VBS indictment lifts lid on Danny Msiza’s money machine

A 206-page indictment of suspects in the VBS Mutual Bank case has blown the lid off the patronage system beneath the scheme that destroyed the bank as well as the alleged shameless bribery that went with it.

The arrest of new suspects in the plunder of VBS Mutual Bank last week has cast significant new light on the network of “commission agents” who fed the bank a steady diet of municipal deposits, including the man allegedly at the heart of this system, ANC Limpopo treasurer Danny Msiza.

A 206-page indictment spells out the case against 14 bank officials, board members and the fixers who, the National Prosecuting Agency charges, pushed municipalities illegally and irresponsibly to invest millions in the tiny Venda bank.

Seven of these had already been arrested last year but the indictment adds seven new suspects, including Msiza and his protégé Kabelo Matsepe.

The seven face charges of racketeering, theft, fraud and money laundering.

*Click on the Evidence docket to access the court documents.

Other new suspects include VBS sales manager Solly Maposa, former MTN executive Robert Madzonga and middlemen Ralliom Razwinane, Edgar Mucheke and Tshianeo Madazhe. The middlemen’s alleged role was to convince municipalities to invest their money with VBS.

Matsepe was VBS’s most important agent and its go-between with Msiza, an allegation attested to by numerous exchanges between Matsepe and VBS officials as well as testimony before advocate Terry Motau, commissioned to investigate by the Reserve Bank in 2018.

Compelling evidence suggests that Msiza frequently intervened to secure VBS deposits, usually through one of the middleman “commission agents” who have also been arrested and charged.

Now the NPA has provided details of how money flowed from VBS to Matsepe and then, allegedly on the command of Msiza, to a variety of mystery recipients. None of these payments were ever made directly but rather via accounts controlled by Matsepe.

According to the indictment Matsepe received VBS payments of R4 963 331 into his personal account at FNB and another R16 043 509 into the FNB account of his company Moshate Investments. This was on top of a mortgage and a vehicle loan on which the balances were R5 672 660 and R2 223 295 respectively when VBS crashed. He used Moshate to invoice VBS for his commissions and has always maintained that this was a perfectly legal contractual relationship.

Once Matsepe got paid, the road led to Msiza’s door.

The case against Danny Msiza

On Msiza’s alleged command at least R4.5-million flowed from Matsepe to a seemingly random assortment of beneficiaries including companies that do not exist or companies that have been deregistered for over a decade. Other payments allegedly were meant to cover Msiza’s living expenses.

For example, Msiza apparently used VBS money to remedy his very visible weight problem. One recipient of a payment made on Msiza’s behalf is Dr Grant Dewar, a Benoni surgeon specialising in the treatment of obesity using gastric bands.

Dewar confirmed to amaBhungane that he did get paid the R87 000 specified in the indictment on the date cited, 22 August 2017. He admitted this was for a surgery. He declined to comment further, citing the legal implications of breaking doctor-patient confidentiality.

A payment of R44 000 was made by Matsepe, alledgedly on Msiza’s behalf, to Bothakgi Construction. This company’s director Mosebiadi Sakong told amaBhungane the money was for an RDP house in Hammanskraal. “We are building a RDP house for Karibu Construction. Msiza was a Contractor from a company called Karibu Construction,” she said by WhatsApp.

Msiza owns the Karibu Group of Companies.

Another cited beneficiary of an indirect Msiza payment is Shwings Construction which, according to the NPA, received R200 000 on 22 December. Executive director, Khani-Mambo Shisinwana denied all knowledge of the payment.

“They must have me confused with someone else. I honestly don’t know anything about that,” he told amaBhungane.

A major beneficiary of a payment allegedly made on Msiza’s behalf was Niland & Pretorius, a law firm in Polokwane specializing in conveyancing. This specialization would indicate that the R1.5-million they received on 17 January 2018, right before the collapse of VBS, was related to a property transfer.

The firm’s Thomas Pretorius told amaBhungane that “we have no knowledge of the indictment as yet and in any event we will not be responding at this stage since this matter is headed for court”.

A company called Riverview Property Development received R150 000. Its sole director is Nhlanhla Ndalani, an employee of the Capricorn District municipality who did not respond when called and messaged.

Other companies on the list are far more mysterious. Some apparently do not exist but some of those that do were deregistered years ago.

SS International received a payment of R200 000 on 16 August 2017, according to the indictment. The company has however not traded since 1991, says retired owner Mohamed Docrat. “I can confirm that no funds received as bank account does not exist,” he said in a WhatsApp message to amaBhungane.

