Embattled Minister of Justice Thembi Simelane. (Photo: Sharon Seletolo/Galo Images via Getty Images)
Controversial Justice Minister Thembi Simelane told MPs on Friday that the loan was taken out at an interest rate of nearly 50% from a financial institution that acted as an intermediary for VBS Mutual Bank after he was unable to borrow on better terms from commercial banks.
“It was about two percentage points lower than the financial investment, the bank,” Simelane said, which he realised after comparing the loan he took out from Gund Wealth Solutions with the terms offered by the bank.
The minister stressed that the agreement with Gund did not require any money to be repaid over several years.
Simelane was grilled about the matter by Democratic Alliance councillor Glynis Breytenbach when he appeared before the judicial committee to answer questions about loans he took out from middlemen who persuaded the city government to put millions of dollars into VBS while he was mayor of Polokwane.
Municipalities are not allowed to deposit money in mutual banks, but Polokwane deposited more than R300 million this way in 2016 and 2017. The deposits were reportedly solicited by Laliom Raswinane, who owns Gundo and faces corruption charges, some of which are specifically linked to withdrawing money from the municipality.
Simelane, a former minister responsible for cooperatives, told a parliamentary committee he had turned to his firm for financial advice as he was looking to start his own business as public service did not guarantee him long-term job security.
She emphasized that the loan came from Gund, not VBS, and that Gund is not a registered service provider for the city and has not received a penny from it.
She said she paid off R849 000 of the R575 600 debt over four years.
“I lent [sic] “Not from VBS, but from Gundo,” Simelane said.
Breitenbach said this was cold comfort and left the question of why he sought personal financial advice from an organisation that does business with the municipality for which he is ultimately responsible as mayor.
“You were the top guy, the guy at the top of the pyramid, and they knew it, so of course they were going to be happy to accept you.”
Breitenbach noted that a forensic investigation following VBS's collapse in 2018 revealed that Gund had received large sums of money from municipalities in return for collecting deposits.
She added that she had no doubt this was the source of the money loaned to Simelane.
“What is clear from the financial analysis is that they were paid huge amounts by VBS to raise investments and they made huge amounts of money doing very little. They also paid huge bribes, which is indisputable. So the whole scheme was a cynical, sick and dodgy scheme to rip off the poorest people, particularly in Limpopo.”
“They did it to make illicit money, and they made a lot of illicit money. All their money was illicit money, and you got a share of that illicit money.”
Breytenbach said Simelane's decision to take funds from the company became more puzzling when he took into account the interest he eventually paid to Gund in repaying the loan he used to buy the Sandton coffee shop.
“Did you at any stage try to get a proper conventional commercial loan independent of a bank? From your own bank?” she asked.
“If your figures are correct, what was the attraction of doing business with Gund given that the interest on the R575,600 loan was exorbitant, really exorbitant?
“You've paid R274,399 in interest – effectively 50% but actually 47%… on a loan that isn't that big in the grand scheme of things. Why go into this one-sided deal when you could have gone to a real bank and gotten a real loan at a real interest rate?”
“It doesn't make commercial sense and I'm sorry but the whole deal looks very suspicious.”
The minister replied that he had initially considered withdrawing part of his state pension but took this approach following advice from Gund.
“I tried to get a loan,” Simelane said. “The costs were just as exorbitant as what this was, it was at that level,” she said, adding that she also approached Old Mutual as well as First National Bank.
“It was out of reach for me at the time, but I wanted to start this business.”
She suggested that the loan from Gund was a case of “someone lending you money and not paying it back for about three years” and so there was a good margin for repayment.
That explanation didn't seem to convince committee members, with Councillor Damien Cropper, D-Del., asking whether Simelane had considered paying with a credit card, since the interest rate charged was about 19 percent, and whether the coffee shop still existed.
Simelane said she had the property but it was no longer in her hands after she decided not to renew her lease during the COVID-19 pandemic.
She said she had provided President Cyril Ramaphosa with a full account of the circumstances upon request, including evidence of the loan and its subsequent repayment in three instalments between late 2020 and early 2021.
These amounts were paid from her family's business account into Gund's Nedbank account on October 9, 2020, November 12, 2020 and January 7, 2021.
Simelane said he would consider giving evidence to the committee.
She stressed that the municipality did not suffer any financial loss in the VBS scandal because she instructed Polokwane to withdraw its deposits after realising the bank was in trouble – the deposits were withdrawn before the bank collapsed.
Chairperson of the parliamentary committee, Shola Nkola, said they would seek the advice of parliament's legal advisers on obtaining documents from the minister.
Simelane resisted strident warnings from MPs across multiple parties that the controversy and ongoing investigation into Gund created an unacceptable conflict of interest because, as justice minister, he has ultimate political responsibility for the National Prosecuting Authority (NPA).
Breitenbach recalled that Vusi Pikoli was removed from his position as NPA chief after he resisted ministerial orders to stop the prosecution of former police chief Jackie Selebi.
The Minister responded that this was a different era and that he would not, and could not, instruct the prosecution authorities not to continue investigating the VBS scandal.
“The Ministry of Constitutional and Justice has no role in the NPA's decision-making on who to prosecute. The position I hold has no direct role in telling or persuading the NPA how to carry out its duties.”
She emphasised that the NPA had reported to the Minister as requested and was not planning to ask him to do so in relation to VBS, but rather that it remained exempt.
Opposition lawmakers were sceptical, with African Christian Democrat MP Steve Swart saying he believed there was a “clear conflict of interest”. But ANC MP Oscar Masafa warned that the prosecution authorities should not be complacent, but added that he wanted Simelane to provide evidence of the loan agreements and repayments to the committee.
Breitenbach is Mail & Guardian She believed Simelane should “step back” but stopped short of calling for him to resign.