In a presentation to Parliament’s Portfolio Committee on Cooperative Governance and Traditional Affairs yesterday, National Treasury revealed that 15 municipalities are still exposed to the VBS Mutual Bank scandal. These include some of the worst run and most financially unstable municipalities in the country.
It has become increasingly clear that VBS was being run as a pyramid scheme, whereby short term deposits from municipalities were utilised to fund long term loans. The bank seemed to have particularly targeted financially distressed municipalities, with weak internal controls and poor municipal governance to attract their deposits.
The Vhembe District Municipality, for example, is exposed to the amount of R311 million, or 34.57% of their annual operating revenue. The Greater Giyani Local Municipality is exposed to the amount of R158 million, or 52.27% of their annual operating revenue. A full list is available here.
Current forensic investigations indicate that VBS was using lawyers to “facilitate” municipal deposits, in contravention of Section 7(3) of the Municipal Financial Management Act.
The DA will be seeking to determine who these lawyers were, and what the nature and purpose of such commissions was. Given that the deposits were themselves illegal, we will be exploring options to have these lawyers disbarred for promoting an illegal activity.
The DA will also be writing to the Chairperson of the Portfolio Committee Cooperative Governance and Traditional Affairs to request that each of the affected municipalities are invited to Parliament to report on what contingency plans they have in place to fund their activities, and what disciplinary action or other consequences they have initiated against municipal officials and public representatives involved in this matter.
It is unconscionable that these municipalities have played fast and loose with municipal funds, intended for service delivery and the upliftment of residents.