VBS. Dewald van Rensburg
(and at the time of writing, ongoing) investigations by the liquidators of SME Bank have established the basic mechanisms of the fraud. SME’s legal advisor Tania Pearson laid it all out in an affidavit in 2019.4
At first, Kamushinda, SME CEO Tawanda Mumvuma and their colleagues allegedly simply created fake invoices for SME to pay. This money disappeared into an array of suspicious companies, largely in South Africa. For instance, they allegedly spent R80 million on ‘computer software and hardware’ that could not possibly have been required for such a small bank. On the South African side, this money apparently found its way into bags that were delivered to fancy hotels in Sandton.
By 2015, SME’s auditors, BDO, had started asking questions. A change of tack was required and this is where Kotane allegedly came in. On 7 April 2015, Kotane stayed at the Windhoek Hilton with a friend of Kamushinda’s. On 30 April, SME started paying money to Mamepe Capital as a ‘money market investment’.
The memorandum Kotane had apparently signed with SME back in January 2014 was in reality fabricated after the fact around this time, Pearson claimed in her affidavit. The real memorandum dates from 2015 and was apparently a ruse to cover up the suspected fraud. Investigators in Namibia found two versions of the contract that were identical except for their dates and the fact that different people had signed them.
With Kotane on board, SME’s bosses apparently frantically backdated all their previous ‘invoices’ as ‘money market investments’ held by Mamepe. Now there was a paper trail saying that the bank had been investing all the missing money with Mamepe as far back as the beginning of 2014. Problem solved.
The Mamepe investments would, however, still have to be shown to exist. The ruses employed to this end became untenably elaborate and contradictory. At first, the money was held in ‘nominee accounts’ belonging to a bizarre array of companies in South Africa, most of which apparently laundered the cash.
In June 2016, the noose tightened once again when SME’s auditors demanded to see the investment agreement with Mamepe. In July, Namibia’s central bank, the Bank of Namibia, instructed SME to employ Deloitte, one of the ‘big four’ audit firms, to independently review the bank’s finances. New ploys were urgently needed.
This brings us to July 2016 when Ramavhunga signed the deal to make VBS the ‘custodian’ of these evidently non-existent investments. SME opened a VBS bank account on 12 August and paid in R10 million as an ‘activation’ deposit. Then the cover-up began in earnest. A week after the first deposit, SME Bank CEO Mumvuma sent an email to Kotane saying that ‘as discussed we intend to liquidate the entire money market portfolio [of R150 million] that you are managing’.5
According to Pearson, this was a ruse because both Mumvuma and Kotane knew there was no ‘money market portfolio’. Kotane nonetheless played along. He wrote back that ‘it should be fairly quick to liquidate the positions as requested … these trades will be executed tomorrow’.6
Now there was correspondence that would make it seem that all involved were convinced of the existence of the R150 million invested with Kotane’s Mamepe Capital.
Mumvuma wrote to Kotane again, instructing him to move the ‘liquidated’ R150 million into the new VBS account. Now they just needed to find someone at VBS to join in the charade. That turned out to be easy. In a ‘confirmation of interest’ letter dated 19 August 2016, VBS general manager for sales Sasa Nemabubuni put on record that SME was investing R150 million at VBS in a twelve-month fixed-deposit account. On 29 August, Kotane wrote to Mumvuma: ‘Your instruction to liquidate R150 million of your funds was successfully actioned and transferred to VBS Mutual Bank’.7
An account statement was produced in September 2016 showing both the R10 million and R150 million deposits. The R150 million supposedly arrived on 22 August. ‘Obviously Mr Nemabubuni knew that no investment of R150,000,000.00 in VBS Bank existed. He was in on the fraud,’ Pearson claimed in her affidavit.8
The same method was apparently employed two weeks later. Mumvuma emailed Kotane to transfer R25 million to VBS and another allegedly fake transaction was duly reflected in the VBS statement. Now there was purportedly R185 million safe and secure at VBS, which at the time seemed like an up-and-coming entrant to the commercial banking space.
