VBS. Dewald van Rensburg
far larger problem: Vele allegedly never paid for its own shares. Phalanndwa makes the astonishing claim that, back in 2016, Matodzi had already explained to him how they could buy shares in VBS without paying a cent.
‘I’ll tell you what they did,’ Phalanndwa told me. ‘All these rights issues, they paid no money. He [Matodzi] approached me … and said myself, Andile and he, we must own at least 51 per cent of VBS because we are the brains behind this thing. I said no. If there is any increase in shareholding it must happen through Dyambeu. I said, “But how will you pay for the shares?” They said, “Ah don’t worry, we own the bank, we’ll pass journals [create fake deposits].” So they pay with fake money. I say, “How are you going to do that?” They say, “Don’t worry, the guys know the system.” This was in 2016. I said this thing is going to blow up in our face because … I was taught in accounting that when you put in the right you must put in the left, so how are you going to balance this fake money which you are creating? It means you must take depositors’ money and shift it as something that you’ve got. Now you are telling Reserve Bank you have put R100 million which is not in the bank.’17
Matodzi’s version is that VBS gave Vele a legitimate loan of R80 million so that it could buy shares in the bank in the second rights issue – because management were begging him to take control: ‘Management presented this to me and said you are the only one who can save us or we must close this thing. What must we do to help you? You are not getting support from PIC, Dyambeu is dysfunctional and the Reserve Bank continued to threaten. One of the things I can say, the guys were very disappointed, even the board members. I will not mention their names … Everybody just felt we are being hanged to dry. These guys are coming to me and saying, you brought us here, some of us even cut our salaries to come here for this dream that you sold us. Now look, all these guys … what can we do?’18 VBS management were only too happy to fund Vele’s acquisition of shares, Matodzi claims.
On 4 April 2017, Matodzi wrote a letter on behalf of Vele to VBS’s board, saying Vele ‘hereby makes an offer’ to buy R80 million’s worth of new VBS shares. VBS CEO Andile Ramavhunga then wrote to the VBS board singing Vele’s praises and recommending that they approve the investment. ‘Vele Investments, a company with Venda heritage and a very good understanding of VBS Mutual Bank’s origins, is looking to invest an amount of ZAR 80 million into the Bank,’ he wrote.19 He didn’t mention that VBS would allegedly be lending Vele the money to buy the shares.
Investigations into VBS have revealed that this sequence of events was manufactured, apparently to make the share issue look legitimate. What actually happened is that the VBS board was presented with a proof of payment for the shares that actually referred to a completely unrelated deposit by a company Vele controlled.
The odd thing about this is that the payment of R80 million was made on 6 March 2017, but Vele only approached VBS to buy shares, contingent on the VBS board’s approval, on 4 April. By seemingly using the unrelated deposit as proof of payment, Vele effectively claimed to have paid R80 million for shares a month before even applying to buy those shares. By the time Vele asked for board approval to buy the shares, that R80 million had already been withdrawn again. It took a spectacularly unobservant board to let that slip by, or one completely beholden to Matodzi and just going through the motions of doing the paperwork.
Astonishingly, things just got worse after that.
Mabilu told me that he gave up on VBS in the course of 2016. He only caught wind of the existence of Vele about halfway through the year when Dyambeu’s soon-to-be jettisoned representative, Mavuso, alerted him to the first of what would be many apparently dodgy finance deals: a R136 million loan to Vele to buy a fuel-trading company called Afric Oil.
Afric Oil was owned by the Pembani Group, and Mabilu knew Pembani’s chairman. Word reached him that Matodzi had shown up to negotiate the deal and from there Mabilu joined the dots. ‘I heard through some grapevine that they were going to buy Afric Oil and then VBS was going to finance that,’ Mabilu told me. ‘To me, I realised this is a conflict of interest because you can’t have the chairperson of VBS financing himself.’20
It was at this point that Mabilu decided to step back. ‘Then I distanced myself from VBS activities completely,’ he told me. ‘I just maintained the shareholding. As things were unfolding then, I started hearing there is a new shareholder called Vele. One, two, three, I hear Vele is the major shareholder.’
There was a third rights issue in 2017. This time Dyambeu washed its hands of the whole affair, but the PIC was somehow convinced to double down on its VBS investment. It would not only participate in this new rights issue, it would also retrospectively participate in the earlier, secret one. As things turned out, the PIC paid R90 million to VBS in December 2017 to restore its shareholding. As for Dyambeu, after the third rights issue its shareholding shrank to under 5 per cent, while Vele owned 59 per cent and the PIC 28 per cent.
With the third rights issue, Vele again allegedly faked a payment under the guise of a loan, this time for R90 million. ‘This amount was backed up by a fictitious deposit generated for Vele with no real flows actually occurring,’ said Phophi Mukhodobwane, VBS treasurer and member of the inner circle, in an affidavit to the SARB.21 Matodzi, however, claims that Vele participated in the third and final rights issue using ‘pre-existing facilities’.22
The drawn-out battle between the shareholders of VBS took place over almost the entirety of the bank’s rise and fall. When the dust eventually settled, it was easy to point towards the arrival of Vele as the turning point.
‘[W]hen Vele Investment[s] became the majority shareholder the PIC’s vision for VBS went up in smoke,’ the PIC’s former CEO Dan Matjila told the Mpati Commission of Inquiry in 2019. ‘I think the biggest problem came when Vele came into the picture and shareholding changed and so on and so forth. That is where we hit problems and this thing was on the downwards spiral and all.’23
4
God’s Bank
At the beginning of 2016, the irregularities at VBS seemed to be restricted to extremely bad corporate governance. Tshifhiwa Matodzi and VBS CEO Andile Ramavhunga hired old friends as consultants when they could and related parties repeatedly received generous loans. A patronage system was emerging with undeclared loans going to the PIC’s representative Ernest Nesane and Ramavhunga’s fealty apparently being bought with a second salary from Matodzi.
There were, on the face of it, also perfectly legal instances of mismanagement, such as VBS’s attempt to corner the market for funding the roll-out of government’s television set-top boxes. It led to some very ill-conceived loans totalling R270 million, which mostly defaulted. At the same time, however, some good ideas presented themselves. The ambitious plan to create the Shembe Unyazi Bank of South Africa was one.
Shembe Unyazi is the largest of the three factions of the powerful Nazareth Baptist Church. It is the second-largest church in southern Africa and takes its name from its leader, Mduduzi Shembe, also known as Unyazi lweZulu – ‘lightning bolt’ in isiZulu.
The plan was for VBS to back the creation of the Shembe bank and effectively force every single one of the church’s three million members to bank with it, to the extent that they would have to pay their church membership fees using new Shembe-VBS bank cards, which would also be their membership cards. VBS would let the new bank piggyback on its own banking licence, run its operations and own 60 per cent of the enterprise.1
Apart from the Shembe bank, there was also a plan to create a Shembe Unyazi mobile service and a veritable empire of branded products, all to be funded by VBS. Shembe was brought VBS’s way by the man who would later become the chief operating officer of VBS and then the COO and ultimately CEO of Vele Investments: Robert Madzonga. The church was his ticket into the VBS-Vele orbit.
Madzonga left mobile giant MTN in 2013 under a cloud of fraud and corruption allegations. He is a consummate churchman: a lay preacher and director of two churches that are registered as companies. One of these, Divine Healing and Deliverance International Ministry, was set up after VBS’s collapse. He also has business interests with Frank Kapenda, an evangelical preacher better known as Francis Winner,