Mayors behind R1.5bn in deposits stand their ground in VBS debacle
Some mayors and senior officials in the 14 municipalities that made R1.5bn in deposits to the controversial VBS Bank remain defiant in the face of criticism — even producing legal opinions to defend their decisions.
This was revealed by Co-operative Governance and Traditional Affairs Minister Zweli Mkhize who said the mayors and officials insisted in a meeting in June that they had followed the law.
"The question we asked them is whether they had a council decision for investing in VBS Bank and most of them said no. We asked them how that happened. They said they considered this as an investment wherein they don’t need to go to report to council," he said.
"They said this was just an investment of the money they had which was in the delegated power of some of the executives, so they went ahead with it. They said they took three quotes, looked at who has the best return and … invested the money."
Mkhize said other officials argued that they had misinterpreted legislation that dictates that municipalities may only make deposits with fully commercial financial institutions.
The government investment policy "precludes [municipalities] utilising mutual banks. They argued that some … understood that the trading accounts of municipalities cannot be opened with a mutual bank … but that you can invest in different possibilities. So, they thought this [investing in a mutual bank such as VBS Bank] was allowed.
Others were "adamant that they were right" and presented legal opinions maintaining their innocence, Mkhize said.
The meeting, on June 19, was held as details of how the bank was plundered by some directors made headlines.
Mkhize, who has also been mentioned as having had a hand in influencing municipalities to invest in VBS Bank during his tenure as ANC treasurer-general, denied ever being involved.
The bank was put under curatorship by the Reserve Bank and the curator has approached the court in an attempt to recover the allegedly stolen funds. However, the municipalities were unlikely to recover the funds soon as the process could take up to a decade.
Mkhize said he had ordered that each municipality restructure its budget to provide for the loss of funds. He maintained this would not affect service delivery in the short term.
Asked what contingency plans have been instituted to ensure service delivery with a now limited budget, Mkhize said municipalities would have to "cut the coat to suit the cloth".
"We have just been told that as things stand now, we must understand that that money is not available because they couldn’t find it in the bank.
"We have asked the municipalities to restructure their budgets…. We have … said they must ensure there are no service delivery implications…."