Mayors defend huge VBS deposits

Cooperative governance minister Zweli Mkhize said he had instructed each municipality to restructure their budgets to make provision for the loss of funds.
Cooperative governance minister Zweli Mkhize said he had instructed each municipality to restructure their budgets to make provision for the loss of funds.
Image: A file photo by SowetanLIVE

Some mayors and senior officials in the 14 municipalities which made R1.5-billion in deposits to the controversial VBS Bank have remained defiant – even producing legal opinions to defend their decision.

This was revealed by cooperative governance minister Zweli Mkhize‚ who said the mayors and officials insisted that they followed the law during a meeting last month.

“In the first instance‚ the question we asked them is whether they had a council decision for investing in VBS Bank and most of them said no. We asked them how that happened. They said they considered this as an investment wherein they don’t need to go to report to council‚” he said.

“They said this was just an investment of the money they had which was in the delegated power of some of the executives‚ so they went ahead with it. They said they took three quotes‚ looked at who has the best return and they took that and went and invested the money.”

Mkhize said other officials argued that they misinterpreted legislation that dictates that municipalities may only make deposits with full commercial financial institutions.

“Our point of departure is that the investment policy in government precludes [municipalities] utilizing mutual banks. They argued that some understood it differently. They understood that the trading accounts of municipalities cannot be opened with a mutual bank…but that you can invest in different possibilities. So‚ they thought this was allowed.

The others‚ Mkhize said‚ were “even adamant that they were right” and presented legal opinions maintaining their innocence.

The said meeting‚ which was held on June 19‚ came as details of how the bank was allegedly plundered by some of its directors made headlines.

Mkhize’s name has also been mentioned in relation to influencing municipalities to invest in VBS during his tenure as ANC treasurer-general‚ but he has denied ever being involved.

The bank was put under curatorship by the South African Reserve Bank and the curator has approached the court in an attempt to recover funds.

However‚ it is impossible for the municipalities to recover the funds in the near future as the process could take up to a decade.

Mkhize said he had instructed each municipality to restructure their budgets to make provision for the loss of funds. He maintained it would not affect service delivery in the short term.

Asked what contingency plans have been put in place to ensure service delivery with a now limited budget‚ Mkhize said municipalities would have to “cut the coat to suit the cloth”.

“We have just been told that as things stand now‚ we must understand that that money is not available because they couldn’t find it in the bank. Whatever the situation‚ investigations are ongoing‚” he said.

“We have asked the municipalities to restructure their budgets…We have actually said they must ensure there are no service delivery implications and then‚ of course‚ they’ve got to stretch the budget. Some of the money they say was not for immediate use…Instead of having a budget that is R100-million more‚ it will probably be R100-million less.”

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