PIC executive quits over VBS
● Another head has rolled at the Public Investment Corporation (PIC) as a result of the VBS scandal, this time that of the executive head for legal counsel, governance and compliance, Ernest Nesane, who resigned on Friday with immediate effect
The PIC said in a statement it was “made aware of serious allegations of impropriety” against Nesane after he had testified before the forensic investigation into VBS Mutual Bank earlier this week.
Nesane was one of two PICappointed directors on the board of VBS Bank until it was placed under curatorship by the Reserve Bank in March. The PIC owns about 25% of VBS, which came in the spotlight last year when it gave former president Jacob Zuma a R7.8-million loan to pay his Nkandla debt.
But the bank’s problems date as far back as 2015, when it took R1.5-billion in deposits from 14 municipalities, deepening its liquidity
PIC made aware of serious allegations of impropriety
crisis. Despite the Reserve Bank issuing concerns over the matter, VBS’s municipal deposits grew from R1.06-billion in September last year to R1.5-billion in March.
The PIC’s other appointed director, Paul Magula, was dismissed earlier this year after a disciplinary inquiry against him in relation to the performance of his duties.
“The PIC is concerned about the developments that have come to light since the commencement of the VBS inquiry and more so that two of its former employees have been implicated in impropriety,” the PIC said.
Regarding claims by a VBS curator that an unnamed PIC executive received a R5-million bribe to facilitate payment of R350-million to VBS, the PIC said it would institute “the appropriate disciplinary proceedings”, if there was proof of a bribe. —Additional reporting by Palesa Vuyolwethu Tshandu
When the then little-known VBS Mutual Bank announced its presence outside the Venda, Limpopo, region with a rather ridiculous R7-million loan to a 74-year-old politician, former president Jacob Zuma, it should have become obvious that its processes were in need of closer scrutiny. Even more so when that loan was twice its annual net profit for that past financial year. Very few lenders of any credibility would have approved such a loan, no matter the relationship — and in this case with an outgoing president. How does a pensioner — and former public servant at that — service a debt that roughly translates to a monthly bill of more than R70 000 a month for a period of 20 years, and that’s just my rough calculation? A high-street lender would find it hard to justify.
But the fundamental issue with VBS was that it was supposed to be a mutual bank. Risking about R7million on a single individual should have raised alarm bells with regulators and posed questions about the average loan size for a home loan at the bank.
Mutual banks are normally small, what some may call a larger version of a stokvel. Such banks encourage people to save so that they earn good interest back. For a
“stokvel” to grant someone a loan as large as the one given to the former president was problematic and, in banking lingo, “not prudential”.
For that amount of money, the bank could have given seven people from Venda about a million rand, and with that money these people could have built their mansions or invested in their businesses and in so doing provided some much-needed spend in an area of the Limpopo province that is among the poorest in the country.
For all the defenders of the bank who have called attacks on it an attack on a “black” bank, such lending activity may have some credence. But R7-million on one person for such a small lender doesn’t fit that billing. Given what we’ve found out about the lender in recent weeks and months, it was clearly just the tip of the iceberg.
The capital afforded to the former president and myriad other businessmen who have benefited from VBS’s maladministration would have been better served if it had been invested in Venda. The traditional big banks aren’t dishing out those amounts of capital in such areas in the country.
Beyond the economic spinoffs of following a more prudent approach rather than loaning R7-million to a politician who is now facing huge legal bills at some point in his future, the bank would have at least spread its risk. Prudent.
Instead of behaving like a mutual bank that adds value to depositors, VBS, in granting the former president a loan, behaved much like a typical bank and one without a functioning credit committee, a cornerstone of any banking activity.
So just how did the lender expect, and still expect, the former president to service a R7-million debt? This is especially the case as the borrower in question was serving out his final term in office as both party and country president. It happened for one of two reasons — the watchdog was asleep at the wheel, or the political climate dictated that they adopt a wait-and-see approach. I’m with the latter, that’s the only way I can explain why regulators left VBS and its executives to their dodgy practices.
Everyone had their eye on the ANC elective conference in December and in so doing the rot continued to grow at VBS, as it was at state-owned enterprises. By affording the former president his loan, the executives bought cover for their practices.
One wonders what would have happened had the December conference not played out the way it did. Would political conversations be about saving the bank and excusing the executives who had caused its collapse? Would it be yet another institution left to the Treasury to sort out? A bullet was dodged at the tail end of last year; let’s hope lessons were learnt so that we don’t have to dodge it again.
It should have been obvious its processes needed closer scrutiny