Evidence is mounting that VBS aided another elaborate bank heist north of the border by producing fake paper trails and channeling stolen cash to fool regulators and auditors – ultimately leading to the collapse of yet another small institution serving the poor and vulnerable.

In February 2017, Namibia’s central bank seized control of SME Bank – set up to serve small businesses and rural communitie in that country – under circumstances similar to the March 2018 collapse of VBS Mutual Bank.

SME’s Zimbabwean minority shareholders had allegedly siphoned off at least R380m and absconded across the border when authorities started circling. The Namibian state is SME’s majority shareholder.

At least R270m of that money flowed to South Africa with the rest largely lost to Dubai, the bank’s liquidators now believe.

VBS and individuals associated with it played important roles in the destruction of SME long before VBS itself imploded.

The details are becoming clearer in waves of court proceedings launched by SME’s liquidators in Windhoek and Johannesburg.

Insolvency enquiries are ongoing in both countries, largely unnoticed by South Africans. Based on current evidence SME was probably one of the first instances of VBS corruption.

VBS allegedly provided two key services to the looters of SME: faking a R150m deposit in SME’s name to help hide the holes in SME accounts, and then channeling R60m in real money back to SME as part “repayment”.

That R60m was almost certainly stolen. The victim of this theft was either a small local asset manager called JM Busha – or VBS itself.

Initial suspicions about VBS’ role have now been backed up by solid evidence, in an affidavit filed two months ago in Windhoek by SME legal advisor Tania Pearson.

Four South Africans have been implicated.

Mauwane Kotane, a childhood friend of VBS chief executive Andile Ramavhunga, was at the heart of the alleged scheme.

Ramavhunga himself and even VBS’ disgraced audit partner, Sipho Malaba of KPMG, also seemingly got involved.

VBS general manager of sales Sasa Nemabubuni allegedly personally produced false documentation.

They all allegedly had a part in a simple task: to pretend SME’s money was safe in South Africa when in fact it had long disappeared.

How it worked

Like VBS, SME had allegedly been captured by rogue shareholders that started running it like their personal piggybank.

First among them was Zimbabwean banker Enoch Kamushinda, who has been fighting a “Stalingrad” legal campaign to stay out of court.

SME’s Nambian liquidators are suing Kamushinda, the former SME board chair, former chief executive Tawanda Mumvuma and three of their colleagues.

The liquidators claim the five were involved in theft, fraud and money laundering that resulted in the bank losing at least R247m and possibly as much as R387m.

Kamushinda has denied all wrongdoing and called the Bank of Namibia’s takeover of the bank “unlawful”. In an affidavit he called the allegations against him “scandalous, vexatious and irrelevant” during his ongoing battle against the SME liquidators on several technical and procedural grounds.

According to the evidence so far, from 2013 onwards Kamushinda, Mumvuma and their colleagues created fake invoices for SME to pay – while the money was actually transferred into an array of companies in South Africa.

From there it disappeared into an elaborate money laundering network based in Johannesburg.

For instance, SME purportedly spent R80m on “computer software and hardware”, an amount that appeared excessive for such a small bank.

Later evidence suggested the recipient was just a front which distributed the money to other companies for a small margin.

By the beginning of 2015 SME’s auditors, BDO, started asking awkward questions.

In stepped Kotane, grandson of the late South African Communist Party leader Moses Kotane.

At this point Kotane was also on the board of the Finance and Accounting Services Sector Education and Training Authority, tasked with funding trainees in the South African financial sector.

By the end of this affair the Financial Services Conduct Authority (FSCA) would bar him from working in the sector for 20 years (though Kotane told amaBhungane he is appealing that ruling). He replied to amaBhungane’s questions by saying they are all “sub judice”.

Kotane was a friend of Ramavhunga, the VBS boss, and very probably the first of VBS’s commission agents – people paid to bring in business.

This commission system later expanded into a massive bribery scheme incentivising municipal officials to deposit money at VBS, ultimately costing 15 of them a collective R1.5bn when VBS crashed.

