Municipalities under fire for illegally depositing money into bank

THE cash-strapped municipalities that deposited billions into VBS Mutual Bank are in deep financial crisis as they also owe Eskom and other creditors hundreds of millions of rand.

Co-operative Governance Minister Zweli Mkhize told Parliament yesterday that the situation was so dire in these municipalities in Gauteng, Limpopo and North West that they needed a recovery plan.

Mkhize agreed with MPs that they needed to ensure they get the money back from those involved in stealing almost R2 billion from VBS.

He said R1.57bn was deposited by several municipalities and the senior officials involved in this scandal are still being pursued.

Other than the report of the South African Reserve Bank, the department was conducting its own forensic investigation to identify those involved and charge them with fraud and corruption.

Some of the municipalities are struggling to pay their employees’ salaries.

Mkhize said Merafong municipality owed Eskom R155 million and the municipality was struggling to settle this debt.

“Eskom has escalated this matter to the provincial Treasury,” said Mkhize.

In the North West, Madibeng municipality owed its creditors R185m and Eskom R21m.

Mkhize also told MPs that Vhembe district municipality owed the Department of Water and Sanitation R691m.

In the Tubatse Fetakgomo municipality in Limpopo, the mayor has said they were bankrupt and they were battling to pay their employees salaries.

Mkhize warned that this was a serious crisis faced by the municipalities.

“The National Treasury is at a stage of approving roll-overs and the disapproval of roll-overs means municipalities will face financial challenges. Effectively we are likely to feel the crunch in a number of municipalities,” said Mkhize.

Mkhize said they wanted to get to the bottom of how municipalities flouted the law and decided to deposit their funds with VBS when it was a mutual bank and not a commercial bank.

The municipalities had defied instructions from National Treasury not to send their monies to VBS Mutual Bank.

They had deposited the conditional grants allocated by National Treasury for the delivery of services.

MPs also warned that no stone should be left unturned in investigating all those who were implicated.

Members of the portfolio committee on co-operative governance also raised concerns that it appeared the senior officials who were involved, including municipal managers and chief financial officers, knew exactly what they were doing because they were qualified in financial matters.

Mkhize outlined the qualifications of these officials when he was asked by the committee.

He said the issue was to dig deeper into the scandal and hold responsible all those behind the looting.