Millions lost as 15 municipalities irregularly invested in VBS: public protector

The public protector has found that the municipalities that banked with the now defunct VBS Mutual Bank acted improperly.

In total, 15 local municipalities in Limpopo, the North West and Gauteng deposited about R1.6bn with VBS Mutual Bank, in contravention of the Municipal Finance Management Act (MFMA) and after being instructed not to do so by the National Treasury.

“Makhado local municipality irregularly invested R155m from 2016 to 2017 with VBS Mutual Bank. The investment resulted in the loss of more than R60m of public funds,” said advocate Busisiwe Mkhwebane during the release of 17 reports stemming from investigations her office conducted.

Among the findings were:

• Vhembe district municipality irregularly invested R1.07bn from 2015 to 2017 with VBS, resulting in the loss of more than R300m of public funds;
• Collins Chabane local municipality irregularly invested R120m in 2017 with VBS;
• Elias Motsoaledi local municipality irregularly invested R190m during 2016/2017 and 2017/2018 financial years with VBS;
• Greater Giyani local municipality irregularly invested R153m with VBS in September and October 2017;
• Ephraim Mogale local municipality irregularly invested R80m from 2016 to 2017 with VBS;
• Fetakgomo Tubatse local municipality irregularly invested R230m from 2016 to 2018 with VBS;
• Lepelle-Nkumpi local municipality irregularly invested R100m for a year and R50m for three months with VBS in November 2017;
• Madibeng local municipality irregularly invested R60m with VBS in 2017 — of this amount, the bank paid back R30m;
• Mahikeng local municipality irregularly invested R89m, excluding interest;
• Moretele local municipality irregularly invested R258m with VBS from July 2017 to January 2018, resulting in the loss of more than R50m of public funds;
• Dr Ruth Segomotsi Mampati district municipality irregularly invested R210m with VBS from July 2017 to March 2018, resulting in the loss of more than R150m of public funds;
• Merafong City local municipality irregularly invested R50m in 2017, resulting in the loss of more than R51m of public funds; and
• he West Rand district municipality irregularly made 19 investments with VBS from February 2015 to February 2018, amounting to R389m.

“These investments were made in violation of the provisions of section 13(1) of the Municipal Finance Management Act, the municipal investment regulations and the policies regulating investments by the municipalities.

“The funds lost could have been used to improve service delivery to the communities,” Mkhwebane said.

She said the conduct of the municipalities was improper.

Mkhwebane said to remedy their conduct and maladministration, municipal managers of the municipalities should:

• ensure that the relevant officials responsible for, and dealing with investments attend a workshop and training sessions on the relevant provisions of the MFMA, the regulations and the policy of the municipality that regulates investments, within 90 days from the date of this report;
• report to the council quarterly on the status of investments made or to be made by the municipality;
• ensure that the internal audit unit of the municipality conducts regular compliance audits on the investment accounts of the municipality and report accordingly; and
• report to the council on the implementation of the remedial action within 120 days from the date of the report and submit a copy of the report to the public protector.

“The Limpopo, North West and Gauteng MECs responsible for local government must submit regular reports to the director-general of the National Treasury with their comments, where appropriate, on the implementation of the remedial action above.”

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