VBS Mutual Bank May be Forced to Shut Down

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mobile banking network. business people using mobile phone with icon application online payment.
mobile banking network. business people using mobile phone with icon application online payment. (Photo Credit: www.shutterstock.com)

The bank that became popular after it granted former President Jacob Zuma a loan to finance the R7.8 million he owed relating to the upgrades of his private residence in Nkandla is facing liquidity crisis.

The VBS Mutual Bank, which received  a permanent Mutual Bank License on 11 October 2000, may soon have to shut its doors.

VBS has its roots in a 1980s building society based in Venda, a rural area given a degree of autonomy by the apartheid government before 1994. It has 30 000 clients with deposits of around R800 million.

VBS’s cash reserves are so low that its executives said that if main shareholders the Public Investment Corporation (PIC) and Vele Investments don’t inject cash, the SA Reserve Bank (Sarb) is expected to place the entity under curatorship this week, according to a City Press report.

The newspaper reported that VBS faces the possibility of a spectacular crash, following Treasury’s instruction to municipalities to stop investing with the institution.

The order was given early last year and states that the Municipal Finance Management Act (MFMA) forbids municipalities from investing in mutual banks. As a result, a number of councils withdrew more than R1 billion from the bank, causing a major liquidity crisis.

In a strongly worded letter, seen by City Press, to Sarb registrar Kuben Naidoo and Treasury director-general Dondo Mogajane, VBS chairperson Tshifhiwa Matodzi wrote: “No matter what happens to the bank and its direction going forward, we will leave the space with our heads held high knowing that we achieved what was considered impossible.

“In the end we were faced with a well-organised and powerful system that does not tolerate growing black banks and black excellence, just as the old African Bank was killed to prevent it from competing with the big guys.”

VBS had big growth expansion plans and was planning to be listed on the Johannesburg Securities Exchange.

“It is a no-brainer to list within the next 3 years,” Matodzi told Reuters in February 2017.

The lender, whose clients are mostly rural homebuilders or small businesses, also planned to expand from only four branches now to a nationwide network.

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