VBS. Dewald van Rensburg
are a few versions of how Msiza became VBS’s political patron, but there is no doubt that his influence became the key to drawing municipal deposits into the bank.
Phalanndwa told me that Matodzi knew absolutely nothing about politics or politicians. What he did have going for him was a knack for getting close to the powerful and making himself indispensable to them.
Venda is a small place. VBS mobilised its cultural, political and business leaders, drawing in more and more people. Among the other corporate Venda notables who came to play a major role were Robert Madzonga, erstwhile chief corporate services officer of mobile giant MTN, and Maanda Manyatshe, former CEO of MTN and the South African Post Office.
VBS Mutual Bank brought all these networks and motley characters together into mutually beneficial alignment, until things fell apart and everyone involved suffered permanent damage. Political aspirations were quashed, careers were ruined, royal status was indelibly tainted and many of the Venda boys found themselves in the dock facing jail time.
‘The whole VBS thing has humbled everybody,’ Mabilu told me. ‘A lot of people were thinking they were powerful.’6
2
The Chairman
In 2005, Tshifhiwa Matodzi and Maanda Phalanndwa launched Brilliant Telecommunications (‘Brilliantel’), which targeted municipalities for IT work. Matodzi, the chartered accountant, was CFO and Phalanndwa CEO. Another of the RAU alumni, Tsumbo Matambela, became the marketing director. Other Brilliantel employees would later make their way to new jobs at VBS, not least Takalani ‘Taki’ Veronica Mmbi, Matodzi’s ubiquitous personal assistant.
The varsity friends did well enough and the company continues to this day, with one significant difference: Matodzi’s name is now a dirty word at the Brilliantel offices.
Phalanndwa saw his friend change in those early days: ‘We were brothers, our families were tight. He was a very good guy until there was more money coming in. Then he started showing his colours, greed, doing things I did not agree with … He would do some funny things. Long before VBS. It just kept getting worse.’1
While the two built their business, a spectacular opportunity was brewing back home in Limpopo. VBS Mutual Bank, the tiny financier created in the former Republic of Venda, was sinking. The bank, which had started life as the Venda Building Society in 1982, was tailor-made to award mortgages to home owners in the old Bantustan’s communal land system where individuals did not have formal title to the land on which they lived or built. It wasn’t a fantastic line of business in the democratic dispensation as land tenure policies changed and the mortgage market opened up. By 2011, VBS faced collapse after years of stagnation.
In a last-ditch effort to turn the bank around, VBS transformed its shareholding structure to try to raise funds from existing shareholders. As a mutual bank, VBS was technically owned by its depositors. Their savings held at the bank amounted to interest-bearing shares that allowed them to vote at annual general meetings.
Depositors were invited to convert their savings into new shares. Around 400 took up the offer and the major outside shareholder, the Public Investment Corporation, converted its old shareholding into these new shares to own 26 per cent of VBS.
The PIC is a state-owned asset manager in charge of the pension savings of the entire South African civil service. It sits on the single largest pot of money on the continent. The PIC was only involved because it had inherited an interest in VBS from the civil servants’ pension fund of the former Venda Bantustan. This fund, like other Bantustan institutions, had been merged into its South African counterpart with the dawn of democracy in 1994.
After depositors and the PIC had bought into the new VBS shares there was still another 26 per cent left for the taking. For about R6 million, someone could become the bank’s major shareholder alongside the PIC. According to Phalanndwa, Matodzi somehow caught wind of this deal long before most: ‘In 2011, he [Matodzi] came and said, look he’s got an opportunity for us to own VBS. He thinks it’s a good opportunity. Where [Matodzi] got it, I don’t know; he said he spoke to some guy. They gave him information that the bank was making losses and the losses are minor and they need someone who can turn it around.’
Phalanndwa was keen on his friend’s plan. ‘To own a bank is a no-brainer, it gives us access to capital,’ he told me. ‘So I then said to him, okay, that’s fine, get all the information. We then had a meeting as shareholders [of Brilliantel]. We then delegated him to handle everything. So just about the end of 2012 he came back and said he had discussions with the shareholders and the directors of VBS. He met with the PIC and then they said he must start a consortium. So around January, February 2013 they came and said they are going to sell shares to us for about R6 million. We said, okay, fine, we will pay for the shares.’
Matodzi’s plan included mobilising Venda’s nominal ruling class: the chiefs and the king. ‘Because the bank was started by the king’s late father,’ said Matodzi (it was in fact his uncle), ‘we had to involve him; we wanted it to be the bank of the chiefs through that ownership because we thought that that would be our base.’2
Venda king Toni Mphephu Ramabulana, who had only just seen the Venda monarchy restored by a ruling of the Thohoyandou High Court, proved very receptive to the plan.
‘I did not know the king before that,’ Matodzi told me. ‘I think I did meet somebody within his circle that made me have a meeting with the king, and I presented … my proposal and that is how we created Dyambeu and we proposed that the king and his chiefs own 51 per cent.’
With that, Dyambeu Investments was born, named for a legendary seventeenth-century Venda king. The problem facing Matodzi, Phalanndwa and the king was that they did not have R6 million. And they had little prospect of raising that much money quickly. A potential co-investor who almost certainly did have the money was David Mabilu, the famous Venda construction magnate with solid political connections.
Phalanndwa told me that Matodzi ‘came back to us to say he had found David [Mabilu] and David is amenable to partnering with us. I didn’t know David at that time, I never had anything to do with David. I said, well, David is a credible businessperson, I know who he is.’3
The link between the then unknown thirty-five-year-old Matodzi and the multimillionaire was the king. Mabilu told me that it was the king who convinced him to contribute R3 million to Matodzi and Phalanndwa’s plan to buy into VBS. At the time it was a lot of money for them, but less so for Mabilu.
‘The person who I knew very well was the king because he is the king of the Venda and I am Venda as well, and we were actually friends,’ said Mabilu. ‘So I knew the king, but the king met Matodzi and then they started Dyambeu trying to buy the 26 per cent from VBS. They were unsuccessful in terms of raising the amount of money required. Understand me, I didn’t even know about him [Matodzi]. I met him for the first time when the king said to me I am trying to do this and that with these guys, this guy is a chartered accountant, he knows a lot about banking and all that … I also got involved because of the respect I had for the king. I didn’t even do a lot of due diligence on all these things.’4
Mabilu ended up owning 24.5 per cent of Dyambeu through a special purpose vehicle called Promafco. Matodzi and Phalanndwa owned another 24.5 per cent through Brilliantel. The remaining 51 per cent belonged to the VhaVenda Heritage Trust, with the king acting as custodian for the Venda people as a whole. The king didn’t have to pay a cent. He also didn’t have to do anything – he was represented at Dyambeu by Paul Makhavhu, the young attorney who had won him the monarchy through an epic legal battle.
Phalanndwa told me that the king’s free ride caused friction right from the start: ‘So he [Matodzi] says no, this is what I’m thinking. He brought me some contract saying the king was going to be given preference [non-voting] shares and we would keep the ordinary shares between ourselves [Brilliantel and Mabilu]. Little did we know that he [Matodzi] was lying. Then he went to David and he said we resolved that the king must get 51 per cent, they must give the king 51 per cent. Now remember, David and the king come a long way. They have a long history, they have a very good relationship,