VBS-hit councils have to plug gap
The 14 municipalities that had invested about R1.5bn in VBS Mutual Bank will have to enter the 2018-19 financial year without the money in their budgets.
Co-operative Governance and Traditional Affairs Minister Zweli Mkhize said in an interview with Business Day last week that the Reserve Bank had indicated they were "very doubtful whether we will be able to get the money".
Mkhize said it was important for the Bank to expedite the investigation so those responsible could be charged.
Separate investigations of each of the municipalities were also taking place, after which completed reports must be tabled in council. "There must be consequences," Mkhize said.
In the meantime, municipalities have been ordered to restructure their budgets so as not to create gaps because of money that "may not be available right now", Mkhize said.
VBS was put under curatorship in March because it was facing a severe liquidity crisis and could not repay deposits as and when required.
Since VBS has been placed under curatorship, the municipalities that invested with the bank have not been able to access their funds. This money was intended for, among other things, service delivery.
National Treasury indicated to municipalities in August 2017 that mutual banks did not meet investment requirements, though investing with them was not specifically forbidden.
Mkhize said the municipalities had been informed there would be no bailouts related to this situation.
He said their budgets must be restructured and public representatives would have to then explain the situation to communities and stakeholders.
He added that if projects were affected, it must be explained in the integrated development plan.
"But at the end of the day, they have to take responsibility for it," Mkhize said.
Gauteng finance MEC Barbara Creecy said last week during her department’s budget vote that she was "deeply concerned" about the effect of the VBS matter on the finances of the West Rand District Municipality and the Merafong Local Municipality. The two municipalities were the only two in Gauteng that had invested there.
The other municipalities were in Limpopo, where the mutual bank is based, North West and Mpumalanga.
Creecy said she had told the two affected Gauteng municipalities that a credible budget should be tabled that takes account of the fact that the municipalities did not have the money at this stage.
She said the West Rand District Municipality had already amended its budget.
The district municipality was dependent on grants, while Creecy said Merafong was in a better position to see if they could increase revenue.