Thembi Simelane’s ‘financial adviser’ debarred, fined for dishonesty, lack of integrity

South Africa’s financial institutions watchdog has found that VBS Bank corruption-accused Ralliom Razwinane did not offer financial services “honestly, fairly with due skill, care and diligence”. 

The Financial Sector Conduct Authority (FSCA) accordingly debarred Razwinane for 10 years and imposed a penalty of R3-million. 

This means Razwinane is prohibited from providing financial services to individuals or companies and may not act as a “key person” (such as a director or senior manager) of a financial institution. 

Justice Minister Thembi Simelane notoriously took a highly questionable “loan” from Razwinane’s Gundo Wealth Solutions in 2016 to buy a coffee shop in Sandton while she was mayor of Polokwane. She claimed Gundo was her financial adviser and money lender – even though it was not in the money lending business. Gundo, in the meantime, has been liquidated because it could not repay its ill-gotten gains to VBS curator Anoosh Rooplal.  

The FSCA investigation came about because Razwinane advised Polokwane Municipality and the Community Schemes Ombudsman Service (CSOS) to invest surplus funds of R349-million and R80-million respectively into VBS Mutual Bank in about 2016 and 2017. Polokwane is one of few municipalities in Limpopo that retrieved its entire investment before VBS imploded in March 2018. The CSOS was not so lucky and wrote off its entire VBS investment, the Mail and Guardian reports. 

A 2018 investigation by advocate Terry Motau and law firm Werksmans found that VBS turned out to be a Ponzi scheme-like scam and when the bank predictably recorded a liquidity crisis, subsequent probes exposed Razwinane’s series of unlawful dealings.

These include “inappropriate” advice which circumvented the Public Finance Management Act, the Municipal Finance Management Act as well as Treasury regulations, the FSCA said on Tuesday (16 October). VBS, being a mutual bank, occupies a lightly regulated corner of the banking industry and was not allowed to bank institutions like municipalities and the CSOS. 

Crucially, Razwinane’s “advice” ignored its clients’ risk profiles and financial and investment needs, the FSCA found. This means Razwinane contravened the General Code of Conduct for Authorised Financial Service Providers and their Representatives, too. 

In addition, Razwinane did not offer financial services “honestly, fairly, with due skill, care and diligence”. He had consequently failed to disclose to his clients the kickbacks received from VBS in return for him influencing Polokwane Municipality and the CSOS into investing in the bank. These were also contraventions of the General Code, the FSCA said. 

It seems a clincher in his fate was when Razwinane “failed to fully cooperate with the investigators” during the FSCA probe – a contravention of the Financial Sector Regulation Act. 

The Motau report found Razwinane received an unlawful R24.2-million in cash and “loans” from VBS in return for cajoling state institutions into investing in the bank.  

All of this, the FSCA found, meant Razwinane and Gundo “no longer meet the fit and proper requirements relating to honesty and integrity” in contravention of the Financial Advisory and Intermediary Services Act – hence the 10-year debarment and R3-million fine. 

A Daily Maverick and News24 investigation revealed in August that Simelane took a R575,600 “loan” from Razwinane’s Gundo in 2016 to buy Silvana’s coffee shop in Sandton. She was mayor of Polokwane at the time, and Gundo was the municipality’s financial adviser. Our investigation proved Razwinane used the unlawful kickbacks from VBS to pay for the coffee shop. 

Simelane denied impropriety. She maintained there is no conflict of interest – not then when she took a loan from her municipality’s service provider, and not now, being justice minister and executive political head of the National Prosecuting Authority, which ought to view her as a suspect in its sprawling VBS case. 

Simelane’s exculpatory explanation was threefold: She had a “legitimate loan agreement” with Gundo, she claimed to have paid back the money (without offering proof), and racist banks declined to give her a loan. 

In a stunning revelation, Daily Maverick and News24, however, unearthed evidence that suggests the “loan agreement” was backdated and therefore likely to have been faked. In terms of South African anti-corruption legislation, a loan can, under particular circumstances, qualify as a bribe and repayment of the money does not nullify any preceding misdeeds. Last, Simelane did not disclose to the public that she had already taken two loans from two commercial banks at the time. 

CSOS chief financial officer Themba Mabuya was in equally hot water for his alleged role in losing R80-million to VBS.

The CSOS is the regulator and handler of disputes involving community housing schemes. By the time it invested the large sum in VBS, it had only existed for about two years. 

The regulator’s board allegedly found evidence of doctored policy documents and material misstatements in its financial statements. DM

'No evidence of impact on NPA', says Ramaphosa's office

In an unrelated press conference on Wednesday afternoon, Presidency spokesperson Vincent Magwenya said that, as things stand, “there’s no evidence” that the revelations about Justice Minister Simelane’s past financial transactions have had any impact on the functioning of the department.

“There’s no evidence of political interference whatsoever, at least to the President’s knowledge.”

He added that the Simelane controversy is a matter which is “top of mind” for President Ramaphosa.

“In taking his time to consider the matter, the President is well aware of the importance of the justice portfolio; the President is well aware of the importance of that portfolio being led by a minister that is above reproach, the President is well aware of the overriding responsibility to maintain stability within that portfolio — that includes the various agencies that form that portfolio. And so in taking his time, he is not discounting any of the major considerations that have to be applied with respect to that portfolio,” said Magwenya.

“As things stand, there’s no evidence to suggest that there is instability either in the department or any of the agencies.

“I’m not suggesting that the president is waiting for evidence of instability in the department before he acts. The matter is top of mind, he is processing it, he is thinking it through,” he continued.

Magwenya said Ramaphosa would deal with the matter “quite soon”. DM

This update by Victoria O'Regan was published at 3pm.