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VBS Mutual Bank ‘used to loot’

The mutual-bank model is not the problem – Cas Coovadia.

NOMPU SIZIBA: The North Gauteng High Court ordered the final liquidation of VBS Mutual Bank today [Tuesday]. The Reserve Bank’s application to liquidate went through without opposition. Many, including the likes of the EFF, have argued that there is no need to completely shut down the bank, but instead just get rid of those who had caused the bank to rot. But the reality is that the bank will now be wound up.

Well, to give us his views on the latest developments, I’m joined on the line by Cas Coovadia, who is the managing director at the Banking Association of South Africa [Basa]. Thanks very much, Cas. It’s always good to have you on the show.

As I mentioned in the introduction, there have been some who have agitated for getting rid of the rot and keeping the bank going, because it was doing good things like providing mortgages to rural farming communities. But of course this wasn’t to be. What do you understand about the Reserve Bank’s determination or rationale for going ahead with the liquidation of the bank?

CAS COOVADIA: Well, the Reserve Bank’s role is to regulate the banking sector and our banking law actually allows the banks to fail under certain circumstances. What’s happened here is that the mutual-bank model is fine. I think as model. There are other mutual banks in the country, and they are working because they stick to the law. They don’t do what they are not supposed to be doing. What happened here is that six or seven people took off with this bank and used it to loot. As a result of that they ran up significant operations that were illegal, and we now find ourselves in a position where the bank is not viable and cannot be saved because of all the corruption and the mismanagement that happened.

So the Reserve Bank is doing what as a responsible regulator it needs to do. The issue about “the bank could have done good work, and not just to poor people in rural areas and farms”. It is a valid argument. But anybody who wants to be a group of people, be it individuals who want to establish another mutual bank in that area, can apply for a licence. If they meet the requirements for the licence they can start a mutual bank and do this properly. And as Deputy Governor Naidoo said in front of the parliamentary finance committee a week or so ago, this bank, with the best will and best of intentions on the part of the Reserve Bank, is going to land up with at least R370 million-odd in losses. So anybody who takes that over will have to take that loss over. Why would anybody want to do that?

NOMPU SIZIBA: You are right. So, Cas, what sort of timelines can we expect for the liquidation, do you think? And are you hopeful that, once that is out of the way, the culprits in the looting will be brought to book, because it seems the prosecuting authorities seem to be on this case?

CAS COOVADIA: Look, I don’t know what the timelines are, because the curator has to look at what still needs to be done, and the Reserve Bank – and we obviously are not opposed to that. Again, it’s public knowledge that documents have been handed to the prosecuting authorities with the evidence, and we would urge the prosecuting authorities to move with haste on this, and actually charge the responsible people for the looting. People must go to jail. We’ve got to begin to hold people accountable in a real way, and that’s by sending people to jail. That should be expedited as soon as possible. I don’t know how long this would take because I’m not close to it.

NOMPU SIZIBA: From Basa’s perspective, what has this whole saga taught you, or what do you take away from it?

CAS COOVADIA: Well, one, we have suspended VBS, which was a member, because they acted contrary to the code of our banking practice. The lesson from this is that the business sector also, in the last few years, has had serious [failures]. We’ve had Steinhoff, we’ve had McKinsey, we’ve had KPMG and others. Now we’ve got VBS. I think the lesson from this is that we need to be, as the banking sector, vigilant that we are conducting our business in a responsible way according to the law; that we understand the sort of business we have; and that, as banks, we are the sort of institutions that have to be responsible and have to act responsibly, because we work with people’s deposits. In VBS’s case we worked with poor people’s deposits. So the lesson to us is that we need to be vigilant about operations as members of Basa. We need to be absolutely clear that we are abiding by the laws and regulations of this country, and that we are absolutely diligent in protecting people’s deposits.

NOMPU SIZIBA: Just moving on, as a little bit of an aside, we’ve just heard that Minister of Home Affairs Malusi Gigaba has decided to resign. In the bigger scheme of things, with President Cyril Ramaphosa trying to clean up and all the rest of it, and Mr Gigaba’s situation seemingly being untenable, do you have a view on it? Do you think it’s better for the country from a governance perspective, etc?

CAS COOVADIA: Look, I think a month or two ago ex-minister Nene set the good example. He had failed to disclose that he had met the Guptas. There were no indications that he was compromised in any way, but he did the honourable thing and he resigned.

I think that people who have allegations against them – serious, consistent allegations – need to do the right thing, not to leave it to the last minute, but need to do the right thing in the national interest. And I think that business played a very good role during the Zuma years in actually trying to defend institutions, fight the corruption. And I think that that battle is not over. We need to continue to be vigilant. We need to  call on those who are alleged to have been involved in nefarious activities to do the right thing.

We need to work with the president to clean this government out, and we need to look within our own constituencies to ensure that we are very careful about how our business organisations and businesses run.

NOMPU SIZIBA: Cas, always a pleasure talking to you.

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Quite correct the bank namely VBS does not loot it is those that run it that loot.

End of comments.

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