Schadenfloyde — EFF, VBS, and the rot of the South African body politic
Banks fail. So do countries.
To the thought control tower: please let me out.
I’m trapped inside your head
— Lesego Rampolokeng
I’m not sure if the Advocate Terry Motau SC-led investigative report into the catastrophic implosion of VBS Mutual Bank was designed to be a classic of South African literature, but it sure has turned out that way. Subtitled “The Great Heist”, and flung into the political maelstrom on 10 October, the preamble reads as follows:
More than forty years ago the most daring heist in South Africa’s banking history took place. A group of industrious thieves, led by the elusive Mister Nightingale, skilfully tunneled their way some twenty-one metres underground into the vault of the Standard Bank in Krugersdorp. The bold bank robbers withdrew the princely sum of R400,000. They disappeared with the loot and no arrests were ever made.
I have, for the past five months, investigated the sorry affairs of the VBS Mutual Bank. My report will reveal that the perpetrators of the heist at VBS made away with almost R2-billion. And they certainly did not put in anything like the hard work and effort of Mister Nightingale and his team.
I trust that, in this case, arrests will be made.
Take that, Zakes Mda.
First, though, a brief summary. VBS was inaugurated in 1982 as the Venda Building Society, and remained until 2014 a modest retail bank taking deposits from stokvels and burial societies, while securing mortgage bonds for largely black, rural-based clients in Limpopo. Four years ago, the bank suddenly turned into a sort of hybrid between Oprah Winfrey and Saudi Arabia, spewing out money and gifts like a leaky oil spigot — most famously, Jacob Zuma received R7.8-million from the institution to pay back what he “borrowed” from the state to fund the renovations of his Nkandla homestead. Last April, the South African Reserve Bank was compelled to investigate what appeared to be a total emptying of the VBS vaults, as it were.
The results were appalling.
Some perspective: VBS was not a big business as far as banks are concerned, and its overall balance sheet, in comparative terms, was bapkes. Nonetheless, the resulting SARB-commissioned report found that the looting was being conducted in a fashion that ensured that no corner of South African society remained unfucked.
First, VBS paid out large sums of money to dodgy beneficiaries both inside and outside of the organisation, and bribed a number of its directors and overseers to look the other way while they were doing so. Second, it handed out “commissions” that served as kickbacks to members of the country’s wretched, appallingly-run municipalities so that they’d illegally deposit large sums into the bank, while paying off union hacks at state entities like Prasa to do the same. Last, an outfit called Vele Investments, ran by a mega-shyster named Robert Madzongo, was employed to manipulate the bank’s systems by creating fake deposits and hiding massively overdrawn accounts amounting to hundreds of millions of rand.
By 31 March, 2017, VBS’s liabilities exceeded its assets by R180-million, which was concealed from the registrar of banks by its auditors — who else but KPMG? A year later, the bank found itself under curatorship by SARB. According to the resulting report, the looting was masterminded by VBS chairman Tshifhiwa Matodzi, and nearly R2-billion was dispensed to 53 blessed and deserving individuals, all of whom are laughing all the way to the … well, bank.
* * *
Before we get any further into the story, it’s important to remember that there are real victims resulting from the VBS crash, and they are overwhelmingly black, poor and elderly. With respect to Advocate Motau, “heist” is too fancy a word: this was a stick up, and instead of a gun, the robbers wielded shamelessness. Cash was slurped from stokvels and burial societies, and there are thousands of families experiencing real pain — which is to say nothing of the citizens of broke municipalities that illegally funnelled cash into what was obviously a listing financial ship.
South Africans have lost the ability for clear-eyed judgement, but take it from me: you’ve got to be a real asshole to be anywhere near this mess.
