By Lee-Yandra Paulsen
The Venda Building Society (VBS) Mutual Bank scandal continues to dominate headlines, with recent revelations bringing renewed scrutiny to the case. Tshifhiwa Matodzi, former chairperson of the now-defunct VBS Mutual Bank, has confessed to channelling funds through his family, adding new layers to the saga of corruption and fraud that has gripped South Africa.
According to reports, Matodzi was the chairperson of VBS Mutual Bank, which collapsed in 2018 after years of looting. The scam, stretching from impoverished rural villages to government circles, defrauded ordinary South Africans. Last week, Matodzi pleaded guilty to 33 counts, including corruption, theft, fraud, money laundering, and racketeering. Matodzi was sentenced to 495 years, with 15 years for each count. However, the sentences will run concurrently, meaning he will serve an effective 15 years behind bars.
Michael Marchant, Head of Investigations at Open Secrets, provided further insight into the scandal. “I think this has brought this matter back to our attention. Many of the revelations are things we’ve heard before from investigative journalists and, of course, things that came up from the Reserve Bank’s forensic investigations into what happened at VBS. It has brought it back into the public discussion, which I think is incredibly important, and it has also reminded us of how many individuals still may need to be held accountable for what happened at VBS. We are talking about a multi-billion-rand fraud. We now have three individuals that have been convicted of crimes related to VBS.”
Marchant added, “The uMkhonto weSizwe party (MK) has another 33 currently charged with crimes, and I think beyond that, another 30 or so have been indicated as people of interest that may be charged. So, it is certainly a reminder that for at least the next decade, these criminal cases are going to continue, and we will continue to hear more and more about just how extensive the criminal conspiracy was.”
The fraud, described as a “bank heist,” involved industrial-scale looting with money transferred to individuals either in cash or through loans for luxury vehicles and properties. Marchant explained, “What the Matodzi affidavit and other investigations remind us of, of course, is that for brazen heists like that to take place, there had to be a lot of individuals both in private and public bodies—regulators, auditors, and others—who were paid to look the other way. When we ask ourselves how something like this happens, we have to look at KPMG as the auditors and the Public Investment Corporation individuals who were supposed to be on the board to provide oversight but instead received money to look the other way. That is really how a crime of this nature can happen.”
Marchant also raised concerns about the systems in place at large auditing firms like KPMG. He highlighted the firm’s secretive settlement around the VBS matter, where it agreed to pay a certain amount of money with little transparency about the recipients. “One of the questions we need to ask is how much of that money goes to the depositors who were defrauded and lost out at VBS,” Marchant said.
Theo Venter, a Professor of Practice at the College of Business and Economics at the University of Johannesburg, discussed the political implications of the VBS scandal for the Economic Freedom Fighters (EFF). The former board chair of VBS alleged that he had agreed to make payments to the leaders of the party in a secret meeting, providing R5 million in R1 million monthly installments.
“I think VBS is but one part of the wheels coming off at the EFF. The EFF is also still reeling from taking a knock during the elections. They went from 10.5% to 9.5%—it is only one percentage point, but they expected a far better performance in the elections. Whenever a political party goes through a system or process where they lose votes, there is always pressure on leadership—somebody must take responsibility,” Venter stated.
Venter added that the EFF faces internal conflict, with a sizeable group in the leadership wanting to participate in coalition governments to demonstrate their ability to govern, while another group favours a culture of destructive politics. “When we get to a system or process like we will see in 18 months’ time, when we’ve got local government elections, the electorate will ask the EFF what their governance profile is, and they won’t be able to show a thing.”
“The VBS scandal is a very clear and present case that must be addressed. There have been mixed reactions to Matodzi’s affidavit—some people say it’s true, and others disagree. The difficulty with such an affidavit is that Matodzi was given the opportunity to tell the truth and everything he knows to assist the National Prosecuting Authority during the court case, and for that, he got a discount from 495 years in prison to just 15 years. So, there is every incentive for him to tell whatever he knows, and I think the EFF is going to face some trouble out of this,” Venter concluded.
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