Ex-municipal manager sentenced in R230 million VBS Bank scandal
Ex-municipal manager sentenced in R230 million VBS Bank scandal! A former manager from the Fetakgomo-Tubatse Local Municipality, Johannes Mohlala, was sentenced to a five-year suspended sentence after pleading guilty to unlawfully investing municipal funds into VBS Mutual Bank.
The Pretoria High Court delivered the sentence on Thursday, marking a significant development in the ongoing investigation into public funds misappropriated in the VBS scandal.
Background of the Case: R230 Million Invested in VBS Mutual Bank
The case stems from Mohlala’s actions as municipal manager, where he approved the investment of approximately R230 million of municipal funds into VBS Mutual Bank between November 2016 and February 2018.
These investments were allegedly made in multiple transactions, raising significant red flags as they contravened the Municipal Finance Management Act (MFMA).
The investigation, conducted by the Hawks, revealed that the funds were transferred in five installments over a 15-month period.
Municipalities are generally prohibited from investing public funds in high-risk ventures without proper authorization, and VBS was known for offering inflated returns to attract public investments, which ultimately led to its collapse.
Sentence and Financial Penalty
The court sentenced Mohlala to a five-year prison term, suspended in light of his guilty plea and cooperation with the investigation.
As part of his sentence, Mohlala was ordered to pay R100,000 to the VBS curator, who is responsible for recovering and managing the assets of the failed bank. This financial penalty is intended to partially mitigate the significant losses suffered by the municipality due to the unlawful investments.
Co-Accused and Arrest Warrants
Mohlala was not the only official implicated in this scandal. Tumelo Ratau, the former Chief Financial Officer (CFO) of Fetakgomo-Tubatse Municipality, and Keaobaka Kgatitsoe, a businessman with ties to the investment scheme, were also charged with violations of the MFMA, corruption, and money laundering. Both were arrested alongside Mohlala in November 2021 at their residences in Pretoria.
Ratau, however, failed to appear in court and now faces a warrant for his arrest. His absence has prompted the court to reschedule proceedings related to his bail forfeiture to November 18, 2024.
Kgatitsoe had previously been sentenced to a five-year prison term, wholly suspended, for his role in the illegal investments. His sentence was handed down by the Pretoria Specialised Commercial Crimes Court in July 2022.
Legal Charges: Violations of the Municipal Finance Management Act
The charges against Mohlala, Ratau, and Kgatitsoe included the contravention of Section 173 of the MFMA, which sets strict guidelines for managing public funds to prevent misuse.
Additional charges of corruption and money laundering were also filed, highlighting the involvement of financial misconduct and possible illicit enrichment through the VBS investment scheme.
The VBS Mutual Bank scandal has seen a string of officials across municipalities and public offices held accountable, as these investments led to massive financial losses. Many municipalities now face constrained budgets and struggles with service delivery due to the funds tied up in the collapsed bank.
Implications and Allegations Involving Former Treasury Head Dondo Mogajane
Adding to the scandal, former National Treasury Director-General Dondo Mogajane recently faced bribery allegations connected to the VBS case.
Earlier this week, Mogajane, who is also the chair of the Government Employees Pension Fund, announced his resignation from all professional roles following accusations that he accepted a bribe during his tenure at Treasury.
Tshifhiwa Matodzi, the former VBS chairperson, claimed in court that Mogajane had taken a R1 million bribe in exchange for withdrawing a letter that directed municipalities to cease depositing funds with VBS. This accusation was documented in Matodzi’s affidavit as part of his plea deal, which aimed to mitigate his own sentence.
Government’s Response to Allegations
Finance Minister Enoch Godongwana addressed the matter during a media briefing for the Mid-Term Budget Policy Statement (MTBPS), expressing the government’s commitment to tackling the reputational risks surrounding Mogajane’s involvement in the VBS case.
The Finance Minister’s acknowledgment of the scandal underscores the government’s awareness of its impact on public trust and confidence in Treasury’s role in safeguarding municipal funds.
A Continuing Saga of Accountability and Financial Recovery
The sentencing of Mohlala and the ongoing proceedings for Ratau and Kgatitsoe underscore the broader impact of the VBS Mutual Bank collapse on South African municipalities and public finances.
The case has exposed systemic vulnerabilities in the management of municipal funds, highlighting the need for stronger oversight and accountability within local government structures.
While Mohlala’s suspended sentence and financial penalty offer some measure of justice, many South Africans remain concerned about the long-term repercussions for municipalities that lost millions in taxpayer funds.
As the Hawks and other investigative bodies continue to hold officials accountable, the case serves as a cautionary tale on the importance of compliance with financial regulations and ethical governance at all levels.