There are, however, further complications. According to the bank’s supporters/enablers/major beneficiaries, the fact that VBS was a black-owned institution lending money to a predominantly black clientele — one that has been traditionally priced out of the formal banking sector — made it a victim of persecution rather than a perpetrator of grand-scale larceny. A bank lending to black rural clients is essential to the future of South Africa. But while it’s certainly true that black poor people rarely get anywhere near an ABSA account (and are excluded from the formal economy at large), it doesn’t make a fake bank any less fake, and it’s late in the day to be conflating these issues.
So let’s think of the VBS meltdown as a tragedy, and deal with its fall as such. And as with every tragedy, there is always a fatally flawed protagonist, which in this case happens to be Economic Freedom Fighters deputy president, Floyd Shivambu. Shivambu has been cast as the star of this particular show, which is perhaps unfair: he wasn’t on VBS’s board; he wasn’t an executive; he wasn’t listed as a beneficiary.
On the face of things, Floyd Shivambu had nothing to do with VBS.
His brother, however, is a different story. The SARB investigation has revealed that Brian Shivambu received over R16-million in so-called “gratuitous payments” from the bank. According to Scorpio, Daily Maverick’s investigative unit, Brian funnelled at least 10 million over to his brother, and it’s alleged that at least R1.3-million made it into EFF coffers. The Mail & Guardian has alleged that there exist links between Brian, Floyd, and an outfit called Grand Azania, into which Brian is said to have shifted a portion of his VBS cash, tying both brothers to a super-dodgy PIC beneficiary named Lawrence Mulaudzi.
Both Brian and Floyd Shivambu have made statements forcefully rebutting the allegations. Tellingly, Floyd has denied that VBS money was deposited into his personal account, and in a statement released by the organisation, he reiterated the EFF’s position: the bank should not be liquidated but recapitalised à la African Bank, so that depositors aren’t screwed; everyone involved in the scam can be prosecuted; SARB should change its capital requirements for banks and stop relying on shitty auditors like KPMG; and an independent commission of inquiry should be established to look into the impact of National Treasury and SARB on the circumstances that led to the collapse of the bank.
On Saturday, Shivambu went on a cathode ray charm offensive, visiting both SABC and eNCA studios to double down on the denials and tripled-down on the EFF’s standard narrative regarding VBS. But here’s where it gets sticky: in his capacity as a Member of Parliament, who regularly sits on finance committees, Shivambu has repeatedly attacked Deputy Director General at National Treasury, Ismail Momoniat, whom he has accused of undermining black bureaucrats in Treasury, and has insinuated was part of an anti-black Indian cabal constructed back during apartheid.
(Not so coincidentally, Momoniat was looking into the VBS scandal at the time, and Shivambu’s submissions took issue with the fact that Treasury wasn’t dealing quickly or forcefully enough.)
Shivambu and the EFF have publicly insisted that VBS was getting unfairly railroaded by racists who not only wanted to see a black bank fail, but who also wanted to maintain firm control of the banking sector — which may, of course, be true. But the pertinent issue in this case is that VBS was a scam, and the only reason to protect it was if one had vested interests.
So, were there vested interests?
Seems to me that an investigation is called for. In response to a tweet I posted on Friday enquiring whether the EFF would be suspending Shivambu pending clarity — the minimum standard to which the EFF would hold the DA or the ANC if the circumstances were reversed — Julius Malema answered: We won’t do it, you can forget about that.
And so what’s sauce for the goose appears not to be sauce for the gander.
* * *
There is no schadenfreude like the schadenfreude saved for the fallen pub gobshite, the phuza specialist at the end of the bar who, it turns out, can’t actually fly a helicopter gunship and doesn’t know the exact dimensions of the world’s largest pleasure yacht. Catching the Big Talker in a porky pie is one of the great pleasures of life, and the EFF have talked so big for so long that they were destined to walk, drunk on microdoses of real power, into one of their own carefully laid bear traps.
No one ever thinks a bank is gonna fail — just ask the idiots at KPMG, who helped usher in the 2008 financial crisis, among other acts of financial chicanery. But banks do fail. This particular VBS fraud was so crude and so ugly that its perpetrators had to expect that the toilet was going to back up and explode in their faces.