According to company records SS was deregistered in 2010.

Another recipient called H F Solutions was deregistered in 2011 but nonetheless got paid R250 000 on the same day as SS, 16 August 2017, according to the indictment.

Most recipients of payments allegedly made on Msiza’s behalf could not be reached while some did not answer the phone and ignored WhatsApp messages which indicated having been read.

The list of beneficiaries is derived from a “reasons and record of proceedings” document penned by Motau, but which does not form part of his public The Great Bank Heist report.

According to Motau, “Msiza repeatedly provided Matsepe with the names and bank account
details of third parties [using WhatsApp] … The names and account numbers of each of these entities and persons, as well as the amount payable, was sent by Msiza to Matsepe.”

Motau’s unpublished document included a far longer list of entities than the one cited in the indictment, most likely because payments were either not made or not proven. The list was produced when Msiza made the perhaps ill-conceived decision to challenge the report in court because it fingered him without interviewing him or including the evidence against him in the report. By taking Motau to court he forced the evidence against him into the public sphere.

Apart from the payments to these various recipients Matsepe allegedly also made payments totaling R716 000 into Msiza’s bond account at VBS in the name of Msiza’s company Mojovax.

What is telling about the list of payments is the way they frequently correspond to payments received by Matsepe from VBS.

On 10 July 2017 Matsepe received R500 000 from VBS. The next day he paid R200 000 into Msiza’s mortgage.

On 22 December, when VBS was already suffering cash shortages, Matsepe received R1.5-million from the bank, according to the indictment. On the same day he made payments to alleged Msiza nominees totaling R807 000. Another R179 000 followed the next day.

On 17 January 2018 Matsepe allegedly received R2-million from VBS and made the R1.5-million payment to Niland & Pretorius on Msiza’s instruction.

The little fish

Last week’s indictment has also shed light on the smaller commission agents used to funnel municipal funds to the bank.

Ralliom Razwinane

Razwinane’s company Gundo Wealth Solutions allegedly operated much like Matsepe’s and got paid R7.3-million between September 2016 and January 2018.

Among other things, Razwinane allegedly managed to secure deposits for VBS from the Free State Development Corporation as well as the Community Schemes Ombud Service.

The ombud service was created in October 2016 to resolve disputes in sectional title schemes. It is funded by a levy charged on sectional title owners and in its first full year of operation collected R168-million. It then invested R80-million in VBS and promptly lost all of it when VBS crashed.

There is evidence that Razwinane was also dependent on Msiza. In a WhatsApp conversation on 20 April 2017, Matsepe told VBS chairman Tshifhiwe Matodzi that “We [he and Msiza] agreed to appoint Raliom at 3 municipalities”.

On 13 September 2017, VBS chief executive Andile Ramavhunga got a message from Razwinane, which he forwarded to Matsepe:

Ramavhunga: Nazeema and Malatji are playing games
Ramavhunga: Message from Ralliom
Matsepe: Let me call Danny now

The apparent context was that municipal officials were not delivering deposits they had promised. Razwinane and Msiza would allegedly have to exert his influence to sway them.

Edgar Mucheke and Tshianeo Madazhe

Mucheke’s company TNE Advisory Services was another municipal go-between and earned R7-million in commissions from VBS. A total of R3.4-million of this was allegedly paid forward to Madazhe’s company Double TM Consulting.

A confidential draft forensic accountant’s report prepared for Motau in 2018 stated that TNE received commissions in relation to at least three municipalities – Collins Chabane, Giyani and Moretelele.

Robert Madzonga

An important new addition to the VBS charge sheet is Madzonga who already had skeletons in the closet when his relationship with VBS began in 2016. He initially acted as a consultant to a handful of bank clients before being hired by the bank as a prospective chief operating officer.

The move was nixed by the registrar of banks, Kuben Naidoo, who wrote to VBS citing concerns about Madzonga’s lack of banking experience as well as allegations of misconduct when he was the chief corporate services officer at MTN.

The Hawks had investigated his role in supposed corruption around MTN’s sponsorship of an ICT indaba in 2013. A report by PwC had also found “alarming evidence of corruption” at MTN relating to allegations Madzonga had signed off on fake invoices worth over R12-million.

After the failed attempt to install him at VBS, Madzonga was instead appointed as chief operating officer at Vele Investments, the company belonging to Matodzi which was the major channel through which VBS funds were allegedly stolen.

