Finance authorities in Gauteng to probe municipal investments with VBS bank

A branch of VBS Mutual Bank in Thohoyandou, Limpopo. Picture: ANTONIO MUCHAVE

The Gauteng treasury is due to investigate investments that the West Rand district municipality and Merafong local municipality made with VBS Mutual Bank.

In a statement on Tuesday, it said it would implement a forensic investigation into the circumstances surrounding investments made by the two municipalities.

According to the Gauteng treasury‚ the West Rand district municipality had R81m invested with VBS and the Merafong local municipality R50m.

The bank was placed under curatorship in March due to what the Reserve Bank said was a “severe liquidity crisis”. As a result‚ the two Gauteng municipalities cannot access the invested funds.

At the end of April the DA accused finance MEC Barbara Creecy of washing “her hands of the fact that ANC municipalities in Gauteng illegally invested its finances into VBS bank”.

The treasury said the aim of the investigation was to determine whether the investments breached the Municipal Finance Management Act and whether any official should be charged with misconduct as a result of these investments.

“This decision follows confirmation from the municipalities involved that they do not have the capacity to comply with an instruction from National Treasury made at a meeting on March 22, to investigate and report on the circumstances surrounding their investments,” the statement read.

It said the terms of reference of the investigation would include the amounts invested in the bank since 2014, how such decisions were reached, which officials signed off on the decisions, and whether any official received any commission or other incentive for facilitating the investment.

The probe would also look at what reports, if any, were submitted to other levels of government detailing these investments, and what remedial action was taken after the Treasury informed municipalities in August last year that Mutual Banks did not meet investment requirements.

Section 7(3) of the Municipal Finance Management Act allows municipalities to open accounts with commercial banks. Treasury regulations promulgated in 2005 set out the statutory perimeters and vehicles which can be used for investments by municipalities.

“These regulations do not specifically forbid investments in Mutual Banks; however, National Treasury did indicate to municipalities in August last year that Mutual Banks do not meet investment requirements,” the statement read.