Probe recommends NW municipalities take legal action against VBS

Published Oct 25, 2018

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RUSTENBURG - Four North West municipalities who invested in the VBS Bank should institute formal legal action against the bank in an attempt to recover the amounts lost, a consulting firm commissioned to conduct a forensic investigation recommended.

The North West provincial government commissioned Sekela Xabanisa CA Inc (SKX) to conduct a forensic investigation into the matter and report back with findings and recommendations into the investments.

Forensic investigators recommend that the municipalities should institute formal legal action within applicable confines against the VBS Mutual Bank to try and recover the amounts lost -- whether partially or wholly as may be determined by the administrators and/or the South African Reserve Bank.

Four municipalities in North West have investment a combined amount of R314 million of taxpayers’ money into the VBS Mutual Bank.

The investigators found that Madibeng local municipality invested R31 million of their conditional grant; Mahikeng R83 million -- of which R23 million was from the municipal infrastructure grant while R60 million was from the municipal equitable share (and was an over-payment from the national department of cooperative governance and traditional affairs); Dr Ruth Segomotsi Mompati district municipality invested R150 million -- of which R100 million was from the regional infrastructure grant (RIG), R25 million from the equitable share-free basic services and R25 million was from the building fund.

The Moretele local municipality invested R50 million from the 2017/2018 water services infrastructure grant.

The four municipalities invested into VBS Mutual Bank contrary to the Municipal Finance Management Act (MFMA) as VBS Mutual Bank was not registered as a bank in terms of the Banks Act.

The Dr Ruth Segomotsi Mompati district municipality’s R150 million investment was authorised by the municipal manager and the former chief financial officer (CFO) without consulting with the mayor as per the investment policy of the municipality.

In Mahikeng, the suspended municipal manager and the former CFO made the decision to invest the R83 million and it was further established that there were other numerous investments made by the municipality to other banks such as Standard Bank – that were found to have been lawful and in line with the municipality’s investment policy.

In the Moretele municipality, the municipal manager and the former CFO failed to adhere to Section 11 of the Municipal Regulation which states that the municipality must take all reasonable and prudent steps when investing municipal funds.

 In Madibeng Local Municipality, the forensic investigators were not privy to the outcomes of the internal investigation instituted by the municipality.

Municipalities were also requested to take disciplinary action against the implicated officials for failing to discharge their duties in accordance with the MFMA and other regulations -- firstly by making irregular investments and secondly by failing to adhere to their fiduciary duties as set out in the MFMA.

The provincial government was expected summon all affected leaders for a further engagement on the findings of the forensic investigation.

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African News Agency (ANA)

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