POLOKWANE – The Capricorn District Municipality (CDM) withdrew its R60m investment from the VBS Mutual Bank shortly after it was made, following advice from the then chief financial officer (CFO) who found the investment was in breach of the Municipal Finance Management Act (MFMA).
This was confirmed to Polokwane Observer this week, amid growing scrutiny on former officials from various Limpopo municipalities implicated by now imprisoned former VBS Bank chairperson, Tshifhango Matodzi. These officials are now at risk of investigation for overlooking the MFMA.
Earlier this month, a leaked 263-page plea affidavit in the hands of the National Prosecuting Authority (NPA) detailed Matodzi’s confession. He described how he, along with other bank executives, deposited nearly R2b into accounts linked to influential business and political figures, coercing municipalities into investing in VBS despite the illegality.
Municipalities, bound by the MFMA, are restricted to investing in commercial banks rather than mutual banks. However, around 15 municipalities, including Capricorn, were found to have invested in VBS before it was liquidated six years ago.
Matodzi’s affidavit includes an account of a 2016 incident where he “convinced” a reporter that Capricorn’s investment in VBS was legitimate. “This was the first time I was aware of MFMA restrictions. The complaint came from someone within the municipality, and I managed to convince them that the investments were legitimate and that the SARB was aware of this strategy,” the statement reads.
National Treasury issued a statement last Monday asserting that it had tried to halt such unlawful investments in 2016 by informing municipalities of the legal requirements prohibiting investments in mutual banks like VBS. “We issued communication to the implicated municipalities clearly drawing their attention to the legal requirements and regulations that do not permit investing in mutual banks such as VBS Mutual Bank. This framework remains in place, with National Treasury not having repealed any of these regulations,” the statement reads.
CDM spokesperson Moffat Senyatsi told Polokwane Observer this week that the municipality had withdrawn the investment even before the National Treasury’s circular was issued, following an order from the council based on the CFO’s advice at the time.
Matodzi’s affidavit also revealed that in 2017, VBS had already received an investment from the Polokwane Municipality, involving a now former senior financial officer. This officer was introduced to Matodzi by one of the mutual bank’s agents, who had been appointed to source investment deposits, according to the affidavit.
Polokwane Municipality spokesperson Thipa Selala did not respond to enquiries about the municipality’s investment, but former Mayor Thembi Simelane confirmed in 2018 that the municipality invested because the bank had produced its operating licence.
ANC spokesperson in Limpopo, Jimmy Machaka, defended the party’s deputy provincial chairperson and Social Development MEC Florence Radzilani, who was implicated in Matodzi’s affidavit.
He stated there was no basis for Radzilani to step aside, as the mention of her name does not equate to a formal charge. Radzilani was said to have received a R300 000 ‘gratuity’ from Matodzi in her former capacity as Vhembe Mayor, facilitated by an agent who convinced her to invest in the bank.
While Machaka agreed that all guilty parties should be punished, he noted, “there is no confirmation if the said money collected using her name ultimately reached her”.
Several attempts for comments from Radzilani were unsuccessful and messages to her phone were not responded to.
Meanwhile, former provincial treasurer Danny Msiza is currently being tested before the court for reportedly coercing municipalities into investing in the mutual bank as an investment agent. Machaka refrained from commenting on Msiza’s situation, stating that he was not a member of the current executive.
