Embattled Justice Minister Thembi Simelane. (Photo by Sharon Seretlo/Gallo Images via Getty Images)
Embattled Justice Minister Thembi Simelane on Friday told MPs she took a loan from a financial entity that served as a fixer for VBS Mutual Bank at an interest rate of nearly 50% because she was unable to borrow money from a commercial bank on better terms.
“It came at about two points down from a financial investment, which is a bank,” Simelane said she found after she compared the loan she had with Gundo Wealth Solutions to the terms banks would offer for the same.
The minister stressed that the agreement with Gundo did not require her to pay back any money for a number of years.
Simelane was grilled on the subject by Democratic Alliance MP Glynnis Breytenbach during an appearance before the portfolio committee on justice to answer questions on the loan she took while serving as mayor of Polokwane from a middleman who persuaded the municipality to deposit millions into VBS.
Municipalities are not allowed to deposit money with mutual banks but Polokwane committed more than R300 million in this manner in 2016 and 2017. The deposits were solicited by Ralliom Razwinane, who owned Gundo and faces corruption charges, some reportedly specifically linked to extracting the money from the municipality.
Simelane, the former minister of co-operative governance, told the parliament committee she approached his company for financial advice because she had been thinking of opening a business given that public office did not guarantee long-term employment security.
She stressed that she did not take out a loan from VBS but from Gundo and that Gundo was not one of the municipality’s registered service providers and did not receive a cent from it.
She said she paid back R849 000 on the loan of R575 600 but did so over a period of four years.
“I loaned [sic] from Gundo, not from VBS,” Simelane said.
Breytenbach said this was cold comfort, and left the question as to why she sought personal financial advice from an entity that was doing business with the municipality for which she had ultimate responsibility as mayor.
“You were the head honcho, the top of the pyramid and they knew it, so of course they would be happy to accommodate you.”
Breytenbach noted that the forensic investigations that followed the collapse of VBS in 2018 showed that Gundo made a lot of money in return for soliciting deposits from municipalities.
She added that this was certainly the source of the money lent to Simelane.
“What is clear from the analysis of the money is that they were certainly richly remunerated by VBS for garnering investments, and made a vast amount of money for doing very little. Also paid huge kickbacks, and that is not even a dispute. So the whole scheme was a cynical, sick and dodgy scheme to defraud the poorest of the poor people, particularly in Limpopo.
“They did it to make dodgy money and they made dodgy money and lots of it. All of their money was dodgy money and you were the recipient of some of that dodgy money.”
Breytenbach said when one considered the interest Simelane ultimately paid Gundo when she repaid the loan she used to buy a coffee shop in Sandton, the decision to take money from the company became more baffling.
“Did you at any stage attempt to get an arm’s-length, proper ordinary commercial loan from a bank? Your own bank?” she asked.
“What was so attractive about doing business with Gundo, particularly bearing in mind the extortionate, really extortionate, if your figures are correct, of the interest on a loan of R575,600.
“You paid interest of R274,399. It is practically 50%, and in fact it works out to 47% … on a loan that in the bigger scheme of things is not even huge. Why would you enter into such a one-sided transaction when you could have gone to a real bank and got a real loan at a real interest rate?
“It makes no commercial sense so it makes, forgive me, the whole transaction look exceptionally suspicious.”
The minister replied that she took this route, on advice from Gundo, after initially considering withdrawing a portion of her government pension.
“I attempted a loan,” Simelane said. “The costs were as exorbitant as this cost. It was at that level,” she said, before adding that apart from First National Bank she also approached Old Mutual.
“It was not affordable for me at the time and I wanted the venture.”
She suggested that the loan from Gundo came with considerable leeway on repayment because it was a case of “someone gives you money and you do not pay for about three years”.
The explanation did not seem to persuade committee members. DA MP Damian Klopper asked whether Simelane considered using her credit card as financing instead, because the interest charged would have been about 19%. He also asked whether the coffee shop still existed.
Simelane said it did but it was no longer in her hands because she decided during the Covid-19 pandemic not to renew the lease.
She said she had given President Cyril Ramaphosa a full report on what transpired, as requested, and that this included proof of the loan and the subsequent repayment in three instalments in late 2020 and early 2021.
The sums were paid from her family’s business account to Gundo’s Nedbank account on 9 October 2020, 12 November 2020 and 7 January 2021.
Simelane said she would consider providing the proof to the committee.
She emphasised that the municipality lost no money in the VBS scandal because once she became aware that the bank was in trouble she gave instructions that Polokwane’s deposits be withdrawn. The money was taken out before the bank collapsed.
Xola Nqola, the chairperson of the parliamentary committee, said he would seek the advice of parliament’s legal counsel with regard to obtaining the documentation from the minister.
Simelane resisted strenuous warning from MPs from several parties that the controversy and the ongoing investigation into Gundo created an untenable conflict of interest because, as justice minister, she holds ultimate political responsibility for the National Prosecuting Authority (NPA).
Breytenbach recalled that Vusi Pikoli was removed as head of the NPA because he resisted ministerial orders to halt the prosecution of former police chief Jackie Selebi.
The minister replied that this happened in a different era and that she would not, and could not, instruct the prosecuting authority not to pursue its investigations into the VBS scandal.
“The department of constitutional development and justice plays no role in the decision-making by the NPA on who to prosecute or not. The office I hold does not have a direct relationship instructing or convincing the NPA on how to act on their mandate.”
She emphasised that the NPA reported to the minister upon request, and that she had no intention of requesting it does so with regard to VBS but would instead remain removed.
Opposition MPs were sceptical, with the African Christian Democratic Party’s Steve Swart saying he believed there was “a glaring conflict of interest”. But ANC MP Oscar Mathafa cautioned that they should not suggest that the prosecuting authority was malleable. He added however that he would like Simelane to provide the committee with proof of the loan agreement and repayment.
Breytenbach told the Mail & Guardian she believed Simelane should “step aside”, stopping short of calling for her resignation.