VBS: Widows and orphans may lose out
The recovery of all the money meant for widows and orphans of former mineworkers from embattled VBS Mutual Bank is in serious doubt, it emerged this week.
The R370‑million is not covered by the treasury’s rescue package aimed at protecting the depositors of the troubled bank — the details of which were announced at a press conference on Monday.
The money, linked to a pension fund and its administrator — the Bophelo Beneficiary Fund (BBF) and Bophelo Benefits Services (BBS) — is classed as a commercial deposit. Only retail depositors, namely individuals, stokvels and burial societies, have had their funds in VBS guaranteed by the treasury — up to R100 000.
“It’s a very tricky position at this point in time and we are still following due process,” the bank’s curator, Anoosh Rooplal, told the Mail & Guardian. “But it’s … uncertain as to whether they will be able to access all of their money.”
Instead, like the municipalities that placed almost R1.6‑billion with the troubled bank, the Bophelo beneficiaries wait in hope that Rooplal and other authorities can recover some of the cash that disappeared in an alleged fraud of “epic proportions”.
The South African Reserve Bank placed VBS under curatorship in March, because of what initially seemed to be a liquidity crisis but has since been revealed to be a case of major mismanagement.
The deal ensuring that the Bophelo funds ended up in the care of VBS was also allegedly part of a web of fraudulent transactions at the bank.
These transactions allegedly benefited Vele Investments, VBS’s largest shareholder, which seemingly went on an acquisition spree to grow its business. The fraudulent transactions also put millions of rands into the pockets of key VBS officials, who allegedly lived large on the proceeds.
These details are contained in an application to liquidate Vele, made last week by Rooplal. He alleged the scheme resulted in Vele benefiting to the tune of R1.5-billion. The people Rooplal puts at the heart of the scheme include VBS chairperson and former Vele chairperson Tshifhiwa Matodzi and Robert Madzonga, the former chief operations officer and current Vele chair.
Rooplal said the implicated officials manually created the illusion of deposits being made into VBS. These were then directed to account holders chosen by or opened for them and their associated entities — including Vele, Matodzi and Madzonga.
“Once these ‘deposits’ appeared in a VBS account, the account holder … was enabled to draw on the deposit,” Rooplal said. “As such, real money [entrusted to the bank by the victims of the scheme] became available. Perpetrators’ overdrafts were cleared and funds could be transferred out of such accounts.”
The Bophelo entities appear to have fallen victim to one such transaction. This is a double blow for the beneficiaries whose money has gone missing in a separate corporate scandal.
In 2017, the BBF and BBS — former subsidiaries of Mvunonala Holdings — were placed under curatorship by what is now the Financial Sector Conduct Authority. This was after it emerged that at least R255‑million had gone missing under the watch of Mvunonala founder Bongani Mhlanga. According to media reports, 90% of Bophelo assets and membership came from the Amplats Group Provident Fund, covering more than 7 200 beneficiaries.
In September last year, Vele bought Mvunonala Holdings and, according to the BBF and BBS curator Juanito Damons, as part of the transaction R410‑million was to be used as a partial recovery of the shortfall in the funds. He has previously said that R40‑million was used to pay beneficiaries and the remaining R370‑million was placed with VBS. The funds were to be drawn from VBS in February, said Damons — but when he attempted to do so, VBS failed to pay up.
But Rooplal alleges that, Vele’s purchase of Mvunonala Holdings, and other acquisitions, was done by raising fictitious deposits at VBS.
Damons told the M&G this week that, in the short term, he remains able to pay benefits that are due to BBF beneficiaries but not to pay benefits to a number of trusts under BBS.
Because the investigation into the origin of the funds and the purchase of the Mvunonala Holdings shares is ongoing, Damons said he could not comment on the validity of transactions.
The implications for the curatorship of BBS and the BBF would only become clear after investigations into VBS were complete, he added.
The chief executive of the prudential authority and the banks registrar at the Reserve Bank, Kuben Naidoo, told the M&G that the guarantee provided by the treasury does not cover the Bophelo entities.
“But we are certainly working quite hard to ensure that there [are] some assets recovered. And that will go some way to contributing a higher amount to what is an orphans’ fund,” he said. “But it is uncertain as to how much money they will get.”
Discussions were being held with the treasury and officials of the Financial Conduct Sector Authority, which oversees pension funds, about mitigating the welfare effects of the situation, he said.
The Reserve Bank launched a forensic investigation into VBS shortly after the curatorship began, and the bank’s latest financial statements were withdrawn as they could no longer be relied on to be a fair reflection of its financial position.
Rooplal received preliminary findings from the probe, allowing him to launch civil proceedings against Vele in a bid to recover money owed to VBS. This was necessary to prevent the “dissipation of assets belonging to VBS”, Reserve Bank governor Lesetja Kganyago said at the press briefing.
Only once the financial statements are restated can the bank’s true state be assessed. In the meantime, Rooplal said, his focus will be on recovering money owed to VBS, starting with the implicated individuals and Vele.
The sheer scale of the fraud has “derailed” the bank’s curatorship, said Rooplal. “We are not as confident as we were when we started the curatorship, as to restoring the bank,” he said. Rooplal has begun to initiate retrenchment proceedings in a bid to cut costs at the bank.
How had the regulator failed to spot the irregularities at VBS sooner? “From the regulator’s side, I certainly hope there will be an inquiry to see if there are any regulatory failings and if we missed something,” Naidoo said. “Not just to hold us accountable … but to ensure that we don’t make these mistakes in future.”
He said there were mitigating factors in this situation, including the fact that “the regulatory framework for a mutual bank is different”.
Importantly, the regulator relied on the monthly data and biannual audited financial statements obtained from the bank, Naidoo said.
“All of that information that we received, in hindsight … was a complete fabrication, signed off by an auditor. And so, in future, we are going to have to be much more vigilant about those situations.”
Vele spokesperson Ndivhuwo Khangale said the company would address the allegations in court. Matodzi did not respond to a request for comment. Anglo Platinum did not respond to questions.