Ramavhunga was appointed at VBS on 1 August 2014 and he appointed Kotane’s company Mamepe Capital to source business the next month.

Ramavhunga told the 2018 enquiry into VBS that he chose Kotane “because he understood the space that we wanted to go into, and he had the knowledge… No one at the bank had the knowledge”.

Ramavhunga testified he “did not think” that there was any conflict, despite the fact that they shared interests in a number of companies and he was earning fees from Kotane’s Mamepe Capital before and after becoming the CEO of VBS.

When contacted, Ramavhunga said he can’t answer any questions about VBS.

In 2015 Kotane scored another major deal, this time with SME in Namibia.

According to Pearson’s affidavit Mamepe Capital and SME signed a “memorandum of agreement for provision of financial services” on 7 January 2015. This agreement would allegedly become a weapon to throw auditors off the SME looters’ trail.

Pearson alleges SME’s finance department started retrospectively reclassifying things like the massive “computer” expenditure as "Investment – Mamepe Capital" in their system.

This ruse was allegedly repeated again and again with fake backdated invoices being produced by the bank using Mamepe’s letterhead. Money previously stolen and yet to be stolen at SME was disguised as an asset in a new account tied to Mamepe.

In June 2016, the noose was once again tightening when SME’s auditors demanded to see the investment agreement with Mamepe.

By July 2016, the Bank of Namibia – the central bank – instructed SME to employ Deloitte, one of the “big four” audit firms, to independently review the bank’s finances. In October the Bank of Namibia informed SME that it considered SME non-compliant with banking regulations.

New ploys were urgently needed.

“With the pressure imposed by the Bank of Namibia as well as the pressure imposed by the external auditors increasing, the fraudsters, particularly Tawanda Mumvuma, Mauwane Kotane of Mamepe Capital and a certain Mr Ramavhunga of VBS Mutual Bank in South Africa, then devised the following scheme,” claims Pearson in her affidavit.

The fake R150m

VBS’s alleged contribution to covering up the looting of SME took the form of a misleading paper trail.

In July 2016, when SME was told to let Deloitte review its books, the bank happened to sign a new agreement with Kotane’s Mamepe Capital that now included VBS as a third party.

VBS was now the “custodian” of money Mamepe Capital was supposedly investing for SME.

SME chief executive Mumvuma then sent off an application to open a VBS account.

Little over a week later the account was confirmed. Mumvuma immediately got SME to transfer R10m into this new account. Later investigations suggested that this was the only SME money ever actually deposited at VBS. On 17 August 2016 the allegedly false trail was laid.

Mumvuma first emailed Kotane saying that “as discussed we intend to liquidate the entire money market portfolio that you are managing”.

According to Pearson, he and Kotane both knew that there was no money market portfolio, but Kotane nonetheless played along. He wrote back that “it should be fairly quick to liquidate the positions as requested … these trades will be executed tomorrow”.

So now there was correspondence that would make it seem that all involved were convinced of the existence of R150m invested with Kotane’s Mamepe Capital. Mumvuma wrote to Kotane again, giving him instruction to move the “liquidated” R150m into the new VBS account. Now they just needed someone at VBS to join in the charade.

That turned out to be easy. In a “confirmation of interest” letter dated 19 August 2016, VBS general manager for sales Sasa Nemabubuni put on record that SME had invested R150-million at VBS in a 12-month fixed deposit.

An account statement was later produced showing both the R10-million and R150-million deposits.

“Obviously Mr Nemabubuni, knew that no investment of R150 000 000.00 in VBS Bank existed. He was in on the fraud,” claimed Pearson.

AmaBhungane could not trace Nemabubuni, but this trail of messages now serves as the SME liquidators’ clearest evidence that VBS helped commit fraud.

The same method was allegedly employed two weeks later. Mumvuma mailed Kotane to transfer R25m to VBS, and another allegedly fake transaction that was duly reflected in the VBS statement.

Now there was purportedly R185m safe and secure at VBS, which at the time seemed like an up-and-coming entrant to the commercial banking space.

