Treasury tells Parliament that 15 municipalities are still at risk to VBS Bank scandal
26 April 2018
In a presentation to Parliament’s Portfolio Committee on Cooperative Governance and Traditional Affairs yesterday, National Treasury revealed that 15 municipalities are still exposed to the VBS Mutual Bank scandal. These include some of the worst run and most financially unstable municipalities in the country.
It has become increasingly clear that VBS was being run as a pyramid scheme, whereby short term deposits from municipalities were utilised to fund long term loans. The bank seemed to have particularly targeted financially distressed municipalities, with weak internal controls and poor municipal governance to attract their deposits.
The Vhembe District Municipality, for example, is exposed to the amount of R311 million, or 34.57% of their annual operating revenue. The Greater Giyani Local Municipality is exposed to the amount of R158 million, or 52.27% of their annual operating revenue. A full list is available here.
Current forensic investigations indicate that VBS was using lawyers to "facilitate" municipal deposits, in contravention of Section 7(3) of the Municipal Financial Management Act.