Details emerge in SME Bank scandal

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Desie Heita

Windhoek-The nearly N$200 million that the SME Bank Namibia invested with two little-known South African entities was emptied out of these companies’ bank accounts less than two months after the deposits were made from Namibia, New Era has established.

SME Bank funds flowed into a troubled bank, called Venda Building Society (VBS) Mutual Bank, as well as into a cash management firm, called Mamepe Capital – both South African entities.

There were major disinvestments (withdrawals in layman’s terms) immediately after the money was deposited with the two institutions. Furthermore, very little interest was earned on the amounts deposited.

According to confidential reports seen by New Era, SME Bank deposited N$70 million with VBS Mutual Bank between August 12 and October 14, 2016.

A further N$181 million was placed in the hands of Mamepe Capital between August 22 and November 8, 2016.

Within two months, withdrawals amounting to some N$69,8 million were made in the period between October 13 and November 8, 2016.

The interest earned on deposits with VBS Mutual Bank in that period include N$460,239 and an additional N$68,143 recorded as interest accrued by December 31, 2016.

This is according to documents detailing the dealings between SME Bank Namibia and the two South African financial institutions.

VBS Mutual Bank is a rural mutual bank with four branches, 30,000 clients and deposits of around N$800 million. Last month the bank announced its aspirations to be listed on the South African stock exchange.

Mamepe Capital describes itself as a derivatives trading and cash management firm.
The two firms entered into a five-year agreement with SME Bank on July 27 last year. The agreement was simply called the ‘Memorandum of Understanding between VBS Mutual Bank, SME Bank Namibia and Mamepe Capital’.

The details or purpose of the MoU have not yet been made public.
Details of the transactions are noted in a ‘Report on Factual Findings’ by South Africa auditing firm KPMG. It appears that the directors of VBS Mutual Bank commissioned the report in response to enquiries from the Bank of Namibia.

Seemingly this prompted KPMG’s partner, Sipho Malaba, who signed the report, to put on record that the factual findings in the report are based on procedures agreed with VBS directors and that it is “solely to assist you in your reporting to the Bank of Namibia, on behalf of SME Bank Namibia”.

KPMG only looked at the transactions involved in the agreement between the three institutions up to until December 31, 2016.

Malaba went on to clarify in his report to VBS that because the procedures and findings in the report “do not constitute an audit or a review made in accordance with International Standards on Auditing or International Standards of Review Engagements, we do not express any assurance on the investments held as 31 December 2016”.

The KPMG report appears to have contributed to the decision by the Bank of Namibia to invoke Section 56 of the Banking Institutions Act last week and take control of the SME Bank’s assets, liabilities and all its business affairs with immediate effect.

The Bank of Namibia also relieved the SME Bank’s board of directors from their duties and sacked the top management, including chief executive officer Tawanda Mumvuma, along with the general manager for treasury and the finance manager.

The Bank of Namibia is now investigating what it says are questionable investments of between N$181 million and N$196 million by SME Bank with South African institutions.
“At this point, the Bank of Namibia is not satisfied with the information provided and is unable to render an objective opinion regarding the soundness or magnitude of the investment in question,” BoN Governor Iipumbu Shiimi said last week.

The flow of cash from Namibia to VBS Mutual Bank and Mamepe Capital – the latter boast on its website that its name “emanates from an imagination of the land flowing with milk and honey” – started in August last year. According to the transaction report compiled by KPMG, SME Bank first transferred N$10 million to VBS Mutual Bank on August 12, 2016, followed by another N$60 million on October 14 that same year.

Mamepe Capital, acting as fund managers, received N$150 million on August 22. That amount was followed up with another deposit of N$25 million on September 1 and a final deposit of nearly N$6 million on November 8.

Interestingly, the withdrawals of the same funds started less than two months after the deposits were made with the two institutions. An amount of N$2,7 million was withdrawn on October 13, 2016, followed by a withdrawal of N$37,1 million the next day. About two weeks later, on October 26, an amount of N$10 million was withdrawn, followed by N$20 million on November 8.

VBS Mutual Bank made headlines last year when it offered South African President Jacob Zuma a loan to reimburse that country’s government for upgrades to his personal home at Nkandla in KwaZulu-Natal.

It also dominated headlines in December when many of its customers experienced problems withdrawing money from the bank. This year it signed up with one of South Africa’s largest church groups to issue cards to the church’s 6.8 million members.

Although they will not automatically bank with VBS, the bank said it hoped to sign them all up eventually, according to Reuters news agency.

The Public Investment Corporation, Africa‘s largest fund manager with more than $120 billion of South African government employees’ pension assets under its management, is also a major shareholder in VBS, with a 25% stake.

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