VBS Bank rot grew out of a culture of impunity at the top

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VBS Bank rot grew out of a culture of impunity at the top

The debacle provides salutary lessons about the nature of the Zuma years

Stuart Theobald


In reading advocate Terry Motau’s forensic report on VBS Mutual Bank, released last week, the question that stuck in my mind was: How did they think they’d get away with it?
It said VBS had bribed municipal officials to direct deposits into its coffers that could not possibly be paid back. It was lying in its monthly Reserve Bank returns. The bank had made up deposits so that it could buy businesses from associates and “lend” money to shareholders to be splurged on cars, houses and a helicopter.
Eventually, the thing that set off alarm bells was that it began defaulting on its daily settlements in the interbank settlement system. Any way you look at it, there was no chance that the house of cards could stand for much longer.
Or was there? Towards the end, the report reveals, VBS was desperate to raise money. It resorted to increasingly frantic efforts to get R1bn in deposits from the Passenger Rail Agency of SA (Prasa), greasing palms, including a planned R30m-R40m to bribe Prasa officials.
It said VBS also was trying to get the Public Investment Corporation to deposit R2bn. Two senior PIC representatives who sat on the VBS board had been bribed with R7.6m and R7.2m respectively while presiding over the PIC’s decision to put R350m into the bank’s coffers.
Prasa was all lined up to pay out the money but for an acting CFO, Yvonne Page, who was refusing an instruction from the CEO to do the transfer, claiming doing so would be in violation of national Treasury regulations. But she was being dealt with.
According to a senior VBS employee, the Prasa money was in the bag provided “NDZ” won the ANC elective conference last December. That, of course, is a reference to Nkosazana Dlamini Zuma, the preferred candidate of the Zuma faction of the ANC.
Why would this be? Motau’s report doesn’t go into that. But to my mind the key to understanding how the VBS leadership thought they would get away with it is that they believed an NDZ presidency would ensure impunity reigned.
The key obstacle to Prasa’s R1bn deposit, the Treasury, would be sidelined under an NDZ presidency. Zuma had already destroyed the key oversight institutions that are meant to protect the public from brazen corruption. The Hawks were declawed, the National Prosecuting Authority was craven, the intelligence agencies were sycophantic.
The white-anting of the Treasury was under way and NDZ could ensure it was fully bent. Only the Reserve Bank was resisting a kleptocratic takeover, though a strategy was under way using nationalisation as the thin end of the wedge to undermine its independence.
So in the mind of VBS chairperson Tshifhiwa Matodzi, I can only imagine the outlook was something like this: We’re only doing what everyone else in power is doing, and they are ensuring there’s nothing that will stop them from doing it. Therefore, we should be able to get away with it in their wake. An NDZ presidency will ensure the institutional destruction continues unabated.
The state, through institutions such as Prasa and the PIC, could continue to keep money flowing into VBS, with bribes smoothing its way, covering up the fact that the bank had become little more than a Ponzi scheme, dishing cash out to its principals while taking it from the public purse. In short, an NDZ presidency could have ensured that the party never ended.
The forensic investigation of VBS lifts the veil on just how debauched this line of thinking had become. It is by far the most brazen act of bank fraud that I can think of in SA history. The last banker to go to jail – Regal Treasury’s CEO Jeff Levenstein – committed relatively paltry sins of taking an unauthorised R2m bonus and lying about whether auditors had signed off the bank’s financials in 2001.
But unlike that criminality, VBS relied on politicians to keep the scam going. Senior ANC officials were central to its extraction of money from Limpopo municipalities, getting millions themselves to keep the cash flowing. The EFF is spinning, amid allegations that millions flowed to its senior leaders too.
About the only surprise is that the Guptas haven’t cropped up in the mess. And it is a surprise, considering how desperate they were for bank accounts and how desperate VBS was for more cash. Perhaps the Guptas were among the few who knew that VBS was not a safe place for their money.
There are many lessons to learn from the VBS debacle. The Reserve Bank will have to think through the wisdom of relying so heavily on auditors to ensure that banks are not committing fraud. There needs to be greater verification of returns that are filed to the bank and closer monitoring of accounts in the interbank settlement system.
But it also provides salutary lessons about the nature of the Zuma years and the culture of impunity that arose. We are being provided many lessons through the Nugent commission on Sars and the Zondo commission on state capture. VBS is another teachable moment.
• Stuart Theobald is chairman of research and consulting house Intellidex.

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