Mkhize: No bailouts for municipalities implicated in VBS scandal

Cooperative Governance Minister Zweli Mkhize says once forensic investigations are completed municipalities must launch lawsuits to recoup their monies.

Cooperative Governance Minister  Zweli Mkhize. Picture: @NationalCoGTA/Twitter.

CAPE TOWN - Cooperative Governance Minister Zweli Mkhize says there will be no bailouts for municipalities that illegally invested in VBS Mutual Bank.

The National Assembly is debating the Reserve Bank report on VBS on Tuesday afternoon.

The bank was placed under curatorship earlier this year when widespread looting came to light.
He says once forensic investigations are completed municipalities must launch lawsuits to recoup their monies.

On Tuesday, Mkhize provided a bleak picture to Parliament’s cooperative governance portfolio committee on the state of finances of the municipalities.

It has been revealed some municipalities illegally invested millions of rands in conditional grants they received from Treasury. The funds were specifically intended for infrastructure projects.

Municipalities which owe millions to water boards and Eskom have had to put water infrastructure projects on hold, and don’t have money for day-to-day operations.

Among the worst affected councils is the West Rand District Municipality, Dr Ruth Segomotsi Mompati District Municipality and the Fetakgomo-Greater Tubatse Local Municipality.

Mkhize says municipalities must chase after their money or find other ways to plug the hole left in state coffers.

“I believe we have to aggressively pursue lawsuits to get as much of this money recovered as possible.”

Mkhize says forensic investigations by provincial departments will put councils in a better position to act against responsible municipal officials.

Almost R2 billion has gone missing, with top Limpopo politicians, businessmen and the bank's executives listed in a South African Reserve Bank report as being responsible.

A total of R1.2 billion of that money was deposited by eight Limpopo municipalities without any success of retrieving the funds.


Mkhize is adamant municipalities who invested money with VBS bank, must do everything they can to recover the money.

He says patience will have to be exercised to determine exactly who should be held liable for the illegal investments.

Forensic investigations are still underway in municipalities in Gauteng and Limpopo.

Mkhize says the Reserve Bank’s Great Bank Heist report focuses on what went wrong at the bank, but a lot is still unknown about municipalities’ role in fueling the looting.

He has revealed that the Mahikeng Local Municipality refused to return an erroneous R60 million transfer from the Cooperative Governance Department and instead deposited the money with VBS bank.

Mkhize says he must accept that a lot has gone wrong in the VBS matter.

“We need that forensic audit to give us where their decisions were taken, who by and all of that. Then you can take the necessary action."

The minister says it is up to municipal councils to act against municipal managers and chief financial officers who illegal deposited money with the bank.

He also says mayors and MECs must follow the money trail to recoup the millions lost.

(Edited by Mihlali Ntsabo)