On paying back the money

Victory for accountability, but questions remain

The announcement from the Presidency that President Jacob Zuma has now, at last, “Paid Back the Money” is a rare and wonderful moment that reflects a victory for accountability.

The Nkandla saga and the obduracy of the president and his coterie of advisers did huge damage to some of SA’s most important institutions, Parliament not least among them, and that will not easily be undone. Nevertheless, the Constitutional Court did finally uphold the public protector’s finding that the president must pay for nonsecurity upgrades to his R250m Nkandla homestead and the Treasury hired quantity surveyors to establish what the sum should be.

That relatively modest sum — of R7.9m — has now finally been paid back. And although there were benefactors who were clearly willing to write cheques, the president appears to have paid back the money personally, thanks to a loan from VBS Mutual Bank.

This is welcome news and with any luck, we will have seen the end of the Nkandla saga and its fallout. It may be good news too for the littleknown, Makhado-based VBS, the former Venda Building Society, which has no doubt won more publicity in the past couple of days than it had in its entire 34-year history.

But the story has a degree of irony to it, and it raises some intriguing and important questions. This small bank was chosen, according to Presidency officials, because it is one of very few willing to grant home loans on properties owned by traditional authorities.

Perhaps Zuma wouldn’t have had a problem getting a home loan if his administration had made sure that people in rural areas had their own title deeds and owned their own properties, instead of being reliant on traditional leaders and communal tenure, but ironically, the Zuma administration has attempted to reinforce communal land tenure and the power of chiefs.

It seems Zuma himself did, however, receive a title deed for Nkandla not long ago, benefiting from an unusual exception to the rule governing the Ingonyama Trust land where Nkandla is located. So, it is not entirely clear why he could go only to VBS, and there will be suspicions about what influence might have been brought to bear.

That is particularly so since our president, at age 74, is not a natural candidate for a home loan. We hope that he isn’t taking too much risk by taking out a mortgage at this late stage of his career — and neither is VBS, which is a very small bank with a balance sheet of just more than R1bn, of which loans and advances make up just R695m. A R7.9m loan is a reasonably meaningful exposure on a mortgage book as small as VBS’s.

The detailed terms of Zuma’s mortgage have not been disclosed, but on a typical 20-year home loan at about the prime overdraft rate, the monthly payment has been calculated at about R78,000 – which is a chunk of change for a president who earns about R2.7m a year in pretax income, or about R220,000 a month.

On a 20-year home loan at about the prime overdraft rate, the monthly payment has been calculated at about R78,000

The public deserves answers on whether Zuma is meeting those payments out of his own pocket, and if not, who is providing the cash.

We trust too that VBS, which is one of just three registered mutual banks, will have provided answers to the banking regulator on the Zuma loan and its governance, and assured the regulator that it has been prudent.

This is depositors’ money that the bank is lending out to Zuma, and most of it belongs to small retail depositors. Until very recently, when it changed its funding model and brought in more than R280m of wholesale deposits from institutions and municipalities, VBS relied almost entirely on retail deposits for its funding. Those depositors need safeguarding. But who knows, perhaps they will be thrilled to know that their money is paying for those nonsecurity upgrades at Nkandla and bailing the president out of a difficult spot.