28 May 2024 | 08:55 AM

How VBS bet on saving itself with Prasa money — and lost by the skin of its teeth

Key Takeaways

By now, however, VBS had its eye on an infinitely larger prize: the Passenger Rail Agency of South Africa (Prasa). The agency runs all South Africa’s commuter rail services and has billions in its bank accounts. It was meant to be VBS’s saving grace and ticket to a whole new level of operation.

The plan was for Prasa to deposit R1-billion in VBS for twelve months. That would keep the whole scheme running for at least another year – and possibly create a bridge to other state-owned companies that could provide billions more.

The only problem was that Prasa could also not legally give VBS R1-billion, at least not without the approval of national treasury. What ensued was desperate lobbying involving two different VBS agents, outright bribery and an apparent bet on the outcome of the watershed 2017 ANC elective conference that saw Cyril Ramaphosa replace Jacob Zuma as president of the ruling party.

According to [former VBS treasurer Phophi] Mukhodobwane, it began in October 2017. The man initially at the helm of the transaction was Gift Manyanga, the consultant who had brokered VBS’s deals with unions throughout that year and who had come up with the bank’s ambitious five-year strategy. According to [former VBS CEO Andile] Ramavhunga, Manyanga’s job was to “try to convince Prasa to open a bank account with VBS”.

He was evidently successful, despite Prasa’s acting group CFO, Yvonne Page, concluding that “VBS was not a proper place to house Prasa’s funds”. According to Page, VBS did not qualify on any criterion. Prasa could only invest with registered banks, not mutual banks. They could also only invest in entities with a certain risk rating, and VBS fell far short in this regard. Furthermore, investments of this sort could not be made without treasury approval, which Prasa did not have. But most obviously, the investment made no sense.

“We asked for [VBS’s] financials which were not forthcoming,” Page told SARB investigators. “Then we went on to the internet and printed the annual financial statements. Anybody in my position would have done the same. The financials for March 2016 showed that their total assets were R1-billion. How can a normal person invest R1-billion into a company whose total assets is a R1-billion [sic]? It just does not make any sense.”

After considering the financial statements, Page went to the acting group CEO of Prasa, Lindikhaya Zide, and gave him her recommendation. To which Zide replied: “This is political, and we have to invest R500-million and then later another R500-million.” I said to him there is absolutely no way we can do that.”

Page was overruled. Unbeknown to her, in a letter to the bank dated 6 November 2017, Zide wrote:

Dear Mr A Ramavhunga.

On behalf of the Passenger Rail Agency of South Africa (Prasa), I duly acknowledge the receipt of the letter sent with VBS Mutual Bank’s proposed investment terms. We have considered VBS Mutual Bank’s proposal, and we fittingly accept your offer of 8.25% pa interest, and flexible terms as per our needs.

We intend to commence with an investment of R1 000 000 000.00 only (1 Billion Rands), further steps regarding such will be communicated thereafter.

Our finance department will be in contact with you to facilitate the necessary arrangements for the transaction within the next 21 working days. We are excited by the opportunity to work with an institution such as yours.

Months later, even after everything that happened, Ramavhunga still insisted that this letter showed VBS had been “awarded” the mammoth deposit. Manyanga also used this letter as proof of his success, which earned him a contentious fee of R1.5-million.

On 2 December, VBS sent Zide a “Confirmation of Investment Account” letter giving details of the VBS account into which Prasa would deposit its money. None other than Manyanga signed the letter. Mukhodobwane told investigators that by this stage Manyanga was the “Chief Banking Officer” of VBS despite also being a contractor through Bhekwam. This was jumping the gun somewhat. According to Manyanga, he was in the middle of negotiations to take up this role, but it never happened.

The red flag in Manyanga’s letter to Prasa was that VBS said it guaranteed “no downside risk on the capital”. In other words, the bank told Prasa that it was literally impossible to lose the money, when in reality it was almost inevitable.

Just then, on 7 December, Zide’s term as acting group CEO ran out and Cromet Molepo replaced him. Zide returned to his previous position as company secretary, but remained in the loop.

A few days later, on 12 December, Mukhodobwane and Ramavhunga exchanged WhatsApps. There had been a hiccup and someone had to be paid.

Ramavhunga: Eish my chief, we need that R1 million, plus R500K to unlock Prasa this week. The initial R1 million was not done. Please work with Gift.

