VBS. Dewald van Rensburg
in current affairs of Vele, as this does not concern us, our transaction never proceeded.12
The rest of the email conversation was around how the Petroport deal collapsed, including Jooste’s claim that Belton Park was owed back the management fees it had paid to Petroport when the deal was being put together. According to Jooste, the fees he had paid were specifically tied to the amalgamated Petroport company. As the merger never happened, he was of the view that he was entitled to his money back.13
Mmampilo Petroleum’s role in both the outright fraud and the Petroport plan is often unclear. On paper, Mmampilo became the single largest beneficiary of the PIC facility. It was ostensibly given R100 million in early 2016 and another R20 million later on. Mmampilo’s Vukani Nxumalo told me it was never more than R5 million.14 Ramavhunga also told investigators that Mmampilo never got more than R5 million.
The figure of R100 million comes from an ‘addendum to the main agreement’ for R5 million between Mmampilo and VBS. The mysterious addendum specified that ‘the total revolving fuel facility’ was R100 million.15 There is no paper trail for who was to get the additional R95 million.
Belton Park also got up to R100 million to finance deliveries to Eskom in partnership with Afric Oil, but this seems to have been more or less legitimate.
A source close to the investigations that followed VBS’s demise described a tangled mess of Vele companies involved in the fuel business and receiving VBS funding. ‘We also heard that Vele had Mmampilo as a wholesaler,’ this source told me. ‘If you got funding, you had to get your diesel from them. So the PIC money goes to VBS and then to Vele.’16
Court records demonstrate how this worked. In early 2016, on paper at least, a company called Leruo Petroleum applied for and received a fuel facility from VBS for R70 million to fulfil orders from its client, PetroSA, the state-owned gas exploration and extraction company. In terms of the contract with VBS, the fuel would have to be bought from Mmampilo.17
As soon as Leruo got the facility, it paid R20 million to Mmampilo’s bank account, leaving it with a negative balance of that amount. One would assume that this was for the purchase of the fuel to be delivered to PetroSA. Yet Leruo’s bank statements show it never got paid for its alleged fuel purchase from Mmampilo and delivery to PetroSA. All it did was transfer money to Mmampilo and sit with a R20 million debt that accrued interest for the better part of two years. Much later on, when VBS was on the precipice, Vele, ostensibly a completely unrelated party, inexplicably settled most of Leruo’s debt to VBS, a clear indication that they were somehow linked.
In 2019, the VBS liquidator interviewed Leruo’s CEO, Ofentse Mothoagae, who made a startling admission: he had been paid R300 000 to go along with the whole thing. The fuel purchase was fictitious. It is still unclear if the PetroSA order for fuel was even real to begin with.18 On Mmampilo’s side, Nxumalo pleads ignorance of the R20 million his company, according to VBS bank statements, received from Leruo. He said that Mmampilo had bank accounts at VBS that ‘we didn’t control’.19
Belton Park’s Jooste similarly denies that his company had an account at VBS other than the vehicle finance one. ‘Because they got my information with [the Petroport deal] they literally took my information, opened a fake account and then withdrew the money,’ he told me.20 Jooste told me he couldn’t elaborate because he is working with the National Prosecuting Authority (NPA) and the SARB to pursue the matter.
Accounting for the amount of money siphoned off the PIC fuel facility (as opposed to what was legitimately lost) has been nearly impossible. And it’s not for lack of trying. The Motau investigation, the separate forensic investigation commissioned by the PIC and the Mpati Commission all took a look.
The PIC has to shoulder much of the blame for what looks like mind-bogglingly lax monitoring. Investigators were faced with completely irreconcilable records of where the money went – legitimately or illegitimately. There is basically no way to know who actually got the money.
There were seven drawdowns in total, amounting to R484 million – the full R350 million plus the re-use of amounts VBS had paid back on its revolving credit facility. The drawdowns were approved with visibly untrustworthy documentation, and in some cases no documentation at all. The PIC records also bore no resemblance whatsoever to VBS’s own, questionable internal records – basically an Excel spreadsheet listing seventeen fuel companies and their supposed debts. There may have been twenty or seventeen or fourteen beneficiaries, depending on which set of documents you believe.
The PIC paid out money but only sporadically got repaid, which should have been a red flag. ‘Our analysis … reflects that drawdowns were approved and paid without any or minor performance in terms of repayments in return for the drawdowns,’ the Nexus report noted.21 The investigators’ analysis of PIC reports also showed that an initial quarterly evaluation done in March 2014 was repeatedly ‘copied and pasted’ in subsequent reports. ‘This action is evidence of an ineffective and probably non-existent Risk assessment function,’ the investigators noted.22
Later PIC reports gushed about VBS turning a profit despite the profit being far smaller than anticipated. No red flags were raised when the 2016 annual financial statements came in late. And in early 2017, when VBS received a letter of demand from the PIC because it had fallen behind on its repayments, no real consequences followed.
When VBS crashed, the PIC lost R374.7 million – the entire facility and the interest on it. That is on top of the R108 million it lost buying VBS shares, making the PIC the largest loser in the whole affair.
Investigations revealed that the fuel facility was compromised from the very beginning with the help of the two PIC representatives on the VBS board, Ernest Nesane and Paul Magula, who both happened to work on the deal. Magula had joined the board in 2015.
The final contract with the PIC was mysteriously changed at the last minute to significantly reduce the PIC’s protection against VBS failing to repay. A clause 3.5 was added, which read: ‘The facility shall be ring-fenced for its Purpose as defined in this Agreement as such shall be subordinated against other Borrower creditors.’23
The ring-fencing part was fine – it meant that VBS could not legally, at least on paper, use the money for anything but the fuel finance business. The problem was the second part, the subordination of the debt owed to the PIC. This meant that the PIC would stand at the back of the queue if the bank went belly up.
Evidence given at the Mpati Commission highlighted how no one seemed to know how the contract got amended. It was, however, clear who did it: Nesane. As head of legal at the PIC, he had last sight of the agreement. Boitumelo Leroke, the PIC’s legal advisor, testified that she had called up the law firm that the PIC had used to draft the agreement to find out what had happened: ‘I had to call Madhlopa Incorporated … I asked them for an explanation as to who exactly from the PIC instructed them … So their response was 3.5, yes it’s there and it came later on after an instruction from Mr Ernest Nesane.’24
The law firm provided the email in which Nesane had instructed them to insert the damaging subordination clause. It was dated 7 April 2015 and read:
Dear Thenga, as per our discussion this morning and the proposals from Andile below we have discussed internally and you are instructed to make the changes as discussed in the facility agreement to add the following clause in the agreement, add clause 3.5 and send back the revised agreement … If we can finalise this without delay, kind regards Ernest Nesane Executive Head Legal.25
‘Andile’ is Andile Ramavhunga, CEO of VBS. On the face of it, the client (VBS) was dictating what protection the lender (the PIC) should have for a R350 million fuel facility. There is nothing wrong with a client telling you what they would like. Secretly giving them what they want when no one else seemingly knows about it is another thing entirely. No one at the PIC seems to have been aware of the internal discussions Nesane said had taken place.
The facility was ultimately signed off by then CEO of the PIC Dan Matjila on 23 June 2015 and by Ramavhunga on 30 June. Two weeks later, VBS requested the first R100 million for mystery beneficiaries and got it on 31 July. The rest is history.
The effect of the subordination