirement, thus leaving his post as premier of the North West Province. Picture: Michel Bega

The former premier stands accused of encouraging investment in the bank by municipalities – including his own.

The results of a forensic investigation show former North West premier Supra Mahumapelo to be responsible for the province’s municipality illegal investment of R314 million in VBS Bank, The Mail & Guardian reports.

Municipalities are among the worst affected by the collapse of the bank. A report, The Great Bank Heist written by advocate Terry Motau, implicates 53 people in what is described as the “looting of the bank” to the tune of around R1.8 billion.
Now, Mahumapelo has been accused of having “vigorously encouraged” municipalities including his own to invest in VBS Bank, inviting officials from the bank to a conference in the North West to make a presentation. This, the Mail & Guardian said, has been verified by “two highly placed sources”.

These two highly placed sources, one in the treasury and one in the provincial government, confirmed this, saying it was Mahumapelo who had invited VBS officials to a conference in North West in March, 2017.

READ MORE: Mahumapelo calls on Dali Mpofu to help challenge PEC disbandment

One quote from a forensic report investigating the VBS matter reads: “We were informed during our interviews that VBS [was] given an opportunity to present their services and that the former North West premier vigorously encouraged the municipalities to invest with VBS, as VBS was a black-owned bank, which offered better interest rates.”

The report was presented to the ANC provincial task team in Tlokwe on Monday, where the VBS scandal was on the agenda.

Mahumopelo denied inviting the VBS officials to the conference and said he had no knowledge of the report.

READ MORE: The lessons that must be learnt from the collapse of VBS bank

The way the bank was looted is explained in the Mail & Guardian report. It operated like a “Ponzi” or pyramid scheme, in which those who benefit can only make money by attracting others to invest in the scheme.

It explains that the bank would create fake deposits in the name of various parties. It would then receive deposits from municipalities, which would be withdrawn against fake deposits or used to grant supposed loans to related parties. These loans would be taken care of via fraudulent payments along with accounting entries.

The bank’s CFO would then crook the books, submitting data to the Reserve Bank each month in a bid to make the looting appear legitimate. These monthly statements and returns would get signed off by external auditors, with those who knew about the scheme receiving payments in a bid to keep them quiet.

READ MORE: No sign of municipality’s R10m it withdrew from VBS Bank – EFF

Mahumapelo’s was forced out as North West premier earlier this year after his alleged mismanagement sparked a wave of violent protest in the province calling for Mahumapelo to step down.

He was later fired as ANC chair in the province together with the entire leadership and the ANC subsequently formed a provincial task team (PTT) to take over from the disbanded Provincial Executive Committee (PEC) that had run the province.

Mahumapelo was initially part of the PTT but he later quit.

ANC branches from the North West are currently challenging the decision to disband the PEC in the South Gauteng high court, insisting the move was unlawful.

(Compiled by Daniel Friedman. Additional reporting by Kaunda Selisho)

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