VBS Mutual Bank claims the Public Investment Corporation was about to lend it R700-million when the Reserve Bank placed the cash-strapped bank under curatorship.
In court papers challenging the decision, VBS's majority shareholder said the PIC had decided to lend the bank enough to keep it afloat amid a liquidity crisis.
"It transpired on 12 March 2018 that the PIC agreed to advance R700-million as a loan to VBS Mutual Bank," Vele Investments said in its affidavit. "Had the minister [of finance] waited until [then] the liquidity would, due to such loan, have improved beyond a point of concern and with no need to appoint a curator."
The company went to court in March to challenge the curatorship decision. The matter was withdrawn, but the Sunday Times understands Vele intends to make a fresh application because shareholders and directors believe the Reserve Bank negotiated with them in bad faith.
But the PIC, a 26% shareholder in VBS, told the Sunday Times its investment committee had reviewed the loan application and decided to reject it.Vele Investments chairman Maanda Manyatshe said that at a meeting with the Reserve Bank and Finance Minister Nhlanhla Nene on March 8, three days before VBS was placed under curatorship, it had been agreed the company would be given an opportunity to seek funds to keep it afloat.
The company argued in its affidavit that the curatorship decision must be reviewed because section 69(1) of the Banks Act stipulates that the finance minister must give written notice of the appointment of a curator. In the VBS case, the letter came from the registrar of banks, it said.
Liquidity crisis
Manyatshe also said Vele was not given a chance to seek funds to rescue VBS in the short term.
"The decision lacks rationality in that the pending application for a loan from the PIC was either not taken into consideration or [Nene] made a material error in accepting the advice of the registrar of banks that such an application to the PIC had failed when in fact it had not yet been considered," he said.
VBS shareholders also believe they could mount a constitutional challenge because the decision to place the bank under curatorship was taken without them being afforded a proper hearing.The bank experienced a liquidity crisis after municipalities that deposited a combined R1.5-billion were instructed by the National Treasury to withdraw the funds because the Municipal Finance Management Act did not permit them to invest in a mutual bank.
When the municipalities sought to withdraw their money, it emerged that VBS had used some of it to grant long-term loans to directors, shareholders and other associates, and could not refund the investments with interest, as promised. It also emerged that middlemen who facilitated the transfer of municipal funds to VBS were paid hefty commissions. They included senior politicians in Limpopo. Seven district and local municipalities in the province - Fetakgomo-Greater Tubatse, Lepelle-Nkumpi, Collins Chabane, Vhembe, Makhado, Greater Giyani and Ephraim Mogale - are owed a combined R1.1-billion by VBS.
Vele Investments is also challenging the assertion that municipalities are not allowed to invest in mutual banks.
In its responding affidavit, the Reserve Bank said VBS was severely mismanaged and there was reason to believe there had been fraudulent reporting and manipulation of financial information.
A spokesperson for Vele Investments said the company had yet to decide whether to reinstitute the case. The Reserve Bank said it was not aware of any moves to make a new court application...