Municipalities could lose billions in VBS collapse
Twenty-one municipalities face the prospect of losing all the cash — mostly unconditional grants — that they placed with this mutual bank
Municipalities disclosed at least R500m in exposures to VBS Mutual Bank in their filings to treasury last year, even as treasury warned them they were breaching finance regulations by dealing with a mutual bank. The filings show municipalities such as Merafong in Gauteng’s West Rand, and Greater Giyani and Polokwane, both in Limpopo, had placed at least R412m in the bank at the end of June 2017. Another municipality, Makana in the Eastern Cape, had nearly 16% of its R12.6m cash deposits in GBS Mutual Bank, VBS’s rival. This contravened the Municipal Finance Management Act (MFMA), which states that no municipality may open an account with an institution which is not registered as a bank in terms of the Banks Act. Mutual banks are governed by a separate act. Most of the money deposited with VBS consisted of unspent conditional grants, and these were slashed by R13.7bn over the medium term in government’s 2018 budget to free up cash for fee-free higher education. Treasury makes the gra...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.