We're above board, insists Zuma's bank

14 September 2016

Cape Town - VBS Mutual Bank, the institution that granted President Jacob Zuma a R7.8m bond to pay for non-security upgrades to his home at Nkandla, has a credible track record and adheres strictly to principles of sound corporate governance, it said in a statement on Wednesday.

VBS Mutual Bank chief executive officer Andile Ramavhunga said the bank would under no circumstances release information about the business dealings of its clients.

This comes after the presidency issued a media release on Monday, naming VBS Mutual Bank as the institution which granted Zuma a home loan to pay back the money for improvements to his Nkandla homestead.

Ramavhunga however clarified a number of issues, especially the fact that the bank is one of only a few institutions to grant loans to traditional communities.

The fact that Zuma managed to receive a loan for his Nkandla homestead raised questions, as he is not the rightful owner of the land on which the property is situated. The land belongs to the Ingonyama Trust.

“As a responsible corporate citizen, the bank abides by regulations pertaining to the privacy of customer information,” said Ramavhunga. “However, following unprecedented public interest, the VBS Mutual Bank wishes to highlight its long-standing, credible track record and strict adherence to principles of sound corporate governance.”

He explained: “Home loans are granted to individuals, partnerships, trusts, closed corporations, private companies or prospective owners who wish to buy, improve or build their own fixed residential property. Like any financial institution, the bank lends to qualifying individuals only.

“In granting a loan the usual processes and conditions apply, no matter who the client may be,” he said.

According to Ramavhunga, the bank has been granting full title and permission to occupy (PTO) loans – a requirement for people who live on land owned by traditional communities – since its formation as a building society back in 1982.

“The fact that rural homes tend to remain in families for several generations has resulted in our loan book being consistently rated the best by the regulator in terms of low impairment levels. It is one of few financial institutions offering home loans in respect of land owned by traditional authorities.”

Ramavhunga also clarified that the Public Investment Corporation (PIC) is a shareholder in the bank. The PIC has a 25% stake in VBS.

“The PIC, as the largest pension fund and investor in the country, has a varied shareholding in almost all banks, as well as in a number of top listed and unlisted entities in the country,” Ramavhunga said.

He also said that although Dyambeu Investments has a significant shareholding of over 25% in the bank, it has no direct involvement in the day-to-day running of VBS Mutual Bank. It also does not participate in the bank's governance structures.

Dyambeu Investments stands under the leadership of the Venda king Khosikhulu Toni Mphephu Ramabulana, who was crowned by Zuma in May this year.

Ramavhunga pointed out that the highest decision-making body within the bank is the board of directors, who at all times act independently of its shareholders.

He stated that VBS Mutual Bank acts within the confines of its banking licence terms and conditions in all its dealings, and periodically seeks guidance from the regulator where deemed necessary.

This article first appeared on Fin24, see here.