Hawks hot on heels of VBS looters

Hawks are hot on the heels of the VBS Mutual Bank looters as some cases are reportedly at an advanced stage.
At the time of going to press Hawks national Spokesperson Hangwani Mulaudzi indicated that investigations into VBS Mutual Bank saga were moving swiftly. He stated that they were on record that some are at an advance stage, however, he was reluctant to give time frames. He added that the Limpopo community must be rest assured that the Hawks have taken the matter seriously and law enforcers will leave no stone unturned to secure anyone responsible for court.
During a meeting with officials from the Office of the Auditor General of South Africa for the purpose of giving overview of the audits of municipalities in Limpopo at Protea Hotel Ranch Resort last Thursday, Portfolio Committee on Cooperative Governance and Traditional Affairs (Cogta) Chairperson Faith Muthambi criticised the lack of clear and substantial consequence management in local government in Limpopo despite continuous transgressions.
The committee is of the view that without concomitant action, municipalities will continue to struggle to deliver quality services, which will impact on residents, especially the poor.
It was learnt that municipalities that invested public funds with VBS Mutual Bank were technically insolvent and that this impacted on their financial viability as well as the ability of municipalities to service their creditors. It was reported that the Collins Chabane Local Municipality was unable or unwilling to fill vacant positions in an effort to maintain a positive cash-flow balance, but to the detriment of the ability of the municipality to service its clients.
Muthambi said the VBS Mutual Bank investments saga was concrete illustration of lack of consequence management in the face of municipalities in the province cumulatively losing over R1,2 billion, which has a direct impact on service delivery: “It is concerning that some municipalities have even paid out Municipal Managers (MMs) and Chief Financial Officers (CFOs) who have been identified to have been central in investing the money of the municipalities into VBS. There is clear lack of appetite for consequence management, which undermines prescripts of good governance,” she explained.
She further said MMs and CFOs committed financial misconduct in terms of section 171 and 173 of the Municipal Finance Management Act and it was in this context that the committee is perplexed that despite suspensions of various MMs and CFOs, no further action has been taken.
According to her municipal councils have also neglected their fiduciary and oversight duties as they adopted investment policies that are contrary to the Municipal Investment Regulations and also failed to adequately investigate the recoverability of expenditure and liability of officials. The committee urged for speedy civil claims to be instituted, especially against MMs and CFOs who have since resigned.
The committee further urged the Department of Public Service and Administration to find a way of blacklisting officials who resign before completion of disciplinary proceedings only to re-emerge somewhere else within the public service. Regarding negative audit opinions in many municipalities in the province, the committee criticised the over reliance on consultants to prepare financial reports.
Amounts invested with VBS and consultants payments were highlighted as follows:
Vhembe District Municipality
The municipality participated in the VBS investment since March 2014. The money was withdrawn and reinvested when it matured. The municipality has made a total investment of R1 070 000 000 with VBS since February 2015 and lost R300 million at the time the bank was placed under curatorship. The municipality also spent R41 million on consultants over the past three financial years.
Fetakgomo-Tubatse Municipality
The municipality is having cash flow challenges due to loss of R243 169 120 which was invested with VBS. There is a significant overreliance on the use of consultants in the preparation of financial statements. The total expenditure on consultants amounts to R7 354 539 for the previous financial year. It was revealed that one consultants firm was paid R8 520 339 over the original contract of R2 960 000.
Collins Chabane Local Municipality
The municipality suffered a financial loss of R122 million as a result of investments made with VBS. The funds invested were equitable shares allocated to the municipality for purposes of employee related costs. The municipality has subsequently lodged a claim with the court to recover the lost funds but due to VBS being liquidated, the recoverability of the R122 million is highly unlikely.
Ephraim Mogale Local Municipality
The financial health of the municipality is concerning. The municipality wrote off R84 million that was invested with VBS. The money lost had an impact on service delivery and caused a lot of community unrest. The consultants were paid R2,7 million to prepare financial statements but material misstatements were identified from the annual financial statements.
Greater Giyani Municipality
The municipality lost R159 million that was invested with VBS. The money lost had an impact on service delivery as certain projects could not be implemented due to the lack of funds. Such projects had to be postponed and planned in phases. Consultants were paid R3,9 million to prepare financial statements for 2017/18.
Elias Motsoaledi Local Municipality
The municipality was able to withdraw R119 million that was invested with VBS. The entity paid consultants R24,6 million to maintain assets register and do annual financial statements.
Makhado Local Municipality
Invested R62 million and a further R20 million with VBS while over R8 million was used to pay consultants.
Mopani District Municipality
The municipality spent R24 million on consultants.
Lepelle-Nkumpi Local Municipality
R150 million was invested with VBS while R7 million was wasted on consultants to manage assets register and preparation of annual financial statements.

Story/photo: ENDY SENYATSI
>>endy@observer.co.za