Here’s the thing though: this story has focused on the EFF, when there are any number of ANC cadres implicated in the scandal, and entire ANC municipalities that have been caught illegally dumping your money into the VBS gyre. Meanwhile, sources inside the EFF claim that this is retaliation for their sustained attacks on former finance minister Nhlanhle Nene, who resigned following revelations that he lied about meeting with the Gupta brothers. The way they see things, in these days of Zondo, this is an epic battle between the faction loyal to hyper powerful “prime minister” Pravin Gordhan (whose actual job is running the Public Enterprises ministry), and factions loyal to a black nationalist left, who bleed over from the ANC into the EFF.
The way the EFF sees it, the negative “propaganda” tying Shivambu to VBS looting is the result of Gordhan’s sustained revenge campaign against anyone/thing that stood in the way of the Ramaphosa transition, or stumped for Zuma back in the old days.
In other words, this is one large family battle, and Limpopo subsistence farmers are the collateral damage.
And so we arrive at the paradox the politician inevitably finds himself in at some point in his career: The public is not compelled to keep the same standards as the courts. Floyd Shivambu is obviously not responsible for the behaviour of his family members, and before a judge he is innocent until proven guilty. But South Africans are basically experts in picking up the stench of political rot, and are thus long past being gaslit by lines from the scripture peddled by EFF National Chairperson Dali Mpofu, who suggested that Shivambu is somehow expunged from the scandals by dint of the fact that he is not his brother’s keeper. That just doesn’t fly around these parts, where we all know that nepotism is the number one way of shunting money around the patronage network.
At the same time, the political chaos in this country has become so inflammatory and unpredictable that no one – not even formerly unimpeachable characters like Nhlanhla Nene – is safe from the threshing machine. And who killed Nene politically? The EFF. Who replaced him? The “ungovernable” Tito Mboweni, a stalwart outside the Gordhan network, who EFF insiders believe offers a real challenge to the status quo, and who has been described in these pages as a “Marxist”. (Are you listening, Moody’s?)
The EFF is of course the ANC Youth League in exile, and the lessons learned in the mother ship are intoxicating and difficult to shed: politics is a vehicle for enrichment; enrichment is the vehicle to power; power is a virtue in and of itself. The fact that prevails is: Brian Shivambu is not an ANC muppet taking money from a bank. He’s a member in good standing of the EFF, a consigliere who plays an important role at the Braamfontein HQ. While Floyd has insisted on television that he knows little of Brian’s business dealings, that seems unlikely. Floyd Shivambu is the furthest thing from an idiot, and he knows how this must look.
Indeed, the optics on this look wretched, and no one should be made to feel like they’re a pitchfork wielding member of the Twitter mob, or a Stratcom lackey (whatever the fuck that means in 2018) for demanding that the EFF explain Brian Shivambu’s windfall, and defend why his brother ran such spirited interference for a bank that was, as it has now been revealed without a shadow of doubt, an open vault for connected shysters.
With City Press actively suggesting that President Cyril Ramaphosa knew about and ignored the VBS saga in 2017, and with the rats not just ditching the ship but actively eating each other’s faces as the waters close in, the chaos that defines South Africa has reached soap operatic proportions. The dead savings accounts of Limpopo farmers are used as weapons in a factional war, while the powers that be blather on about land reform and restitution while properly fucking the poor. The EFF are simply playing the ANC’s violent, absurd MPORG — and they’ll likely win. The ANC flounder about and take notes from the EFF — and they’ll likely lose.
On Tuesday, the EFF will hold a press conference that they claim will clear up the fog. The party that has defined the South African present must now define its role in a crisis that threatens its legitimacy. As their power grows, so do the stakes. Which doesn’t change the fact that the EFF are just another faction —perhaps the dominant faction— in the ANC. They know how to fight these battles. A dead bank is just another stage set in the theatre of war. DM
Daily Maverick © All rights reserved