Get more Mail & Guardian
Subscribe or Login

Municipalities to feel the heat over VBS investments

Cooperative Governance and Traditional Affairs (Cogta) Minister Zweli Mkhize says forensic investigations that are currently underway in municipalities that had invested in beleaguered VBS Mutual Bank will pave the way for government to proceed with a lawsuit in attempt to recover the monies.

Mkhize was briefing Parliament’s portfolio committee on municipalities on the state of service delivery and the finances of municipalities in the wake of the VBS saga.

A total of 14 municipalities invested funds to the tune of R1.57-billion with VBS and while seven removed their funds when they matured, the other seven still have money in the bank.

In Limpopo, eight municipalities — Makhado, Greater Giyani, Collins Chabane, Vhembe, Lepelle Nkumpi, Elias Motsoaledi, Ephraim Mogale and Fetakgomo Tubatse — invested with the bank. Merafong and West Rand — two municipalities in Gauteng — also conducted business with VBS; as did four municipalities in North West province. These are Moretele, Madibeng, Mafikeng and Dr Ruth Mompati.

Mkhize told the committee that the biggest challenges these municipalities are faced with are an inability to pay creditors, and most importantly, fulfilling their service delivery mandates.

The hardest hit by service delivery challenges are Mahikeng, Madibeng, Dr Ruth Mompati, West Rand, Fetakgomo Tubatse ang Giyani, with projects being suspended and debt into the millions for water and electricity.

The municipalities will not be receiving bailouts but Cogta will provide the necessary support to get them up and running effectively again, Mkhize said.

Mkhize also pointed out that the municipalities invested their funds in VBS in contravention of the treasury’s Municipal Finance Management Act but Mkhize says the West Rand municipality asserts that it got a legal opinion saying it was allowed to invest which he says he doubts.

The Mahikeng municipality has suspended its municipal manager for the investment in VBS and for an overpayment by Cogta of R60-million which the manager then refused to return to the department.

The Giyani municipality has also fired its chief financial officer for his alleged involvement in the saga.

READ MORE: Giyani municipal CFO fired over suspected involvement in VBS saga

“The report from the Reserve Bank has indicated the very crude abuse of finances which were destined for poor communities. It creates an impression we are not only dealing with the situation where investments were taken to the Mutual Bank which was illegal and unprocedural, but also, inside the institution was a systematic, structured, fraudulent process siphoning money out of municipalities, out of the bank,” Mkhize said. 

Subscribe to the M&G

Thanks for enjoying the Mail & Guardian, we’re proud of our 36 year history, throughout which we have delivered to readers the most important, unbiased stories in South Africa. Good journalism costs, though, and right from our very first edition we’ve relied on reader subscriptions to protect our independence.

Digital subscribers get access to all of our award-winning journalism, including premium features, as well as exclusive events, newsletters, webinars and the cryptic crossword. Click here to find out how to join them.

Related stories


Subscribers only

GDP, recession, JSE, rallying rand … these terms mean very...

The economy is not producing work, with many young adults working outside their fields of study or considering leaving the country as a result

More top stories

New membership system encounters problems in ANC branches

The Lower South Coast region has complained of a plot by some branch secretaries to manipulate the system

Economy’s signs of life mean little for the poor

GDP growth may be encouraging but it doesn’t mean much for SA’s millions of unemployed

The ANC has moral decay on its plate, and the...

Analysis of news coverage in May shows a governing party that is broke — and bitterly at war with itself

Police analyst implicated in R600k fraud scheme

But the forensic analyst has also claimed to be a victim of identity fraud

press releases

Loading latest Press Releases…