Date: 14 July 2018 By: Anton van Zyl
It seems more and more likely that the plug will be pulled on the embattled VBS Mutual Bank. Whether the municipalities that invested millions in the bank will ever get their money back is also doubtful. For the ones who allegedly looted the bank there may be some further bad news – the tax collector is lurking, and he may become their worst nightmare.
The past week marked a hive of activity as far as VBS Mutual Bank was concerned. On Friday the curator appointed to take over the reins at the bank filed an urgent application in the High Court, asking that the estates of five of the bank’s former top officials be sequestrated. The curator also asked for the liquidation of the bank’s biggest shareholder, Vele Investments.
On Monday night, the curator issued a statement announcing a number of steps that would make it easier for small depositors to withdraw their money. Government has provided a guarantee to the SA Reserve Bank (SARB), allowing them to pay out up to R100 000 to retail depositors. To make it easier for clients the money can be withdrawn from Nedbank branches from Friday, 13 July.
Relief for some investors
The steps that the curator announced on Monday were welcomed by many. The past week customers, predominantly women, were still sleeping in long queues in front of branches of VBS Mutual. Strict limitations were put on the amount of money that individual investors could withdraw.
“After considering several options, and based on specific criteria for how we could give retail depositors access to their funds, we have decided to use Nedbank to facilitate the repayment of retail depositors,” said Ms Louise Brugman, spokesperson for the curator, SizweNtsalubaGobodo Advisory Services.
The R100 000 withdrawal limit is, however, only for retail depositors. “Retail deposits are defined as deposits in VBS by individuals, burial societies, stokvels and savings clubs, collectively referred to as retail depositors,” explained Brugman. The SARB guarantee does not cover municipal or corporate deposits.
The VBS depositors need to visit their closest Nedbank branch with an accepted form of an identity document and proof of address. “Nedbank will also use a biometric system which is linked to the Department of Home Affairs to verify retail depositors’ identities,” said Brugman. They will then have to sign an agreement ceding their rights to their claim in VBS to the SARB up to an amount of R100 000. A new account for each person or party will be opened at Nedbank and a new bank card will be issued. “Stokvels, burial societies and savings clubs will not be issued with cards and will have to transact at Nedbank branches,” said Brugman.
Retail depositors will have three years to claim their deposits. Brugman explained that depositors’ funds in their new Nedbank accounts will be secure and accessible for up to three years, and there should be no rush for people to withdraw their funds. The bank cards can also be used at ATMs or to purchase goods at stores.
“VBS branches will not be able to provide cash withdrawal services from start of business on Tuesday, 10 July, 2018 onwards. VBS branches will remain open for queries, client education and loan repayments,” said Brugman.
Not the same for municipalities
The picture does not look rosy at all for big investors and institutions that invested more than R100 000 with VBS Mutual. It is estimated that about 97% of the 22 700 VBS retail depositors will receive all of their money, but the 3% with the large investments have reason to worry.
“The amounts in excess of R100 000 will remain as deposits in VBS. These deposits will remain valid and depositors may receive a portion of their amounts above R100 000 in future, depending on successes in recovering loans and other assets due to VBS. This is, however, not certain nor guaranteed,” said Brugman.
The investors that will have to wait patiently, include the municipalities such as Vhembe, Makhado and Collins Chabane, that together invested almost R500-million with the mutual bank, in spite of warnings from national treasury not to do so.
Brugman emphasized that customers who have loans with VBS, must continue paying their loans as they are still legally obliged to do so. “People may face penalties and other sanctions if they fail to repay monies owed to VBS. VBS customers are requested to continue using VBS infrastructure and branches to repay their loans.,” she said.
Trying to recover the money
The representative of the curator, Mr Anoosh Rooplal, recommended to the SA Reserve Bank in April this year that a forensic investigation into the affairs of VBS Mutual Bank be conducted. Adv Terry Motau was subsequently appointed as an investigator.
“The forensic investigation into possible fraud and malfeasance at VBS is still in progress. We expect the investigation to be completed by late August or early September 2018,” said Brugman. The preliminary findings, however, prompted the curator to launch urgent court applications last Friday to take steps to recover monies owed to VBS. “This was a necessary action required by the curator to prevent the dissipation of assets belonging to VBS,” said Brugman.
In an urgent application filed in the High Court on Friday, the curator of VBS Mutual Bank asked that the estates of five of the bank’s former top officials be sequestrated. The curator also asked for the liquidation of the bank’s biggest shareholder, Vele Investments.
