Investing in VBS Bank: A dereliction of duty

Share on facebook
Share on twitter
Share on linkedin
Share on telegram
Share on whatsapp
Share on email

A number of municipal employees have appeared in court following the collapse of the VBS Mutual Bank.

In many instances the municipal officials in question deposited municipal funds into the VBS Mutual Bank despite a policy prohibiting municipalities from placing deposits in banks which were not registered in terms of the Banks Act.

In 2016 rumours started circulating that the VBS Bank was broke. When it collapsed, it transpired that almost R2 billion invested by among others the elderly, the poor, and about 15 municipalities had simply disappeared.

There are mainly two questions on the lips of many ratepayers.  The first is: What happened? It stands to reason that this question will only be answered once the trials of the accused are finalised.

The second question is: Will these officials be held accountable? Based on the judgment in the matter of Minah and Elias Motswaledi Local Municipality, it is apparent that some municipal councils are holding the officials to account.

Minah Maredi was the municipal manager at the Elias Motswaledi Local Municipality in Groblersdal. She was suspended for having deposited more than R192 million of the municipality’s funds – and therefore public money – into the VBS Bank.

Maredi challenged her suspension in the Labour Court. Her defence was that upon receiving MFMA Circular No 4 (‘Banking and Investments’ dated 27 February 2018) she immediately ordered the withdrawal of all investments from VBS Bank.  As the municipality had retrieved its deposits before the VBS Bank collapsed, Maredi argued that the municipality did not suffer a loss. She asked the court to set aside her suspension.

Refusing to overturn her suspension for what was termed “serious misconduct”, the court described her “gross misdemeanours” as “sheer incompetence or wilful disregard of the prescripts and dereliction of duties”.

The court held

  • that she could not be trusted to “perform duties with due diligence and care”;
  • that it was “astonishing” that she could “seriously and unashamedly” contend “that the municipality has not suffered any prejudice”;
  • that although she “shamelessly” claimed that she wasn’t “aware of the applicable prescripts in so far as the investments with VBS were made”, she painted herself as a heroine for not only having withdrawn the amount before the collapse, but also because the deposit had earned an interest of R2 million. This, the court said, was the  “result of the investments unlawfully made”, in a scheme that was designed to rob money from ordinary investors who stood in long lines outside the bank hoping to get something back:

“That sight and cruelty as witnessed nationally, should be engrained in our collective memory forever, and the perpetrators and participants in that national tragedy, inclusive of individuals such as the applicant, should hang their heads in shame.”

The court held that a further investigation should take place in her absence in order to establish “how these lapses took place, and to further put mechanisms in place to ensure that there is no repeat of the misconduct”.

The importance of this judgment is that when matters relating to the VBS saga make their way to the Labour Court, municipal officials may discover with a start what is meant by consequence management.

Note:  Maredi resigned when required to face a disciplinary hearing.