The PIC Commission of Inquiry heard that the VBS Mutual Bank specifically targeted municipalities as well as churches as part of its growth strategy. File Photo: IOL

PRETORIA – A senior Public Investment Corporation (PIC) manager of portfolio management and valuations has told the Mpati Commission of Inquiry that the corporation was not aware that municipalities' deposits into VBS Mutual Bank were illegal.

Khaya Zonke said the bank specifically targeted municipalities as well as churches as part of its growth strategy.

Zonke said that VBS had paid the PIC an outstanding amount of R36 million after it issued a letter of demand on a revolving credit facility.

“On the 8th of February 2017, we sent a letter of demand to VBS for an outstanding amount of R36 626 736.56 in both capital and interest, as at January 31, 2017 on the R350m revolving credit facility,” he said. 

“We issued a letter of notification for outstanding management accounts and overdue quarterly meetings on the 3rd of March 2017, as VBS was in breach of the obligation(s) set out in the loan facility agreement.” 

Zonke said VBS' biggest shareholders were the Government Employees Pension Fund (GEPF) at 25.26 percent, Dyambeu Investments with 25.22 percent and various organisations and individuals who together held 49.51 percent before the company embarked on a long-term capitalisation strategy. 

He said the first rights issue was approved by a special general shareholders' meeting in December 2015 and was implemented in March the following year.

“At the time Vele Investments did not own shares in VBS and subsequently held 5 100 shares to the value of R51 100 after the first rights issue,” he said.

Zonke said the board resolved to embark on a second rights issue and this was done on a two shares for every one held basis. 

Shareholders who did not take up their rights were diluted and this included the GEPF, due to the timing and committee approvals process at the PIC. 

He said it was during this process that the Vele Investments shareholding increased to 53.2 percent with 8 005 110 shares to the value of R80 051 110. 

Tshifhiwa Matodzi was already the chairperson of VBS during the first and second rights issue and the post-investments team was not aware of this fact during this process. 

“We were aware that Vele Investments had diluted most of the individual shareholders who did not take up their rights during the two rounds of capital raise and to a large extent also Dyembeu Investments as well. 

“PlC’s participation in the rights issue was to assist the company with their capitalisation programme and had no intention to increase the GEPF shareholding in the business, hence it only subscribed to what was allocated and maintaining the 25.26 percent shareholding. Our interaction was mainly with the investee company, which is VBS, and not the other shareholders we did not have exposure to,” said Zonke.