In affidavits filed in court, more information surfaced detailing the manner in which funds were allegedly syphoned to directors of Vele Investments and top officials. The affidavits also detail how bribes were allegedly paid to officials of, among others, the PIC and Prasa, to supposedly get these organisations to pump more money into the cash-strapped VBS Mutual Bank.
Apart from Vele Investments, applications have been brought against a further five individuals, being Tshifhiwa Calvin Matodzi, (former chairman of VBS Mutual Bank), Andile Ramavhunga (former CEO of VBS Mutual Bank), Philippus Truter (former CFO of VBS Mutual Bank), Phopi Mukhodobwane (general head of Treasury and Capital Management) and Robert Madzonga (former COO of VBS Mutual Bank) for the sequestration of their estates.
The past weekend more revelations about the somewhat shady dealings at VBS Mutual Bank were reported in newspapers. It was reported that the bank’s head of Treasury and Capital Management, Phopi Mukhodobwane, filed an affidavit in which he “blows the lid” on how just over R1,5-billion was used by Vele Investment to buy subsidiary companies, pay lucrative bonuses and fund lavish lifestyles. Mukhodobwane alleges that millions were used to pay bribes to officials to encourage them to pump more money into the bank. The names of ANC Youth League members, as well as a prominent Limpopo politician are mentioned as people who acted as “agents” to convince municipalities to deposit funds with VBS.
Millions to finance lavish lifestyles
In newspaper reports the past month the names of several top officials at Vele Investments as well as that of the Vhavenda king were mentioned as people who benefitted from a multimillion-rand spending spree, using VBS Mutual Bank’s money.
The City Press newspaper reported that it had access to bank statements showing that King Toni Mphephu Ramabulana received a monthly salary of R310 000 from Vele, which was deposited into his VBS account. “The bank also financed the king’s five cars, worth more than R6,5m in total, including a top-of-the-range Mercedes-Benz Viano worth R1,6m and a R1,4m Range Rover,” the article stated.
The documents leaked apparently also show that VBS paid R9-million to the Dzata Trust, which is registered under the name of Ramabulana’s legal advisor, Paul Makhavhu. Some of this money was allegedly used to pay for a mortgage on the king’s house in the upmarket suburb of Dainfern in Johannesburg.
The allegations that the Vhavenda king improperly benefited from the VBS Mutual Bank fracas were strongly denied by Thovhele Nthumeni Mmbangiseni Masia in his speech during the Vhembe State of the District Address last month. He said the king is not above the law and he is prepared to answer any questions regarding his involvement with the bank.
In a report that appeared last month in the Sunday Times, Ramabulana is quoted as saying that VBS left him with a R240 000 monthly bill after they allegedly used his name to secure money from the bank. The newspaper reported that Ramabulana was planning on opening a case of fraud and corruption against VBS’s former chairman Tshifhiwa Matodzi and Vele Investments’ Robert Madzonga. It was also reported that the king believed the luxury items such as the house and cars were gifts.
But the taxman may be lurking
The investigation about the alleged irregularities at VBS Mutual Bank is continuing and more revelations are sure to follow. “At a suitable time, evidence documented by the investigator will be handed over to law enforcement authorities and the South African Revenue Service,” Brugman said in the press release earlier this week.
The reference to SARS would surely have caught the attention of many of the people involved with the bank. “The Receiver may become their biggest problem,” an independent tax expert who preferred to stay anonymous said earlier this week.
He explained that the sudden windfalls and the gifts create a big tax burden on the individuals involved. If Vele Investments did shower their directors or other parties such as the Vhavenda king with gifts, this would have had to be done out of profits declared. Such profits are taxable, normally at around 28% for a company.
The individuals who have received such gifts would have had to declare it and it will in all probability be seen as a fringe benefit. This would be taxable at the applicable tax tables, but it will probably be in excess of 40%. It is also possible that the “receivers” of the gifts will hide ownership thereof in a series of trusts and subsidiary companies. “The fact is that the tax collector is not stupid. He has heard the excuses before. If the gifts were for personal used, it is taxable,” he said.
As far as the future of VBS Mutual Bank is concerned, it is difficult to tell, but the signs don’t look good. “In the opinion of the Curator, the 2017 financial statements of VBS did not present an accurate account of the mutual bank’s financial position and are thus being restated. This process is likely to take a few more months. Only once this process has been completed can a definitive assessment be made about VBS’s true financial position and the future of the mutual bank,” Ms Brugman said.
Anton van Zyl has been with the Zoutpansberger and Limpopo Mirror for over 27 years. He graduated at the the Rand Afrikaans University (now University of Johannesburg) and obtained a BA Communications degree. He is a founder member of the Association of Independent Publishers.