Sunday Times

Prasa in Zuma bank scandal

Agency plans R1bn stake in bank that lent cash for Nkandla


● Cash-strapped Prasa is investing R1-billion with the bank that lent President Jacob Zuma R7.8-million to “pay back the money” in the Nkandla scandal.

This is despite the bank not meeting the state entity’s investment requiremen­ts and the Passenger Rail Agency of South Africa itself struggling financiall­y.

The Sunday Times has learnt from senior executives that Prasa’s interim chairwoman, Advocate Tintswalo Makhubele, and acting CEO, Cromet Molepo, are putting their weight behind a move to ensure that the first R500-million tranche of the investment is paid to VBS Mutual Bank this week — without any agreement being signed.

Makhubele and Prasa denied the rail authority was investing R1-billion with VBS, saying this was only a proposal from the bank. Makhubele also argued that the investment idea predated her appointmen­t on October 19 and that no one had been instructed to pay VBS.

But the Sunday Times has seen correspond­ence from Prasa’s former acting CEO Lindikhaya Zide confirming the state entity’s commitment to a R1-billion investment with a return of 8.25% per annum.

“We intend to commence with an investment of R1-billion only. Further steps regarding such will be communicat­ed thereafter.

“Our finance department will be in contact with you to facilitate the necessary arrangemen­ts for the transactio­n within the next 21 working days. We are excited by the opportunit­y to work with an institutio­n such as yours,” Zide wrote on November 6.

Two months later, on January 24, the bank’s CEO, Andile Ramavhunga, wrote back “pleased” to be offering a revised rate of 9.25%. Ramavhunga stresses that VBS is “fully compliant” with all National Treasury regulation­s.

The Sunday Times has reliably learnt that VBS sent Prasa a letter this week reminding it to effect payment of the first tranche by close of business on Friday February 2.

Prasa did not respond to a request to provide the date on which VBS first proposed the investment.

“The acting CEO, as well as the interim chairperso­n of the board, have not instructed any officials of Prasa to facilitate any payment to VBS,” said Prasa spokeswoma­n Nana Zenani, despite the VBS letters showing otherwise.

“The proposal is still under discussion internally and a decision is yet to be made. The proposal from VBS predates both the acting group CEO and the chairperso­n of the interim board.”

But four Prasa sources with intimate knowledge of the matter independen­tly told the Sunday Times that in December Makhubele and Molepo pressured acting chief financial officer Yvonne Page to sign off on the investment. Page, according to one source, expressed reservatio­ns and refused to pay the funds.

Prasa said it had met a VBS delegation but no agreement had been signed.

But an insider at VBS confirmed it was expecting a payment from Prasa by Friday. “Prasa had agreed to invest R1-billion and it will come in two tranches and the first payment was expected before the end of business on Friday,” said the source.

“We are not being used as a conduit for any corrupt activities, this is a pure investment and it will be monitored by the National Treasury and the Reserve Bank. Prasa will get value for their money. This is not money intended for Zuma or the Guptas, it is pure investment,” said the VBS official.

Yesterday Molepo passed the buck to Zide, saying: “There was a proposal prior to my time, and there have been other proposals.”

Molepo said the proposal made by VBS was in the “normal course” of business.

Pressed on whether or not he was admitting that Prasa was entertaini­ng an unsolicite­d bid from VBS or any other bank, Molepo denied this and again put the blame on Zide: “I was told that they get proposals from time to time, and that there is another proposal in addition to the VBS one in possession of Prasa.”

Zide yesterday confirmed that Prasa received an unsolicite­d bid from VBS and that it was willing to invest with the bank if it met all the criteria.

“As far as I know the new board is still busy with the matter with VBS and appointed an auditor to look into the matter on Friday,” he said.

“After VBS approached us and made their proposal, I wrote them a letter assuring them that if they can meet our investment criteria we can invest between R500-million up to R1-billion for a start with them.”

Zide said Prasa has invested about R13billion with other banks. Nothing had been paid to VBS yet, he said.

Prasa, according to another executive, would be in the red by R1.7-billion by the end

of March on its operationa­l budget due to bloated employee numbers.

A senior executive at Prasa said Page submitted her resignatio­n in December as pressure mounted for her to sign off on the payment, but Molepo refused to accept it.

“She has been under so much pressure and she is really scared to sign off on this deal because there are no reasons for Prasa, which is struggling financiall­y, to invest money it doesn’t have,” said the executive.

It is understood Page was so frantic that she contacted the Treasury to raise concerns about the deal with VBS. A senior government official confirmed Page had contacted the Treasury to share her concerns.

“[Page] said she had reservatio­ns. She was quite worried. She is not an investment analyst. [Prasa] don’t play in the investment space,” said a senior Treasury official.

Page declined to comment.

Treasury director-general Dondo Mogajane said the Treasury would only get involved if the investment was made and found not to conform to regulation­s.

The proposed investment, according to a copy of a memo seen by the Sunday Times, did not meet Prasa investment requiremen­ts. According to the memo, which was written by Page:

Any activity that may be construed as speculativ­e in nature is expressly forbidden;

The counterpar­ty must have a minimum equity of R2.5-billion; and

VBS “does not meet the credit risk analysis that was done on their financial statements”.

The Sunday Times understand­s the VBS proposal was to invest the state entity’s money and provide in-house loans, including home loans to staff.

VBS’s annual report for its financial year ending on March 31 2017, said it had R1.553billion in deposits, assets of R2.1-billion and made a profit of R5.9-million.

Prasa’s investment will be the biggest it has handled.

VBS’s Ramavhunga told the Sunday Times that, like any other bank, VBS took part in competitiv­e bidding processes for investment­s despite this being an unsolicite­d proposal.

The bank made headlines in 2016 when it lent Zuma R7.8-million to repay the state for nonsecurit­y upgrades in his Nkandla homestead after the public protector found he had unduly benefited from state spending.

In November, Zuma appointed Makhubele as a judge of the Gauteng division of the high court.

She was meant to take up her position on the bench on January 1, but the Sunday Times has establishe­d that she asked for and was granted an extension until April.

Prasa was one of the worst-performing state-owned businesses for 2015-16 and missed September’s deadline to table its 2016-17 report to parliament.

The agency’s interim board and management failed to appear before parliament’s transport portfolio committee in November to answer questions on state capture allegation­s.

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