But by the end of 2016, the Bank of Namibia was knocking on VBS’s door asking questions. This led KPMG auditor Sipho Malaba to produce a ‘report of factual findings’ on behalf of VBS. Although Malaba’s written report displayed the disclaimer that it was not an audit but rather a check of VBS transaction records, it reflected Kotane’s alleged R150 million and R25 million deposits.
When the Bank of Namibia took control of SME in February 2017, it did an audit that found no trace of this money at VBS. A total of R155 million was impaired, which immediately rendered SME insolvent and paved the way for its liquidation. According to Pearson, ‘the amounts actually transferred to VBS Bank do not remotely add up to R150,000,000. In fact, only an amount of N$10,000,000.00 was directly transferred from the SME Bank to VBS Bank’.9
While VBS seemingly provided cover in the form of fake documentation for non-existent deposits, Kotane had another trick up his sleeve. In June 2017, he was called on to depose an affidavit in which he claimed that R175 million of SME’s money had in fact been invested in fertiliser, not VBS. As evidence, he produced a consignment note from a Lebanese fertiliser trading company that later was found to be a forgery.10
This was not VBS’s only role in the SME saga, however. It also recycled money for Mamepe and the Namibians in a second scheme seemingly designed to cover up lost money. This time, SME convinced a Zimbabwean-owned asset manager in South Africa, JM Busha Investment Group, to pay R60 million into the SME account at VBS. In return, SME gave JM Busha nothing more than a promissory note that it would repay the R60 million plus interest. Needless to say, that never happened. JM Busha is named for its owner, Joseph Makamba Busha, a Zimbabwean politician who ran for president in the 2018 general elections.
The R60 million landed at VBS in October 2016. VBS then paid R37 million of it to SME, in a transaction designed to look like part of the Mamepe investments coming back home. VBS paid another R20 million to Mamepe, which Mamepe paid to SME for the same reason, according to Pearson’s affidavit. A further R2.7 million was paid to an obscure entity called Base Data. VBS then also paid an additional R10 million out of the SME account to Kotane, as alleged fees for his work.
South Africa’s Financial Sector Conduct Authority (FSCA) suspended JM Busha’s licence in 2020 in relation to the R60 million it ‘invested’ in SME – the money belonged to the Municipal Workers Retirement Fund.11 As it turned out, this R60 million was the tip of the iceberg when it came to Busha’s alleged gambling with the pension funds he administered.
As part of the subsequent SME investigation, Ramavhunga was called on to depose an affidavit in June 2017 to set out all the inflows and outflows of SME money through VBS. He made no mention of the R150 million and misrepresented, perhaps unwittingly, the R60 million as being part of the ‘liquidated investments’ from Mamepe. All told, Ramavhunga seems to have done his old friend Kotane a very ill-advised and possibly illegal solid in an example of how the bank’s early exploits were not necessarily the kind of frenzied theft that soon took hold, but still symptomatic of a complete and utter corporate governance meltdown.
VBS helped cover up as much as R347 million that had been stolen from SME from 2013 onwards – money that liquidators are still chasing in South Africa, Namibia and Dubai. At the time Kotane got involved with SME, he was also on the board of the Finance and Accounting Services Sector Education and Training Authority, the entity tasked with funding trainees in the financial sector in South Africa. Kotane has subsequently been barred from practising in the financial sector for twenty years.
News of VBS’s possible exposure to blowback from Namibia in early 2017 once again set Matodzi’s old partner Mabilu on the warpath. He wrote a letter to Matodzi under the Dyambeu letterhead on 24 March 2017 demanding answers:
The Shareholders and Directors of Dyambeu Investments (Pty) Ltd have noted with great concern that VBS has attracted potentially negative publicity and is being linked to the SME Bank of Namibia in what