VBS Corruption Central – National Treasury throws its weight behind former director-general Dondo Mogajane

After a weekend when the witness affidavit of disgraced VBS Mutual Bank chairman Tshifhiwa Matodzi made waves, National Treasury has spoken out in defence of former director-general Dondo Mogajane. 

Treasury did not mince its words, lambasting the “corruption, money laundering, manipulation and theft of citizens’ hard-earned money that led to the eventual and regrettable collapse of VBS Mutual Bank” as a blight on the financial system, and lauding the response of the Prudential Authority at the South African Reserve Bank (Sarb) and Financial Sector Conduct Authority.

National Treasury and Sarb officials worked closely with investigators from the Hawks and the National Prosecuting Authority to secure this conviction. As Treasury points out, the former minister of finance, Nhlanhla Nene, approved the curatorship of VBS Mutual Bank on 11 March 2018 following the recommendation of the then deputy governor of Sarb and registrar of banks, Kuben Naidoo. 

The Government Employees’ Pension Fund (GEPF), of which Mogajane is currently chairman, was a little more circumspect, saying it would not comment on the affidavit because it (the affidavit) is part of a legal process. 

“The GEPF chairman has publicly issued a statement in his personal capacity,” it said. 

When approached by Daily Maverick last week, Mogajane was quick to dismiss the allegations as “nonsense” and “hogwash”, saying “there is no shred of evidence to prove that I took the money”. 

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Mogajane agreed that he had met with Matodzi several times during his tenure, but says the meetings took place because Matodzi was pushing for Treasury to withdraw a circular warning municipalities that deposits at a mutual bank were not allowed. 

This would in effect have put the brakes on the constant flow of money from municipalities, which was being facilitated through a “commission” system. This was nothing more than a system where bribes were paid to municipal officials to persuade them to channel municipal funds into VBS. 

The forensic report by Advocate Terry Motau says that VBS treasurer, Phophi Mukhodobwane, admitted that “commission” or “consultation fees” were paid to solicit these deposits. 

In some cases, the “commission” was 2% of the total sum deposited over the tenure period. Payments were made to consultants, who then paid money on to municipal officials – after taking their cut. 

In one instance, a municipal official complained he had only received a can of Coke, while the consultant received R1-million. 

Treasury refused to back down 

The steps Treasury took to stop VBS 

• The Office of the Accountant-General (OAG), as part of their oversight over municipal finances, addressed the incidents of municipalities placing deposits with VBS Mutual Bank in contravention of the Municipal Finance Management Act (MFMA). National Treasury pointed out the legal requirements to the implicated municipalities, clearly drawing their attention to the regulations that do not permit investing in mutual banks such as VBS Mutual Bank. This framework remains in place, with National Treasury not having repealed any of these regulations.


• In 2017, VBS Mutual Bank, in response to the actions of OAG to prevent illegal transactions being made by municipalities in favour of VBS Mutual Bank, brought an application to court seeking to interdict National Treasury from issuing instructions to municipalities not to invest in mutual banks. National Treasury opposed this action by deposing the first of many affidavits in this matter.


• After VBS Mutual Bank was placed under curatorship in March 2018, National Treasury invited affected municipalities to discuss the extent of their investments, clarified the investment framework and highlighted the consequence management framework for financial misconduct contained in the MFMA. Each municipality was requested to complete and submit information on the extent of investments held with the VBS Mutual Bank, including the source of funds for the investment.


• After meetings convened by the Department of Cooperative Governance with municipalities, it was resolved that the National Treasury would confirm the legal framework on investments, budget-related implications, accounting requirements on investments in terms of the MFMA, as well as how municipalities must implement consequence management. This communication has never been withdrawn by National Treasury.