Disgraced lender VBS Mutual Bank had grand growth ambitions before it was hit by a liquidity crisis and put under administration in March 2018, the judicial commission of inquiry into the Public Investment Corporation heard on Monday.
The commission is investigating governance and investment decisions taken by Africa’s largest asset manager, which has R2trn under its control, mostly on behalf of government employees.
According to evidence submitted by Khaya Zonke, a senior manager in Post Investment Monitoring and Valuations, VBS quickly shifted from performing entity to a distressed business, skipping other risk ratings used by the fund to monitor investments.
Zonke told the inquiry that the collapsed bank had a '2021 growth strategy', which should have seen it increase its balance sheet to R11bn and expand from being a regional bank to a national financial institution.
Funds were to be raised from the PIC, municipalities, churches, stokvel groups and taxi associations.
'A performing business'
"The company was doing well, and we supported their strategy," said Zonke, adding that VBS had opened a corporate office in Rivonia, a branch in central Johannesburg and had started internet banking.
"For us all, these were signs of a bank that was expanding, and it was rated as a performing business," he said.
VBS had raised a loan of R350m from the PIC, and another R360m from three different municipalities. Local governments were part of the now defunct bank's growth strategy. Late last month the inquiry heard that changes were made at the 11th hour to the conditions attached to the PIC loan facility.
Deputy Commissioner Gill Marcus asked Zonke on Monday if he and his colleagues were aware at the time that the municipal deposits were not legal. He said they were not and "the bank was specifically targeting municipalities".
The PIC was VBS's second-largest shareholder, with a 25.2% stake through its client, the Government Employees Pension Fund.
The PIC, through GEPF, had a R458m equity exposure to VBS in total, said Zonke. He further stated that the PIC was still awaiting the bank’s liquidation process and its facility was currently not being serviced.
Up to 15 municipalities across the country had deposited large sums of money into the bank before it was placed under curatorship by the South African Reserve Bank in March 2018.
In October 2018, a report by Advocate Terry Motau titled 'The Great Bank Heist' revealed that almost R2bn was looted from VBS and payments made to several politically connected individuals. The report implicated over 50 people, including VBS bank executives and Brian Shivambu, brother of the Economic Freedom Fighters' Floyd Shivambu.
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