VBS’ former chief financial officer, Philip Truter, has fallen off the new indictment after striking a plea bargain with the NPA. He has already pleaded guilty and is assisting prosecutors in exchange for a reduced prison sentence.

Charlotte Ngobeni

Separately from the VBS officials and middlemen, last week also saw the arrest of Charlotte Ngobeni, the municipal manager of the Collins Chabane municipality in Limpopo.

She is charged with corruption related to the illegal deposit of R120-million of the municipality’s money in VBS on 23 October 2017. The money was lost when VBS crashed in March 2018.

A week after that deposit, Ngobeni was allegedly treated to a three-day stay at the Fairlawns Boutique Hotel and Spa in Morningside worth R51 196 – paid for by Matsepe’s company.

That was however the least of it. The day after her stay at the spa she allegedly received a credit facility for R1.4-million to buy a Range Rover after previously being turned down for the same facility.

Later on, she got a TAG Heuer watch worth R28 500. According to the charge sheet, Matsepe lobbied VBS bosses to cancel most of the vehicle debt but bank records in amaBhungane’s possession show that the debt was still formally owing at middle-February 2018 when the bank was running out of money.

Ngobeni’s arrest is the second arrest of a municipal official after Thys Wienekus, the acting chief financial officer of Merafong, was taken into custody in June last year. Like Truter, Wienekus turned state witness after he was charged with contravening the Municipal Finance Management Act for depositing money in VBS at the behest of his boss.

Ngobeni’s arrest is however the first of what will likely be a wave of arrests of municipal officials including chief financial officers, municipal managers and mayors who accepted bribes to channel funds to VBS.

Her case shows what can be expected to emerge in the trials that will surely follow.

A report delivered to the Limpopo provincial treasury by auditing firm BDO in 2019 found an incredible professed lack of knowledge of regulations around municipal finances by municipal officials at 12 different Limpopo municipalities that invested at VBS.

In the case of Ngobeni it also shows how Ngobeni scrambled to get the money back as VBS was teetering on the edge in early 2018. The three-month fixed deposit of R120-million was meant to be released on 23 January but nothing was forthcoming.

On 13 February Collins Chabane chief financial officer Eddy Makamu emailed VBS retail manager Sasa Nemabubuni instructing him to transfer the funds back – to no avail.

A week later he tried again but attached a letter from Ngobeni threatening to take the matter to the Reserve Bank and provincial treasury. On 28 February she made good on the threat and wrote to the provincial treasury requesting “intervention”.

Someone seemingly made a phone call because on 2 March, VBS wrote to Makamu, promising to repay the money by 9 March. On 11 March VBS entered curatorship.

Other documents that have been made public in court proceedings also show how Ngobeni interacted with VBS and how VBS seemingly thought she could be counted on to produce more money when things got tough. She allegedly felt familiar enough with the middleman Matsepe to ask him to bring her a “very expensive handbag” from Dubai when Matsepe accompanied VBS officials on a trip to the World Economic Forum in Davos in January 2018. The TAG Heuer watch appears to be what she got instead.

On the morning VBS was put into curatorship, chief executive Ramavhunga was still scrambling to find cash. Matsepe allegedly sent him the numbers of municipal officials he could try. Among these was Ngobeni.

She was however far from a unique case. In testimony before Motau, former VBS treasurer Phophi Mukhodobwane said that “the whole municipal book” involved the bribery of officials. Municipal officials who felt aggrieved by the size of their “commissions” would complain to Nemabubuni, he said.

BOX: VBS IN A NUTSHELL

In 2018, VBS Mutual Bank was placed into curatorship after a severe liquidity crisis. It was soon discovered that executives had ransacked the bank, stealing depositors’ money through what amounted to a Ponzi scheme. Massive “loans” were extended to related parties and extended on non-commercial terms to politically exposed persons.

Roughly R2-billion was lost, including R1.5-billion belonging to municipalities who are not by law permitted to invest in a mutual bank. The Public Investment Corporation also lost over R400-million after buying shares and giving the bank a loan facility. Largely poor pensioners, stokvels and burial societies in Limpopo suffered massive losses as well.

In 2018 the Reserve Bank commissioned advocate Terry Motau to investigate the collapse of VBS, which led to the publication of his report, The Great Bank Heist, in October that year. Much of that investigation remains confidential.

Read more on the VBS saga:

Breaking: VBS gang finally goes down

Update: State presents case against VBS accused

‘We must bow out with pride,’ says VBS boss Matodzi

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