Mukhodobwane: Okay, sure, no problem. I will speak to him.

Mukhodobwane: Will they need it in cash?

Ramavhunga: A trust account

It is clear that Manyanga either was the recipient of R1.5-million or was arranging it for someone else. On the same day, bank statements show R1.5-million leaving Robvet’s account with the description “Mgadi payment”. Further VBS bank records used by the SARB show that, on 15 December, VBS made a payment of R1.5-million to a company called Mgadi Investment Group, which forensic investigators identified as the Prasa “commission”.

Mgadi is a bit of a mystery. It belongs to Muzi Chonco, who calls himself an “acquaintance” of Manyanga. According to Chonco, he simply provided the Mgadi account as a place for Manyanga to receive his VBS fee because there was some kind of issue with paying him directly. When the “internal politics” were resolved, Mgadi returned the money, which was then paid to Manyanga, as should have been the case to begin with, Chonco claimed. “I don’t know why anyone would think I had anything to do with Prasa … my company did nothing,” he told me. “Remember, at the time it was just a bank like any other,” he added.

According to Mukhodobwane, the R1.5-million payment was ultimately meant for “some union members that were involved in the transaction” and who “happened to have some positions of influence or power, or authority within Prasa”. The union in question was the South African Transport and Allied Workers Union. From Mukhodobwane’s understanding, the money was paid, through a front, to Satawu members in advance as a “pre-commission” to “facilitate” the R1-billion deposit from Prasa.

Ramavhunga said that he had in fact instructed Mukhodobwane to pay Bhekwam a legitimate R1.5-million fee, but that only reflects in Bhekwam’s bank statements later, on 28 December, possibly supporting Chonco’s version, in which the money first went to his company, then back to VBS and finally to Manyanga.

Manyanga also claims he received nothing aside from his legitimate R1.5-million fee and “didn’t work as a conduit for anyone”.

But it seems that high-level politics were very much at play.

Ramavhunga told investigators that “I know for a fact that we were asked to put money into the Dudu Myeni Foundation … it was just a donation, because they were going to make our life easier.” It was his understanding that the process of obtaining the R1-billion deposit from Prasa was contingent on this “donation”. Motau noted in his report that there is no such entity as the Dudu Myeni Foundation, but that he assumed “Ramavhunga intended to refer to the Jacob G Zuma Foundation, which is chaired by Myeni.”

According to Mukhodobwane, he understood that the successful facilitation of the deposit from Prasa “hinged” on “NDZ” winning the presidency of the ANC at the party’s elective conference held from 16 to 20 December 2017. NDZ is Nkosazana Dlamini-Zuma, Cyril Ramaphosa’s opponent for the top spot and, as Jacob Zuma’s ex-wife, the favoured candidate of most of the pro-Zuma faction of the ANC. Mukhodobwane’s claim is seemingly borne out by Ramavhunga’s mention of the “donation” to Zuma’s charity.

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VBS had been called on to participate in the elective conference as part of the Progressive Business Forum. As mentioned previously, the bank sponsored buses for delegates travelling from Limpopo and also funded a suite at one of the forum’s events that ran in tandem with the conference.

On 18 December, Ramaphosa narrowly defeated Dlamini-Zuma to become ANC president and de facto president of South Africa. The various corrupt networks that had been fostered under his predecessor suddenly faced an existential threat from the new guard, at least potentially. The result was that political support for VBS’s Prasa deal “evaporated”. “Manyanga himself told me that the outcome of the December elections was unexpected, and that’s why it [the Prasa deposit] didn’t happen,” Mukhodobwane told investigators.

  • A Dream Defrauded unravels the saga of the mega fraud at VBS Mutual Bank, exploring how suspected mastermind Tshifhiwa Matodzi and his associates first took control of the bank, fed ANC patronage networks and operated under a nationalist mantle endorsed by Venda royalty.
    The book explains how the bank and its shareholder Vele were seemingly built into a multibillion-rand business, exposes the political machinations that guaranteed VBS up to R3.5-billion in unlawful funding from municipalities and other state institutions, and describes the free-for-all that ensued after the bank’s collapse.
    Dewald van Rensburg, who joined amaBhungane in May 2019, was one of the original journalists to break the VBS scandal.


Dewald van Rensburg and Sam Sole

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