Co-operative governance minister Zweli Mkhize. Picture: SUNDAY TIMES
Co-operative governance minister Zweli Mkhize. Picture: SUNDAY TIMES

There will be no bail-out for municipalities affected by the VBS scandal, co-operative governance and traditional affairs minister Zweli Mkhize said on Tuesday.

Mkhize told parliament’s portfolio committee on co-operative governance that the government was in discussion with its legal team around launching a lawsuit against those implicated, including municipal officials. 

This would be informed by the outcome of an ongoing forensic investigation, which is separate from the recent report on VBS‚ titled ‘‘The Great Bank Heist’’‚ which was commissioned by the SA Reserve Bank.

The report detailed how the bulk of the stolen funds‚ close to R2bn‚ allegedly benefited individuals and entities related to VBS executives‚ including its largest purported shareholder‚ Vele Investments.

Some of the municipalities from the North West, Limpopo and Gauteng deposited close to R1.6bn in VBS, in contravention of the Municipal Finance Management Act and the municipal investment regulations. 

In March, the SA Reserve Bank placed VBS under curatorship after it faced a liquidity crisis.

Treasury deputy director-general Ismail Momoniat previously told parliament that the Treasury was worried that the unavailability of funds invested by municipalities in VBS would affect service delivery. Their deposits are not guaranteed.

Mkhize said on Tuesday that most of the municipalities were unable to provide services and had failed to pay creditors within 30 days. There are fears that the municipalities will struggle with payment of salaries, statutory payments, including money owed to Eskom, water boards and Sars. 

The minister said municipalities in Limpopo had confirmed that they used their own revenue/surplus funds to invest with VBS; however, part of the forensic investigation is expected to confirm the sources of investment.

He said while the municipalities would not be bailed out, the government would provide support to strengthen their internal controls, reporting, revenue raising measures, capacity building and service delivery.

“The back to basics programme seeks to address municipal performance failures; it will assist the affected municipalities to provide quality and sustainable service delivery,” Mkhize said.