MEC for Provincial Treasury, Rob Tooley met with the Minister of Finance in Cape Town on Friday to discuss the VBS Mutual Bank (VBS) liquidity crisis that is affecting seven municipalities in the province that have made investments amounting to more than R1,1 billion during the 2017/18 financial year.
Tooley confirmed that the meeting was fruitful but indicated that he would only provide further details of the outcome after a consultation with Premier Stan Mathabatha today (Thursday).
The municipalities may not be able to implement their funded projects due to a lack of funds after the curator of VBS has placed limitations on withdrawal of funds.
During a MEC/Mayor’s Forum at Bolivia Estate last Tuesday, Tooley reportedly said that there is a possibility that the affected municipalities may only receive 40 cents in the Rand when funds are finally released and will therefore not have funds to implement the projects for which the invested funds were earmarked, while day-to-day service delivery may also suffer due to lack of funds.
At the meeting, to which the media was not invited, the Provincial Treasury reportedly revealed that the Collins Chabane, Ephraim Mogale and Fetakgomo Tubatse Local Municipalities invested R122 410 520, R83 428 490 and R210 649 836 at VBS Mutual Bank during the 2017/18 financial year, while Greater Giyani, Lepelle Nkumpi and Makhado Local Municipalities invested R156 971 444, R163 321 224 and R63 296 159. Vhembe District Municipality invested R316 385 541. All the amounts include the initial investments as well as interest accrued to date. It could not as yet be ascertained whether some of the investments which matured before the bank’s curatorship was announced, were withdrawn or re-invested.
VBS was placed under curatorship by the South African Reserve Bank (SARB) on 11 March this year. After VBS was placed under curatorship, Registrar of Banks Kuben Naidoo reportedly said that VBS has grown from a balance sheet of R150 million three years before to over R2 billion, mainly due to an increase in municipal deposits. “The bank had over R1,5 billion in municipal deposits,” Naidoo reportedly said.
Municipalities ceased to invest funds at the bank after National Treasury alerted them that the Municipal Finance Management Act does not allow for investments being made with mutual banks as they are not registered in terms of the Banks Act and more than R1 billion was subsequently withdrawn. VBS, with its headquarters in Louis Trichardt, was in the news earlier when it provided a loan of R7,8 million to former President Jacob Zuma to repay the SARB for expenses incurred during upgrading done at his family home in Nkandla.
Story: BARRY VILJOEN