In February 2017, Namibia\u2019s central bank seized control of SME Bank \u2013 set up to serve small businesses and rural communities in that country \u2013 under circumstances similar to the March 2018 collapse of VBS Mutual Bank.<\/p>\n
SME\u2019s Zimbabwean minority shareholders had allegedly siphoned off at least R380-million and absconded across the border when authorities started circling. The Namibian state is SME\u2019s majority shareholder.<\/p>\n
At least R270-million of that money flowed to South Africa with the rest largely lost to Dubai, the bank\u2019s liquidators now believe.<\/p>\n
Like this story? Be an amaB Supporter<\/a> <\/span>to help us do more. Sign up for our newsletter<\/a><\/span> to get more.<\/em><\/p>\n VBS and individuals associated with it played important roles in the destruction of SME long before VBS itself imploded.<\/p>\n The details are becoming clearer in waves of court proceedings launched by SME\u2019s liquidators in Windhoek and Johannesburg.<\/p>\n 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.<\/p>\n VBS allegedly provided two key services to the looters of SME: faking a R150-million deposit in SME\u2019s name to help hide the holes in SME accounts, and then channeling R60-million in real money back to SME as part \u201crepayment\u201d.<\/p>\n That R60-million was almost certainly stolen. The victim of this theft was either a small local asset manager called JM Busha \u2013 or VBS itself.<\/p>\n Initial suspicions about VBS\u2019 role have now been backed up by solid evidence, in an affidavit<\/a> filed two months ago in Windhoek by SME legal advisor Tania Pearson.<\/p>\n Four South Africans have been implicated.<\/p>\n Mauwane Kotane, a childhood friend of VBS chief executive Andile Ramavhunga, was at the heart of the alleged scheme.<\/p>\n Ramavhunga himself and even VBS\u2019 disgraced audit partner, Sipho Malaba of KPMG, also seemingly got involved.<\/p>\n VBS general manager of sales Sasa Nemabubuni allegedly personally produced false documentation.<\/p>\n They all allegedly had a part in a simple task: to pretend SME\u2019s money was safe in South Africa when in fact it had long disappeared.<\/p>\n Like VBS, SME had allegedly been captured by rogue shareholders that started running it like their personal piggybank.<\/p>\n First among them was Zimbabwean banker Enoch Kamushinda, who has been fighting a \u201cStalingrad\u201d legal campaign to stay out of court.<\/p>\n SME\u2019s Nambian liquidators are suing Kamushinda, the former SME board chair, former chief executive Tawanda Mumvuma and three of their colleagues.<\/p>\n The liquidators claim the five were involved in theft, fraud and money laundering that resulted in the bank losing at least R247-million and possibly as much as R387-million.<\/p>\n Kamushinda has denied all wrongdoing and called the Bank of Namibia\u2019s takeover of the bank \u201cunlawful\u201d. In an affidavit he called the allegations against him \u201cscandalous, vexatious and irrelevant\u201d during his ongoing battle against the SME liquidators on several technical and procedural grounds.<\/p>\n According to the evidence so far, from 2013 onwards Kamushinda, Mumvuma and their colleagues created fake invoices for SME to pay \u2013 while the money was actually transferred into an array of companies in South Africa.<\/p>\n From there it disappeared into an elaborate money laundering network based in Johannesburg.<\/p>\n For instance, SME purportedly spent R80-million on \u201ccomputer software and hardware\u201d, an amount that appeared excessive for such a small bank.<\/p>\n Later evidence suggested the recipient was just a front which distributed the money to other companies for a small margin.<\/p>\n By the beginning of 2015 SME\u2019s auditors, BDO, started asking awkward questions.<\/p>\n In stepped Kotane, grandson of the late South African Communist Party leader Moses Kotane.<\/p>\n 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.<\/p>\n 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\u2019s questions by saying they are all \u201csub judice\u201d.<\/p>\n Kotane was a friend of Ramavhunga, the VBS boss, and very probably the first of VBS\u2019s commission agents \u2013 people paid to bring in business.<\/p>\n 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 R1.5-billion when VBS crashed.<\/p>\n Ramavhunga was appointed at VBS on 1 August 2014 and he appointed Kotane\u2019s company Mamepe Capital to source business the next month.<\/p>\n Ramavhunga told the 2018 enquiry into VBS that he chose Kotane \u201cbecause he understood the space that we wanted to go into, and he had the knowledge\u2026 No one at the bank had the knowledge\u201d.<\/p>\n Ramavhunga testified he \u201cdid not think\u201d that there was any conflict, despite the fact that they shared interests in a number of companies and he was earning fees from Kotane\u2019s Mamepe Capital before and after becoming the CEO of VBS.<\/p>\n When contacted, Ramavhunga said he can\u2019t answer any questions about VBS.<\/p>\n In 2015 Kotane scored another major deal, this time with SME in Namibia.<\/p>\n According to Pearson\u2019s affidavit Mamepe Capital and SME signed a \u201cmemorandum of agreement for provision of financial services\u201d on 7 January 2015. This agreement would allegedly become a weapon to throw auditors off the SME looters\u2019 trail.<\/p>\n Pearson alleges SME\u2019s finance department started retrospectively reclassifying things like the massive \u201ccomputer\u201d expenditure as “Investment \u2013 Mamepe Capital” in their system.<\/p>\n This ruse was allegedly repeated again and again with fake backdated invoices being produced by the bank using Mamepe\u2019s letterhead. Money previously stolen and yet to be stolen at SME was disguised as an asset in a new account tied to Mamepe.<\/p>\n In June 2016, the noose was once again tightening when SME\u2019s auditors demanded to see the investment agreement with Mamepe.