But by the end of 2016 the Bank of Namibia was knocking on VBS’ door asking questions.

This led to a “report of factual findings” being produced by KPMG auditor Sipho Malaba on behalf of VBS.

This is the same Malaba who would later cover up the looting of VBS and who was at this time already secretly on VBS’s payroll. Malaba could not be reached despite amaBhungane’s best endeavours.

Although Malaba’s written report displayed the disclaimer that it was not an audit, but simply a check of VBS transaction records, it reflected the R150m and R25m.

When the Bank of Namibia took control of SME in February 2017, it did an audit that found no trace of this money at VBS. A total of R155m was impaired which immediately rendered SME insolvent and paved the way for its liquidation.

The mysterious R60m

A second fraud allegedly involving VBS and SME took place on 12 October 2016, one week after the Bank of Namibia had warned SME about its regulatory non-compliance.

Mumvuma, the SME chief executive, instructed a South African asset manager called JM Busha Investment Group to transfer R60m to the SME account at VBS in exchange for a promissory note.

This note was like a bond. It bound SME to repay JM Busha the R60m plus interest three months later. For some reason JM Busha agreed to the transaction despite SME already being under scrutiny by auditors and the Bank of Namibia.

The liquidators clearly have not made up their mind about the role played by Busha, whose principal, Joseph Makamba Busha, ran in Zimbabwe’s presidential elections in 2018 as the candidate of the FreeZim party. He came in fourth.

Busha told amaBhungane that was pursuing SME for his money: “I deal with a lot of institutions. I don’t know any of these guys personally.”

Pearson noted: “It appears to the liquidators that Mr Busha contends that he may also have been defrauded by Mr Mumvuma to transfer the N$60-million [R60m] … this investigation is still continuing.”

Whether or not JM Busha was defrauded, VBS received the R60m the following day, 13 October.

It immediately paid R2.7m onward to an obscure entity called Base Data (which ultimately received R68m from SME largely through other channels).

Another day later VBS paid R37m to SME in Namibia.

This was, according to Pearson, supposed to look like one of the Mamepe Capital investments “maturing”.

Later in the month VBS paid R10m to an account in the name of ZE2 Ample, another company belonging to Kotane. He has since claimed this was fee income due to him. This was funded by the initial R10M SME had put in VBS.

Finally, in November, VBS paid the R20M balance of the R60M ostensibly belonging to SME to Mamepe Capital, which paid it on to SME “again as if it was one of the alleged matured investments mentioned by Kotane in his affidavit”, said Pearson.

The story of where this R60m came from has changed a number of times before it was discovered that it came from JM Busha. The report from disgraced KPMG auditor Sipho Malaba mentioned above called it a direct deposit from SME, which it definitely was not.

Ramavhunga was later called on to depose an affidavit in June 2017. In it he changed the story.

“I have noted a discrepancy in the report on one item which indicated the source of an amount of R60m to be direct deposit from SME Bank to the VBS account. Such amount was actually received from one of the liquidated investments.”

That was unfortunately still not true. The R60m came from JM Busha, not an Mamepe Capital “investment”.

Kotane has consistently declared his innocence.

In June 2017, when SME was about to get liquidated, he deposed a sworn affidavit in which he claimed that he still had R188-million of SME’s money safely invested – in fertiliser “for trading purposes”.

A consignment note provided to back this up turned out to be a forgery.

“The maturity dates, of the alleged investment of some R 188,201,341.00 (according to Mr Kotane), all came and went. In short, the so-called investments Mr. Kotane referred to is nothing but a grand fraud perpetrated on the SME Bank,” said Pearson.

In 2018 the Namibian authorities requested the South African regulator, the FSCA, to help in its investigation of Mamepe Capital and VBS’ role in SME’s demise.

The FSCA found Kotane’ lied about the alleged SME investments and deemed him to no longer be a “fit and proper” person in terms of financial sector regulations and has barred him from the sector for 20 years.

* The amaBhungane Centre for Investigative Journalism, an independent non-profit, produced this story. Like it? Be an amaB supporter to help it do more.