The arrest of municipal officials — reportedly the next in line after the Hawks and National Prosecuting Authority pounced on eight kingpins last week — will bring the authorities closer to the engine room of the VBS Mutual Bank heist.
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The money stolen from VBS largely came from municipalities. For their efforts, some of the municipal officials who directed that these deposits be made allegedly got bribes running into hundreds of thousands of rands in hard cash.
Between 2015 and 2018 some 20 municipalities deposited R3.5-billion at VBS and withdrew R2-billion. When the bank crashed in March 2018, there were 15 of these municipalities with a collective R1.5 billion in the bank, all of which they lost.
Former VBS treasurer Phophi Mukhodobwane told investigators working for the South African Reserve Bank under advocate Terry Motau in 2018 that “the whole municipal book” at VBS involved incentive payments of some sort.
The system was described to Motau by more than one witness. It worked through a handful of “commission agents” as well as allegedly through direct bribes paid to municipal officials.
The system generally involved a 2% commission payable to the commission agent for procuring a deposit. From this, payment would in turn be made to officials.
Mukhodobwane claimed to have reformed this system after getting hired at VBS in August 2016 by making the commissions more rational and affordable. He indicated that before his time, the bank was paying ad hoc “sporadic” amounts that were often unsustainably high.
The best-known of the commission agents was a former ANC Youth League leader from Limpopo, Kabelo Matsepe, who allegedly served as a proxy for the ANC’s Limpopo provincial treasurer, Danny Msiza.
Their constant intermediation between VBS and municipalities is amply documented in WhatsApp messages that emerged in court proceedings.
Exchanges like this one from December 2017 were commonplace:
MATSEPE: “This MM is full of shit but Danny is intervening”.
MUKHODHOBWANE: “Yah this is some super bullshit”.
MATSEPE: “Danny just dealt with Elias”
MATSEPE: “They say first thing in the morning but its only 35m”
“MM” is shorthand for municipal manager and “Elias” is understood to be the Elias Motsoaledi municipality which lost a relatively minor R20-million when VBS crashed three months later.
Apparently all it took to get them to put money in VBS was a phone call from “Danny” — believed to be a reference to Msiza.
Matsepe had a written contract with VBS for “business sourcing and development” and he formally invoiced for his commissions. He has steadfastly defended his business as legitimate and legal.
Msiza rushed to court after Motau’s Great Bank Heist report was released to try and get all references to him expunged.
These “unfairly and unlawfully impugn my reputation,” he declared in an affidavit.
He argued that the report, or at least the part of it that was publicly released, did not substantiate allegations about the role he played. But his court attack dislodged a mountain of evidence.
The VBS liquidators sent Msiza’s lawyers 459 pages of transcripts, invoices and bank records that set out in great detail how the ANC’s man in Limpopo greased the wheels of the municipal deposit scheme.
Motau’s report recorded that Mukhodobwane testified that Msiza was “the kingpin” in the commission agent scheme.
According to the transcript of his interview with Motau on 22 May 2018, Mukhodobwane added that “some of the municipal officials would actually in some instances not be happy, because they would feel that they had been short changed…
“[Despite this] you never really had a clean removal of the middle man. The middle man always stayed, because … these middle men in most instances had political ties to very powerful people within the ANC structures within that particular region.”
One difficulty prosecutors will face is that a lot of the alleged bribery took place in cash.
VBS had a number of slush funds — accounts held in the name of shell companies to disguise payments that were actually being made by the bank itself. There was a constant flow of large cash withdrawals from the main slush fund, called Robvet.
Mukhodobwane had identified Robvet as the source of cash taken to municipal officials.
According to Mukhodobwane the municipal officials who wanted to deal directly with VBS had to go see the general manager of sales in Makhado, Ntendeni Sasa Nemabubuni.
“They would give us an entity they would want us to pay into. Some of them would want to get paid in cash… So Mr Nemabubuni would then call me and tell me: X Municipality wants, for argument’s sake, R150 000. Then in effect he would be seeking authorisation to go and withdraw funds from this Robvet account.”
The hypothetical R150 000 Mukhodobwane cited falls squarely within the range of cash withdrawals regularly seen in the Robvet bank statements: R100 000 to R200 000.
VBS spent up to R30-million on commission agents and direct payments to municipal officials, Mukhodobwane claimed.
Testimony from Nemabubuni himself described how Msiza formally introduced him to Limpopo’s municipal ruling class.
In late 2016, Limpopo premier Stan Mathabatha held a conference of mayors and municipal managers at the Ranch Hotel in Polokwane.
“I drove from Thohoyandou, as I had been instructed. The meeting was at this hotel in Polokwane… I received a call from the Chairman [of VBS, Tshifhiwa Matodzi], saying: Just go there and you will see there is a guy called Kabelo Matsepe…
“I went there, and then when I was there we went to a smaller room, like this one, where Danny Msiza comes up. From there one Mayor comes, and it was: Okay, this is Sasa from VBS, we want you guys to bank with VBS Mutual Bank.”
Nemabubuni told Motau that a whole line-up of mayors and municipal managers were marched in and out of the room for this kind of introduction.
When VBS chief executive Andile Ramavhunga first appeared before Motau, he argued that the bank may very well have paid bribes but that these must have been minor — otherwise the municipal officials would not have complained so much.
“The majority of the Municipal Managers and CFOs were complaining about them giving us this money for free,” he told Motau.
“Even if there were monies that got to them, it was very minimal, because we wouldn’t have most of them complaining as to not getting monies.”
He added that the problem might have been that the bribe money was not reaching the municipal officials after going to the commission agent.
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“My understanding is as follows. If they say … we give the middleman 2%, they are complaining that the middleman did not give them the 2%. That’s what I’m saying.”
Municipalities nonetheless kept the money pouring into VBS coffers.
“From what I understood, and from the little discussion I had with Kabelo, it’s that the
ANC had adopted us as a bank to be supported in Limpopo. It was an ANC decision that was taken,” Ramavhunga claimed.