<\/p>\n By July 2016, the Bank of Namibia \u2013 the central bank \u2013 instructed SME to employ Deloitte, one of the \u201cbig four\u201d audit firms, to independently review the bank\u2019s finances. In October the Bank of Namibia informed SME that it considered SME non-compliant with banking regulations.<\/p>\n New ploys were urgently needed.<\/p>\n \u201cWith 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,\u201d claims Pearson in her affidavit.<\/p>\n VBS\u2019s alleged contribution to covering up the looting of SME took the form of a misleading paper trail.<\/p>\n In July 2016, when SME was told to let Deloitte review its books, the bank happened to sign a new agreement with Kotane\u2019s Mamepe Capital<\/a> that now included VBS as a third party. VBS was now the \u201ccustodian\u201d of money Mamepe Capital was supposedly investing for SME. SME chief executive Mumvuma then sent off an application to open a VBS account.<\/p>\n Little over a week later the account was confirmed. Mumvuma immediately got SME to transfer R10-million into this new account. Later investigations suggested that this was the only SME money ever actually deposited at VBS.<\/p>\n On 17 August 2016 the allegedly false trail was laid. Mumvuma first emailed Kotane saying that \u201cas discussed we intend to liquidate the entire money market portfolio that you are managing\u201d.<\/p>\n According to Pearson, he and Kotane both knew that there was no money market portfolio, but Kotane nonetheless played along. He wrote back that \u201cit should be fairly quick to liquidate the positions as requested \u2026 these trades will be executed tomorrow\u201d.<\/p>\n So now there was correspondence that would make it seem that all involved were convinced of the existence of R150-million invested with Kotane\u2019s Mamepe Capital. Mumvuma wrote to Kotane again<\/a>, giving him instruction to move the \u201cliquidated\u201d R150-million into the new VBS account.<\/p>\n Now they just needed someone at VBS to join in the charade.<\/p>\n That turned out to be easy. In a \u201cconfirmation of interest<\/a>\u201d 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.<\/p>\n An account statement was later produced<\/a> showing both the R10-million and R150-million deposits.<\/p>\n \u201cObviously Mr Nemabubuni, knew that no investment of R150 000\u00a0000.00 in VBS Bank existed. He was in on the fraud,\u201d claimed Pearson.<\/p>\n Click on the Evidence docket to access the court documents.<\/strong><\/p>\n AmaBhungane could not trace Nemabubuni, but this trail of messages now serves as the SME liquidators\u2019 clearest evidence that VBS helped commit fraud.<\/p>\n The same method was allegedly employed two weeks later. Mumvuma mailed Kotane to transfer R25-million to VBS, and another allegedly fake transaction that was duly reflected in the VBS statement.<\/p>\n Now there was purportedly R185-million safe and secure at VBS, which at the time seemed like an up-and-coming entrant to the commercial banking space.<\/p>\n But by the end of 2016 the Bank of Namibia was knocking on VBS\u2019 door asking questions.<\/p>\n This led to a \u201creport of factual findings\u201d being produced by KPMG auditor Sipho Malaba on behalf of VBS.<\/p>\n This is the same Malaba who would later cover up the looting of VBS and who was at this time already secretly on VBS\u2019s payroll. Malaba could not be reached despite amaBhungane\u2019s best endeavours.<\/p>\n Although Malaba\u2019s written report<\/a> displayed the disclaimer that it was not an audit, but simply a check of VBS transaction records, it reflected the R150-million and R25-million.<\/p>\n 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 R155-million was impaired which immediately rendered SME insolvent and paved the way for its liquidation.<\/p>\n 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.<\/p>\n Mumvuma, the SME chief executive, instructed a South African asset manager called JM Busha Investment Group to transfer R60-million to the SME account at VBS in exchange for a promissory note.<\/p>\n This note was like a bond. It bound SME to repay JM Busha the R60-million 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.<\/p>\n The liquidators clearly have not made up their mind about the role played by Busha, whose principal, Joseph Makamba Busha, ran in Zimbabwe\u2019s presidential elections in 2018 as the candidate of the FreeZim party. He came in fourth.<\/p>\n Busha told amaBhungane that was pursuing SME for his money: \u201cI deal with a lot of institutions. I don\u2019t know any of these guys personally.\u201d<\/p>\n Pearson noted: \u201cIt appears to the liquidators that Mr Busha contends that he may also have been defrauded by Mr Mumvuma to transfer the N$60-million [R60-million] \u2026 this investigation is still continuing.\u201d<\/p>\n Whether or not JM Busha was defrauded, VBS received the R60-million the following day, 13 October.<\/p>\n It immediately paid R2.7-million onward to an obscure entity called Base Data (which ultimately received R68-million from SME largely through other channels).<\/p>\n Another day later VBS paid R37-million to SME in Namibia.<\/p>\n This was, according to Pearson, supposed to look like one of the Mamepe Capital investments \u201cmaturing\u201d.<\/p>\n Later in the month VBS paid R10-million 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 R10-million SME had put in VBS.<\/p>\n Finally, in November, VBS paid the R20-million balance of the R60-million ostensibly belonging to SME to Mamepe Capital, which paid it on to SME \u201cagain as if it was one of the alleged matured investments mentioned by Kotane in his affidavit\u201d, said Pearson.<\/p>\n The story of where this R60-million 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.<\/p>\nHow it worked<\/h5>\n
The fake R150m<\/h5>\n
The mysterious R60m<\/h5>\n