VBS scandal: six convicted, 35 arrested – and more to come

With six convictions and 35 arrests in the VBS Mutual Bank scandal so far – and more expected – the wheels of justice may be turning slowly, but they are turning.

This week, Brigadier Thandi Mbambo, the head of communication at the Directorate for Priority Crime Investigation (Hawks), confirmed that 35 arrests have been made, with six convictions already secured, leaving 29 accused still on trial.

This marks an increase of two more arrests and four additional convictions since Lieutenant General Godfrey Lebeya, the head of the Hawks, last provided an update in June 2024.

Mbambo stated that investigators are working on the remaining 43 suspects out of a total of 76. So far, the investigative team has recorded 5 455 statements as part of the probe.

“Investigations are continuing, and some have reached the decision stage. It will be premature to determine when other arrests will be effected, as that is guided by an ongoing investigation,” she said.

Six down, 70 to go

VBS Mutual Bank, once a key player in South Africa’s banking sector, was founded in 1982 as the Venda Building Society. Over the years, it evolved into a mutual bank, expanding its services to include deposits, loans, and transactional accounts. The bank earned a reputation for offering attractive interest rates on municipal investments, making it a popular choice for local governments seeking to grow their funds.

However, VBS’s rapid rise came to a halt in 2018, when it was exposed as the epicentre of a massive fraud and corruption scandal. A forensic investigation by the South African Reserve Bank found that about R2 billion was siphoned off through fraudulent schemes involving bank executives, board members, and well-connected political figures.

The core of the scandal involved the unlawful deposit of municipal funds into VBS, with bribes paid to officials to secure these investments. As the fraud unfolded, VBS was liquidated, leaving numerous municipalities grappling with significant financial losses.

The latest in a growing list of convictions was handed down on 27 November last year when Eddie Makamu, the former chief financial officer of Collins Chabane Municipality in Limpopo, was found guilty of violating the Municipal Finance Management Act (MFMA).

Makamu was sentenced to five years’ imprisonment, wholly suspended for five years, on the condition that he does not commit a similar offence during this period. He was also ordered to pay R150 000 to the VBS to partially compensate the victims of the bank’s collapse.

This conviction stems from his involvement in Collins Chabane Municipality’s illegal R120-million investment with VBS, funds that were never fully recovered, with a remaining R123.98m still outstanding.

Earlier in 2024, on 6 November, Johannes Mohlala, the former manager of Fetakgomo-Tubatse Local Municipality in Limpopo, became the fifth individual to face conviction. Mohlala was sentenced to a five-year suspended sentence and ordered to pay R100 000 to the VBS curator. The conviction stemmed from his role in facilitating the illegal investment of R230m in VBS, paid in five instalments between 2016 and 2018.

The fourth conviction, and by far the most severe, was that of Tshifhiwa Matodzi, the former chairperson of VBS and the so-called kingpin behind the bank’s massive looting. In July 2024, Matodzi was sentenced to 495 years in prison – although he will serve just 15 years – after pleading guilty to multiple charges, including fraud, corruption, money laundering, and racketeering.

But more on this later…

In October 2023, Hlengani Maluleke, the former municipal manager of Thulamela Local Municipality in Limpopo, was sentenced to a five-year suspended sentence for approving an illegal R30m investment in VBS. Maluleke, who was arrested by the Hawks in February 2022, entered a plea agreement, admitting guilt to contravening the MFMA.

Then there’s Keaobaka Kgatitsoe, a businessman linked to the VBS scandal. In July 2022, he received a five-year suspended sentence and was ordered to pay R460 000 for his role in a money-laundering scheme involving fictitious invoices submitted to the bank.

In October 2020, Philip Truter became the first to be convicted in the VBS scandal. He pleaded guilty to fraud, corruption, money laundering, and racketeering charges and was sentenced to 10 years in prison, with three years suspended, leaving him to serve a seven-year sentence.

EFF under scrutiny

This list is expected to expand in the coming months, with the possibility of more familiar names emerging.

According to a statement released by AfriForum this week, the prosecution in their EFF docket is now “imminent”.

In July last year, AfriForum chief executive Kallie Kriel submitted an affidavit urging the police to investigate EFF leaders, including Julius Malema and Floyd Shivambu, on charges of racketeering, fraud, and other offences. Kriel’s affidavit referenced allegations made by Matodzi.

As part of a plea agreement with the National Prosecuting Authority (NPA), Matodzi received a reduced sentence of 15 years in prison in exchange for detailed testimony about the bank’s collapse. He also submitted a 70-page affidavit outlining the extensive corruption and looting that led to VBS’s downfall. This affidavit, which was leaked to the public, contained several significant allegations.

According to The Citizen, Matodzi accused EFF leaders, including Malema and Shivambu, of receiving substantial sums from the misappropriated funds. He claimed Malema received R5m, while Shivambu received R10m. The affidavit further alleged that the EFF was paid R1m a month to prevent the party from criticising VBS and to ensure political protection.

Matodzi also implicated certain ANC officials, alleging they accepted bribes to facilitate the illegal placement of municipal funds into VBS in violation of regulations.

The NPA condemned the unauthorised release of Matodzi’s affidavit, warning that the leak could jeopardise ongoing investigations and legal proceedings.

In their statement, AfriForum said that Kriel, Advocate Gerrie Nel, the head of AfriForum’s Private Prosecution Unit, and Andrew Leask, the chief investigator at the Unit, met with the Hawks’ investigating officer on January 17 to discuss Kriel’s complaint.

According to AfriForum, the investigating officer – whose name was deliberately withheld –explained that Kriel’s docket had been closed because his complaint was considered a duplicate of an investigation initiated in 2019. As a result, they were informed that a copy of Kriel’s affidavit had been filed under the B section of CAS 76/07/2019 and submitted to prosecutors for review.

Nel, however, suggested that instead of treating Kriel’s affidavit as a duplicate, it should be merged with the existing docket and included in the evidence section.

“We must also record our discontent with your decision to file our client’s complaint as a duplication and contend that is an oversight. We emphasise that Mr Kriel’s criminal complaint extends itself to criminal activities of a broader nature than those restricted to the VBS matter.”

AfriForum further claimed that during the meeting, they were informed the original complaint had been filed with SAPS more than four years ago and that the investigation – except for the forensic expert’s affidavit – had been concluded, with prosecution expected soon.

They also stated that the investigating officer had “suggested” that charges of racketeering, money laundering, and corruption were included in the case, “exposing the existence of more than one criminal enterprise”.

Additionally, AfriForum claimed they were told that the case forms part of a formal prosecution-led “case plan”, overseen by advocates from the office of the Director of Public Prosecutions.