VBS Mutual Bank was a South African

mutual bank A mutual bank is a cooperative financial institution owned by its depositors or customers. They include mutual organization, mutual savings banks and cooperative banking. Unlike traditional banks, which prioritize shareholder profits, mutual banks ...

. In 2018 it was declared insolvent and bankrupt and placed under curatorship, with South African citizens and taxpayers defrauded out of roughly R2 billion. It was formed as Venda Building Society in 1982, and became a mutual bank in 1992. By 2016 the bank reportedly had around 30,000 depositors with all deposits in the bank totalling R800 million. In 2017 the bank planned to list on the

Johannesburg Stock Exchange JSE Limited (previously the JSE Securities Exchange and the Johannesburg Stock Exchange) is the largest stock exchange in Africa. It is located in Sandton, Johannesburg, South Africa, after it moved from downtown Johannesburg in 2000. In 2003 ...

; however, this never materialized. Most of its branches and clients were located in

Limpopo province Limpopo () is the northernmost province of South Africa. It is named after the Limpopo River, which forms the province's western and northern borders. The term Limpopo is derived from Rivombo (Livombo/Lebombo), a group of Tsonga settlers ...

History

Prior to 2014 the bank was relatively small and primarily involved in retail banking with many of its depositors consisting of burial societies and

stokvel In South Africa, a stokvel is an invitation-only club of twelve or more people serving as a rotating credit union or saving scheme. Members contribute fixed sums of money to a central fund on a weekly, fortnightly or monthly basis. The name ''stokv ...

s. The bank in turn issued mortgages and short-term loans to its clients allowing them to use their property or banking deposits as collateral. The South African Public Investment Corporation inherited its shares in VBS bank when it succeeded the pension fund of the Venda bantustan government thereby giving it a 25% ownership stake in the bank. Largest shareholder in the bank was Dyambeu Investments which owned 26% of the bank, 51% of Dyambeu Investments was owned by the Venda Royal family. Prior to coming under curatorship in 2018 the bank gained notoriety in 2016 when it gave a R7.8 million loan to then President

Jacob Zuma Jacob Gedleyihlekisa Zuma (; born 12 April 1942) is a South African politician who served as the fourth president of South Africa from 2009 to 2018. He is also referred to by his initials JZ and clan names Nxamalala and Msholozi. Zuma was a for ...

when he was ordered to repay the state for controversial improvements to his personal homestead at Nkandla. In mid-2018 the

South African Reserve Bank The South African Reserve Bank (SARB) is the central bank of South Africa. It was established in 1921 after Parliament passed an act, the "Currency and Bank Act of 10 August 1920", as a direct result of the abnormal monetary and financial condi ...

(SARB) instructed municipalities to withdraw their deposits in the bank as the Municipal Finance Management Act prevented them from depositing public funds in mutual banks. This, along with mismanagement and corruption within the bank, created a

liquidity crisis In financial economics, a liquidity crisis is an acute shortage of ''liquidity''. Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrow ...

for the bank. The prudential authority filed for VBS bankruptcy at the

North Gauteng High Court The Gauteng Division of the High Court of South Africa is a superior court of law which has general jurisdiction over the South African province of Gauteng and the eastern part of North West province. The main seat of the division is at Pretoria, ...

on 30 October 2018. On 13 November 2018 the North Gauteng High Court issued a final order to liquidate VBS mutual bank.

Curatorship

Following liquidity problems, VBS Bank was placed under curatorship on 11 March 2018 in terms of the South African Banks Act, Act 94 of 1990, by the South African Reserve Bank. The collapse of the bank had a large negative impact on the funeral industry in Limpopo Province as the bank was unable to honour insurance and burial society obligations backed by the bank. It also had a devastating impact on stokvel and saving societies held by poor, predominantly black, South Africans in the Limpopo Province. In October 2018 the national government announced that it would not bail out South African municipalities that had irregularly deposited R1.57 billion with the bank before it collapsed. After the bank's collapse it was found that the bank held R372 million in

negative equity Negative equity is a deficit of owner's equity, occurring when the value of an asset used to secure a loan is less than the outstanding balance on the loan. In the United States, assets (particularly real estate, whose loans are mortgages) with ...

