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...

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