Vele chairman quits over VBS debacle
• Matodzi resigns from board with immediate effect • Investment firm holds 53% of the bank
Tshifhiwa Matodzi, the chairman of Vele Investments, has quit as questions swirl around VBS Mutual Bank — one of Vele’s largest investments — and the reasons for its curatorship.
Matodzi resigned from Vele’s board with immediate effect on Monday, a day after Reserve Bank governor Lesetja Kganyago announced VBS would be placed under the care of SizweNtsalubaGobodo Advisory Services after withdrawals by municipalities sparked a severe liquidity crisis.
“He resigned from Vele Investments for personal reasons and the company has welcomed his resignation,” said Vele Investments spokesman Ndivhuwo Khangale.
Vele is VBS’s largest shareholder at 53%, ahead of the Public Investment Corporation (PIC) and Dyambeu Investments.
The Financial Services Board (FSB) has also advised the Treasury that Matodzi’s involvement in Vele, which bought Mvunonala Holdings in 2017, may lead to other related parties being affected by the bank’s curatorship. Vele has interests in insurance and asset management, which are sectors regulated by the FSB.
The FSB placed two entities within the former Mvunonala group under curatorship in 2017, before Vele purchased Mvunonala’s entire share capital.
Regulatory filings show the bank’s liquidity problems were caused by rapid growth in loans and advances funded by deposits from local government — which started flowing in eight months after the bank controversially granted an R7.8m loan to former president Jacob Zuma — in spite of legislation prohibiting municipalities from banking or investing with mutual banks.
The figures show VBS’s gross loans and advances, mainly residential mortgages, fell more than 36% in the six months before the first municipal deposits of about R803.7m
were made in June 2017.
These surged to R1.02bn by December 2017 and appeared to fund the bank’s 85% growth in loans and advances, even as capital reserves remained stagnant. The difficulty was that most of these deposits were short term, with just R233m held in accounts maturing after six months.
“VBS experienced increasing liquidity challenges over the last 18 months,” Kganyago said on announcing the curatorship.
“These problems emanated from a failure of the board of directors and executive management to manage the mutual bank’s rapid growth and its funding and liquidity position.”
The bank’s municipal depositors may incur losses as the Bank has guaranteed deposits only up to R50,000 per depositor. All other depositors will rank as creditors, and curator Anoosh Rooplal is charged with acting in their best interests.
But Matodzi’s widely circulated letter to Bank deputy governor Kuben Naidoo, who is also the registrar of banks, stated VBS was confused about discrepancies in regulations governing national, provincial and local government finances.
“It means we are allowed to bank [state-owned companies], provincial and national departments, but not municipalities,” Matodzi said.
The Treasury later issued a communiqué to specific munic- ipalities saying they should not put their money in VBS, according to the letter.
VBS took the Treasury to court, but was asked to withdraw while the parties reached a negotiated settlement. Khangale declined to say why the bank had not resumed its court action when it could not reach an agreement with the Treasury.
The PIC, which first bought shares in the bank in April 2011, refused to answer questions about the R8.9m it invested in the bank, as disclosed to Parliament in March 2017. The PIC also granted more than R258m in credit facilities to the bank from July 2015 to February 2016, according to its published inventory of unlisted assets.
VBS’s latest annual report says the facility granted was R350m, with R12m repaid by the end of March 2016, its latest financial statements show.
The PIC said it would work closely with the curator and other stakeholders to assist the bank. It would not address any specific questions on its losses, with spokesman Sekgoela Sekgoela saying the statement it issued was adequate.
Some municipalities are unable to explain why they flouted the law by putting money in VBS. Limpopo’s Greater Giyani Municipality, which deposited more than R100m, said it was “gathering facts” and would respond.