More shocks in the ‘great VBS bank heist’
A R350m credit facility that the Public Investment Corporation (PIC) extended to VBS bank in 2015 was used to hand out special “loans” to clients that were not monitored for repayment.
Officials at the bank also created fake loan applications using the information of existing clients to justify drawing down on the PIC funds, which were then used to plug the growing cash hole in VBS.
The details of the defrauding of the PIC forms part of the report by advocate Terry Motau into the collapse of VBS, commissioned by the SA Reserve Bank and published on Wednesday.
Motau’s report, titled The Great Bank Heist, revealed blatant theft by executives and gratuitous payments made to a range of politically connected individuals.
The PIC’s R350m credit facility was used by VBS to fund its “contract finance” book.
It was very plain to me that contract financing was a prime location of the looting of the funds from VBSAdvocate Terry Motau
Ninety percent of the loans on the contract finance book were non-performing, VBS executives told the investigation.
The contract finance book was kept on an Excel spreadsheet and never integrated into the bank’s operating system, making it easy to manipulate.
The PIC, which invests R2trillion in funds on behalf of government pension and other social funds and is the continent’s biggest asset manager, owns 26% of VBS through its biggest client, the Government Employees Pension Fund.
The pension fund inherited its shareholding in VBS when it absorbed the pension fund of the Venda bantustan government.
The PIC subsequently put new capital into the bank in 2002 and, in 2015, provided a further R350m credit facility.
The PIC was considering a request for further funding of R2bn when VBS collapsed.
But the cash it provided in 2015 appears to have been passed directly on to VBS clients in loans that were not subject to “normal credit granting procedures” or used as a slush fund by bank executives.
Motau says that “it was very plain to me that contract financing was a prime location of the looting of the funds from VBS”.
VBS chief executive Andile Ramavhunga told investigators that different rules applied to the contract finance book because it was off balance-sheet funding and had been ringfenced and provided by the PIC for that purpose.
Motau rejected this explanation which, he said, was in the “realms of absurdity”.
Few, if any loans in the book, were serviced.
VBS chief financial officer Philip Truter testified that 80 to 90% of the contract finance book should have been impaired.
Instead, falsified financial statements showed that only a small portion of loans – less than 1% – were impaired.
VBS officials also created fake loan applications by copying and pasting client signatures and details from existing loans to new addenda, which could then be used to draw down more funds.
The report says that these drawdowns were used to improve VBS’s liquidity position.
The same officials created fake loans in the contract book to inflate VBS’ earnings. Two PIC representatives on the VBS’s board, Paul Magula and Ernest Nesane, confessed to the investigators that they had turned a blind eye to the fraud in return for large payments.
Both allegedly received more than R7m in gratuitous payments which, Motau says, were “buying silence from those who could speak the truth”.
The two have since left the PIC, which is pursuing criminal charges against them.
Meanwhile, the ANC in Limpopo has started taking action against party officials implicated in looting from VBS, party spokesperson Pule Mabe said on Thursday.
Mabe reiterated the party’s position that all those implicated must “face the law without discrimination”.
And ANC elections head Fikile Mbalula said that the ANC had in the past taken a long time before dealing with corruption, but the party was determined to act decisively against those implicated in the report.
“Heads will roll‚ the ANC never sent anyone to be corrupt,” Mbalula said.
“They must answer for themselves unless they say they were sent by the ANC.”
ANC Limpopo treasurer Danny Msiza and deputy chair Florence Radizlani are some of the party leaders mentioned in the forensic report.
Mbalula was speaking at a briefing where the ANC unveiled plans to consult the public on the process of developing its 2019 elections manifesto.
The DA said it would lay criminal complaints at the Cape Town police station against 50 people implicated in the report.
Former president Jacob Zuma‚ the Passenger Rail Agency of SA (Prasa) and Floyd Shivambu’s brother‚ Brian‚ are among the people named in the report.
DA MP Solly Malatsi said some of those implicated have close ties to the ANC and EFF and “no doubt shamelessly abused their political connections to steal from the poor”.
“The VBS scandal has already put numerous municipalities at risk of losing revenue,” he said.
“Worst of all this heist has left countless poor South Africans stranded as they struggle to gain access to their lifesavings.”