Liquidity problems were just the start

The treasury has said that retail depositors will be paid back up to R100 000 of money they had invested in VBS, which covers about 97% of them. (SABC)

The treasury has said that retail depositors will be paid back up to R100 000 of money they had invested in VBS, which covers about 97% of them. (SABC)

  • The South African Reserve Bank placed VBS Mutual Bank under curatorship in March, because of what was initially believed to be a liquidity crisis. The move has instead lifted the lid on an alleged fraud scheme of “epic” proportions, which relied heavily on the creation of fake deposits at the bank. The money was then allegedly used to fund the lavish lifestyles of its directors and an acquisition spree by VBS’s largest shareholder, Vele Investments.
  • Not only were the funds of stokvels, burial societies and individuals kept at the bank but also millions of rands meant for the widows and orphans of former mine workers. It looks increasingly unlikely that all the money will be recovered. 
  • About R1.6-billion belonging to municipalities was also deposited in the bank despite warnings by the treasury that municipalities were not permitted by law to invest money with a mutual bank. The treasury estimates that only between 10c and 40c in the rand is likely to be recovered.
  • Money from VBS appears to have been used to establish patronage networks. This allegedly included bribes paid to municipal officials to deposit money in the bank.
  • Two senior officials at the Public Investment Corporation, the second largest shareholder of VBS with a 25% stake, have lost their jobs over allegations of misconduct and poor performance. Both were PIC appointed representatives on the board of the bank.
  • The role of the bank’s external auditors has also hit the headlines. It emerged that two senior KPMG officials who signed off on VBS’s financial statements had not disclosed their financial interests in relation to the bank. The financial statements have since been withdrawn because they cannot be relied upon.

The treasury has said that retail depositors will be paid back up to R100 000 of money they had invested in VBS, which covers about 97% of them. 

READ MORE: VBS chair’s family trust implicated in bank’s looting

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