Corruption

A 2018 report released by the SARB in October found evidence of wide-scale looting, fraud and corruption. It recommended that bank leadership, public officials and auditors be criminally charged and held liable in civil proceedings. The report found that R1,894,923,674 was transferred from the Bank to fifty three individuals between 15 March 2015 and 17 June 2018. According to the report, R16,148,569 of that money went to Brian Shivambu, younger brother of the former Economic Freedom Fighter senior politician and now

UMkhonto weSizwe (political party) , abbreviated as MK, and often referred to as the MK Party, is a South African left-wing populist political party founded in December 2023. The party is named after uMkhonto weSizwe (also shortened to MK), the paramilitary wing of the African Na ...

member

Floyd Shivambu Nyiko Floyd Shivambu (born 1 January 1983) is a South African people, South African politician who served as a member of parliament for the Economic Freedom Fighters (EFF) until 15 August 2024, when he joined Jacob Zuma's uMkhonto weSizwe (poli ...

. The report also implicated the

African National Congress The African National Congress (ANC) is a political party in South Africa. It originated as a liberation movement known for its opposition to apartheid and has governed the country since 1994, when the 1994 South African general election, fir ...

's deputy chairperson for Limpopo, Florence Radzilani, and treasurer, Danny Msiza. EFF leader

Julius Malema Julius Sello Malema (born 3 March 1981) is a South African politician. He is the founder and leader of the Economic Freedom Fighters (EFF), a communist political party known for the red berets and military-style outfits worn by its members. Be ...

sued a former EFF senior member of his party for alleging that Malema had admitted to him that he benefitted from corruption at VBS. Malema later withdrew the lawsuit. By June 2021 Brian Shivambu paid back R4.55 million and admitted that he received VBS money.

defaulted on a R7.8 million loan that he obtained to finance his

Nkandla homestead The private residence of former South African President Jacob Zuma is situated about south of the rural town of Nkandla in KwaZulu-Natal and is commonly referred to as the Nkandla homestead. During Zuma's presidency, the homestead was the sub ...

. In June 2020 eight people associated with VBS and the bank's auditor,

KPMG KPMG is a multinational professional services network, based in London, United Kingdom. As one of the Big Four accounting firms, along with Ernst & Young (EY), Deloitte, and PwC. KPMG is a network of firms in 145 countries with 275,288 emplo ...

, were charged by the NPA on 47 counts of theft, fraud, corruption and contraventions of the Prevention of Organised Crime Act. Chairperson Tshifhiwa Matodzi, CEO Andile Ramavhunga and CFO Philip Truter were among those arrested and charged. As part of ongoing investigations, the

Hawks Hawks are bird of prey, birds of prey of the family Accipitridae. They are very widely distributed and are found on all continents, except Antarctica. The subfamily Accipitrinae includes goshawks, sparrowhawks, sharp-shinned hawks, and othe ...

arrested three additional individuals suspected of fraud on 16 November 2021. In October 2023 the Parliamentary Ethics Committee found that former EFF deputy leader and now MK party member Floyd Shivambu had received VBS money through transfers from Sgameka Projects Pty Ltd. totaling R180,000 but that no evidence could be found that EFF leader Julius Malema had received any of the VBS Bank missing funds. In July 2024 former chairperson Tshifhiwa Matodzi was sentenced to an effective 15 years in prison on multiple counts of fraud, racketeering, money laundering and theft.

Thembi Simelane Thembisile Phumelele Simelane-Nkadimeng (born 10 February 1973) is a South African politician who is currently serving as the Minister of Human Settlements since December 2024. A member of the African National Congress (ANC), she was previously ...

is set to appear before the ANC integrity committee on the 02 September 2024 to answer for the money she received from VBS. Simelane allegedly received a R586,000 loan from VBS Mutual Bank through a company that provided the loan . On the 6th September 2024 embattled Justice Minister Thembi Simelane on Friday told MPs she took a loan from a financial entity that served as a fixer for VBS Mutual Bank at an interest rate of nearly 50% because she was unable to borrow money from a commercial bank on better terms.

Lawsuits

In February 2021, the liquidators for the bank sued their auditor, KPMG, for 863.5 million rand (~US$59 million) over its audit opinion on the now defunct bank. It was reported in February 2024 that KPMG had settled the lawsuit in a confidential out-of-court settlement for Rand 500 million (~$27 million). In July 2021, South Africa's largest asset manager, the

Public Investment Corporation The Public Investment Corporation (PIC) is a South African state-owned entity (SOC) with R2.693 trillion (USD 142 Billion) of assets under management as of 31 March 2024. It is Africa's largest asset manager. Established in 1911, it hold ...

(PIC) sued KPMG for 144 million rand (around US$9.5 million) it lost when the VBS Mutual Bank went bankrupt as a result of fraud. Its claim is centred on the rights issue and a revolving credit facility it participated in at VBS relying on financial statements audited by KPMG and its former senior partner, Sipho Malaba.

References

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