National Director of Public Prosecutions Shamila Batohi at a media briefing on progress of high profile priority cases in Pretoria, June 17 2020. Picture: FREDDY MAVUNDA
National Director of Public Prosecutions Shamila Batohi at a media briefing on progress of high profile priority cases in Pretoria, June 17 2020. Picture: FREDDY MAVUNDA

SA’s elite crime-fighting unit, the Hawks, have made the first arrests in connection with the collapse of VBS Mutual Bank after almost two years of investigating one of the country’s biggest banking scandals.

VBS Mutual Bank collapsed amid allegations that its executives looted almost R2bn they were supposed to be looking after on behalf of municipalities, stokvels and elderly people in Limpopo. Investigative journalism unit amaBhungane reported that the bank’s top executives were among those arrested.

Hawks head Lt Gen Godfrey Lebeya announced that four suspects were arrested during operations on 10 premises in Gauteng and Limpopo on Wednesday morning. Another three were expected to hand themselves over by the end of the day. An eighth suspect was in Covid-19 quarantine.

The suspects are facing 47 counts, including of racketeering, theft, fraud, corruption and money laundering.

Lt-Gen Godfrey Lebeya and the National Director of Public Prosecutions Shamila Batohi brief the media, June 17 2020.

The authorities would not name them before their court appearances on Thursday. A report on the scandal by advocate Terry Motau detailed a criminal enterprise perpetrated at the behest of executives and benefiting politicians who illegally deposited money with the bank in return for backhanders. It detailed how one mayor allegedly pleaded for "Christmas" — slang for a monetary gift — for herself and the speaker of her municipality.

Neither Lebeya nor national director of public prosecutions Shamila Batohi would be drawn on whether high-profile politicians would be arrested in connection with the scandal.

EFF leader Julius Malema and his deputy Floyd Shivambu have also been embroiled in allegations, which they have always denied, that they benefited from money looted from VBS.

Formed in 1982 as a wholly black-owned bank in the former Venda homeland, VBS burst onto the national scene in 2016 when it emerged that it had lent former president Jacob Zuma more than R7m to pay back state funds used to upgrade his Nkandla home. He eventually defaulted on the loan, and the bank’s liquidators issued summons in 2019 for him to pay back more than R7.3m. In March 2018, the Reserve Bank had VBS Mutual Bank placed under curatorship after withdrawals by municipalities caused a cash crunch.

The Bank then appointed law firm Werksmans Attorneys and Motau to establish reasons for the bank’s failure. Municipalities in some of the country’s poorest areas with shoddy local services had about R1.2bn deposited at VBS when it went under.

The report recommended bringing charges against those implicated.

Lebeya said the Hawks had been working on the case since August 2018, and put together a team of 15 investigators, some of whom were seconded from the SA Police Service detective service.

The team had investigated the offences with the guidance of the National Prosecuting Authority (NPA), he said.

The investigation started as an inquiry, and was converted into a police case docket in May 2019.

Lebeya said the investigation revealed that the suspects had directly or indirectly benefited unduly to the tune of R122.2m which was not due to them. The investigation also revealed that 20 municipalities deposited an amount of R3.7bn of which R2.2bn was paid back, leaving an amount of R1.5bn in VBS Mutual Bank.

"Investigations of this magnitude are complicated and labour intensive," Lebeya said.

He said this was the first leg of the investigation the Hawks were conducting, and that the probe had not been concluded.

"Wherever evidence directs us, we will be following that. Watch this space," Lebeya said when asked if there would be more arrests.

Batohi said the work done by the Hawks provided some confidence that the authorities were indeed making headway in key cases. "Whilst today’s developments are an important milestone, and we are certainly pleased ... we all know that still a lot of work lies ahead," she said.

"Although it is imperative that we move with speed to finalise these matters, the team also has to be meticulous, and painstakingly go through all the evidence with a fine-tooth comb. We have to do this to ensure that in the end justice does prevail and the rule of law prevails as well."