MEDIA STATEMENT
 
COGTA COMMITTEE BRIEFED ON THE IMPACT OF INVESTMENT IN VBS BANK BY MERAFONG LOCAL MUNICIPALITY
 
Parliament, Thursday, 5 December 2019 -  The Portfolio Committee on Cooperative Governance and Traditional Affairs (COGTA) heard that the investment of the R50 million in VBS Mutual Bank was according to the investment policy of the Merafong Local Municipality.
 
Merafong Local Municipality appeared before the committee yesterday in Parliament, to brief the committee on the investment of money in the VBS Mutual Bank and on the municipality’s Eskom debt.
 
The Chairperson of the committee, Ms Faith Muthambi, enquired from the political and administrative leadership of the municipality the steps that the municipality took to recoup the money which was lost and what was the consequence management meted out to the officials that were involved in the investment with VBS Bank.
 
The list of dysfunctional municipalities with serious cash flow problems indicates that most of them have invested with VBS Bank. Merafong Local Municipality responded that short term investment competency is the responsibility of the Chief Financial Officer and long term one is the responsibility of the Municipal Council, however the investment with the VBS Mutual bank was unlawful and an investigation by Deloitte revealed that four officials of the municipality needed to be held accountable for this unlawful investment and disciplinary action was to be taken.
 
It was revealed in the meeting that the same official who was responsible for investing R75 million in VBS Bank from the district municipality, was also responsible for investing the R50 million whilst he was the Acting Municipal Manager of Merafong Local Municipality. 
 
The committee has directed that the four officials who are involved in the investments must be held accountable and that a follow up must be made with the law enforcement agencies. Furthermore, the committee questioned the Chief Financial Officer, Ms Chauke on her involvement with the VBS investment and wanted to know why, when she found out about the payment in December 2017, she did not write to VBS Bank, but instead waited until March 2018 to write for the monies to be paid back as it was too late by then.
 
After the disciplinary hearings, Ms Chauke received a letter carrying a 12 month warning for her which the committee found to be too lenient and has requested the report from the law firm that provided legal advice to the municipality on the recommendations of the Deloitte Forensic Report.
 
The committee also heard from the Department of Cooperative Governance and Traditional Affairs that Merafong Local Municipality owes Eskom R392 million  and is at number four in the list of 20 municipalities that owe Eskom. The committee said the R50 million which was invested in VBS Bank could have been used for Eskom debt. The committee told the committees that owe Eskom that they need to develop payment plans that must be submitted to it.
 
The committee resolved that Merafong Local Municipality must submit the reports as it has requested by Tuesday next week, and it will visit the municipality in the new year to assess the impact of the investment on the municipality.
 
ISSUED BY THE PARLIAMENTARY COMMUNICATION SERVICES ON BEHALF OF THE CHAIRPERSON OF THE PORTFOLIO COMMITTEE ON COGTA, MS FAITH MUTHAMBI.