Is In­sure Group’s col­lec­tions in­dus­try fac­ing to­tal col­lapse?


ON JULY 19 we re­ported on the fraud­u­lent prac­tices at VBS. We stated that “Ma­todzi in­struced Truter and Mukhodob­wane to fa­cil­i­tate the ac­qui­si­tion of In­sure Group Man­agers for R250 mil­lion with fic­ti­tious money. The im­bal­ance in VBS’s bal­ance sheet would then be fixed by hav­ing In­sure de­posit its real money back into VBS.

The fake R250m ended up in an In­sure ac­count at VBS in the deal. From there it was paid out to other re­lated par­ties, be­com­ing real money. Vele, in ef­fect, “paid noth­ing for the in­vest­ment” in In­sure, claims SizweNt­salubaGo­bodo di­rec­tor Anoosh Rooplal. Other Vele sub­sidiaries were bought in the same way. Sus­pended In­sure chief ex­ec­u­tive Charl Cilliers is listed among the peo­ple who looted VBS.

In­sure is es­ti­mated to con­trol 75 per­cent of the coun­try’s gross short­term pre­mium col­lec­tions. The pre­mi­ums are col­lected through bro­kers and paid over to in­sur­ance com­pa­nies. The size of the in­dus­try is es­ti­mated to be in ex­cess of R120 bil­lion an­nu­ally. Han­dling amounts of this mag­ni­tude thus re­quires ro­bust sys­tems, high lev­els of in­tegrity, ef­fi­ciency, re­li­a­bil­ity, hon­esty and a host of sim­i­lar best prac­tices. Re­cently In­sure said that it had ex­ceeded R2bn pre­mium col­lec­tions a month.

How close then are we to see­ing a to­tal col­lapse of the in­sur­ance col­lec­tions in­dus­try in South Africa? For had VBS ex­tended its loot­ing fur­ther at In­sure it would have made at least an­other R2bn or per­haps R4bn in two months. Will the losses be re­couped? Is any­one go­ing to jail?

In his re­port, ad­vo­cate Terry Mo­tau says Cilliers, a char­tered ac­coun­tant, al­lowed Vele to ac­quire a sub­stan­tial stake in In­sure through a fic­ti­tious de­posit of R250m. Cilliers is stated in the re­port to have re­ceived R12 683 947. Mo­tau makes the fol­low­ing rec­om­men­da­tions: “It is im­per­a­tive that those who have been iden­ti­fied as par­tic­i­pat­ing and ben­e­fit­ing from this crim­i­nal en­ter­prise be charged and pros­e­cuted.”

In­dus­try lead­ers say In­sure should not have re­ceived the pro­ceeds, but share­hold­ers. The “fake” de­posit, how­ever, was made in the name of In­sure. It would be in­ter­est­ing to see how In­sure han­dled that en­try in its books to get the money out of In­sure to the share­hold­ers. “We can­not see how IFRS (In­ter­na­tional Fi­nan­cial Re­port­ing Stan­dards) or the SA Com­pany Law can ac­com­mo­date such a trans­ac­tion,” an an­a­lyst said.

It would also be in­ter­est­ing to see the orig­i­nal sale agree­ment. In our pre­vi­ous cor­re­spon­dence with Cilliers we re­quested this in­for­ma­tion, but he failed to re­spond. We quote: “Dur­ing the same month in which the trans­ac­tion to buy In­sure took place, a de­posit of R80m was made by In­sure in VBS. Ac­cord­ing to Rooplal, this de­posit was for an un­re­lated mat­ter. From what was re­ported, part of the trans­ac­tion be­tween VBS and In­sure was that In­sure was in fu­ture to use VBS as their banker.” Plac­ing R2bn in the hands of VBS would have been ex­tremely reckless, to say the least. BR asked Cilliers the fol­low­ing ques­tions re­cently, with­out re­ceiv­ing a re­ply:

1. Was it a re­quire­ment of the sale agree­ment that pre­mi­ums col­lected by In­sure Group would be de­posited with VBS Bank? 2. If pre­mi­ums col­lected were de­posited with VBS, what was the amount? 3. Were all col­lected duly paid over to the des­tined in­sur­ers?

Is a limit of cover at R100m not way too lit­tle for a com­pany han­dling as much as R2bn per month?

Charl Cilliers

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