Poor savers ruined by VBS bank collapse
“As treasurer of my stokvel, I had to go to the bank almost every day to find out what is happening,” said Annah Muambadzi, 65, of the panic that gripped her savings club. Fear spread through poor rural communities across South Africa in November when VBS, a regional bank that catered to poorer customers, collapsed.
It came as Muambadzi’s son was about to get married, and university fees were due for another child. “The ladies started looking at me suspiciously thinking I had stolen the money,” she said of her savings club, known as a stokvel, into which members contribute an agreed amount each month. “It broke down the trust.”
The bank was left in ruins after 53 people stole $130 million(R1.9 billion) deposited by individuals like Muambadzi and her club. One of those implicated was the brother of Floyd Shivambu, a prominent leader of the radical Economic Freedom Fighters (EFF) party which has campaigned against corruption.
VBS was founded in 1982 at the height of apartheid in the Venda homeland, an area of modern-day Limpopo province reserved by white authorities for black communities. Its collapse, after the High Court ordered it be liquidated, became one of the most serious corruption scandals to rock post-apartheid South Africa — largely because so many victims were poor, black and female.
South Africa’s central bank was forced to step in and guaranteed $7,300 ( R105 411) per retail depositor through a competing bank. More than 17,000 people flocked to open accounts according to the rescuer, Nedbank. But those with savings above the threshold face losing the difference. Retired university lecturer and minority shareholder professor Elwani Khuba, 81, said she saved at the bank because it promised to guarantee her future.
“We used to get dividends... we were happy that VBS was working well,” Khuba told AFP. Now, “I’m still waiting to get my money and the value of my shares.” Khuba had hoped “to give this legacy to my children and also to my grandchildren. “It was so heart-wrenching, we didn’t know what to do,” she said.
Local investigative journalists reported on executives purchasing luxury cars and chartering helicopters with the bank’s money. The central bank in October published a 148-page report titled “The Great Bank Heist” that laid bare the greed of those who plundered the bank. “These were criminals similar to bank robbers, the only difference was that they carried suitcases and they wore fancy Armani suits,” said administrator Anoosh Rooplal.
Four months after the bank collapsed, officials told AFP that asset recoveries will depend “on the success of the liquidation process“. Cyril Ramaphosa, who became South Africa’s president in February 2018 pledging to stamp out graft, vowed to “prosecute those responsible” for the missing funds, but no arrests have yet been made. The ruling African National Congress fired 14 mayors accused of illegally investing surpluses in the bank. ANC deputy chairperson in Limpopo’ Florence Radzilani, was among those fired for reportedly taking bribes for investing 300-million rand of the Vhembe municipality purse into the bank.
In Hamutsha, a village in the northern Vhembe district, water and electricity supplies are scarce as funds were diverted to dubious investments in VBS. “You must imagine — it’s very hot. There’s no water so people go to the river to get water,” said Aubrey Mulaudzi, a local mechanic who also lost money in the bank. “The money was there but the politicians are playing around with the lives of the people. Poor people who voted for them don’t get services.” The collapse has also hit businesses hard.
At Mulaudzi’s auto repair shop, a thick layer of dust covers the dozens of cars parked there. For 25 years, the garage offered repairs to drivers navigating the potholed road through Thohoyandou, 460 kilometres (285 miles) north of Pretoria. “My father, my mother used to bank there,” said Mulaudzi, 56, wiping oil from his hands with a cloth. Mulaudzi, who started saving with VBS in 1987, lost shares and cash worth $145,000( R2 093 785), and is struggling to pay salaries and suppliers.
“It’s slowed our performance,” he said, adding that he had been forced to lay off half of his 26 workers. Mulaudzi warned that if the money is not recovered, it would end up “killing small businesses like us“. “If we go down, (the unemployed) will be the burden of the government again.”