Parliament Questions Justice Minister Simelane’s Defense of a High-Interest VBS Loan Scandal
Parliament shows scepticism towards Justice Minister Simelane’s defence of a 47% interest VBS loan scandal.
In a tense session with Parliament’s justice committee on Friday, Justice Minister Thembi Simelane defended the R575,600 loan she obtained from VBS Mutual Bank, asserting that no wrongdoing occurred. However, scepticism lingers over the loan’s high interest and connections.
Simelane addressed the committee with confidence, stating she had not received any improper benefits during her time as Polokwane’s mayor. Despite her admission of securing the loan from VBS Mutual Bank to fund a coffee shop in Sandton, Simelane insisted there was no conflict of interest, even though the Polokwane municipality had invested R349 million in VBS through Gundo Wealth Solutions—the very entity that arranged her loan.
What made dealing with Gundo so attractive?” – DA MP Glynnis Breytenbach
She explained her need for financing was personal, driven by the desire to create business opportunities for herself and her family, a pursuit restricted by her mayoral role due to anti-nepotism rules. Simelane revealed she had initially considered using her retirement savings but faced prohibitive tax and withdrawal costs. Instead, she turned to Gundo Wealth Solutions, which had secured the Polokwane investment through what she described as an “unsolicited bid.”
Simelane shared that Gundo suggested a loan product that she eventually took, borrowing R575,600, which she repaid in three installments from October 2020 to January 2021. The minister stressed that her repayment of the loan should dispel any notions of impropriety, stating, “If you ask for assistance from someone not directly linked to the municipality, it’s permissible, and I paid it back.”
Further defending her actions, Simelane noted that she had initiated the withdrawal of Polokwane’s funds from VBS, underscoring that this demonstrated her lack of inappropriate relations with the bank. Yet she contradicted herself by claiming that, as a councillor, she had no role in the municipality’s investments, raising doubts about her ability to then authorise their withdrawal.
However, MPs were unconvinced. DA MP Glynnis Breytenbach challenged Simelane’s decision to approach Gundo Wealth Solutions instead of a conventional bank, questioning why she opted for an entity not registered as a financial services provider, especially one doing business with the municipality.
“What made dealing with Gundo so attractive?” Breytenbach pressed, highlighting the staggering 47% interest on the loan—over R200,000 more than the amount borrowed. This interest rate fuelled suspicions about the legitimacy of the transaction.
Another MP suggested Gundo was simply acting as a loan shark, or “mashonisa.” Simelane claimed ignorance at the time, believing Gundo was a registered financial entity, and added that commercial bank loans were too expensive. Defending her actions further, she argued that seeking financial help is a common practice, likening it to asking family members for loans.
Illustrating her point with a hypothetical scenario aimed at ActionSA MP Athol Trollip, she said, “I could ask you for money on Friday, and on Thursday, you might kill your mother. Sometimes, you don’t know what the other party might go on to do.”
Pressed by multiple MPs to produce the loan agreement, Simelane admitted she had not disclosed the loan to either the National Assembly or President Cyril Ramaphosa, despite being aware of the VBS loan scandal’s impact. FFPlus MP Heloise Denner questioned how she could have overlooked the risk of association with VBS loan scandal’s scale.
This is not an issue that will be brushed under the carpet,” – President Cyril Ramaphosa
MPs also speculated that Simelane’s rapid repayment of the loan, nearly four years after borrowing it, might have been prompted by the growing fallout from the VBS loan scandal. The justice minister faced further grilling over the broader implications of her actions for the public’s trust in the justice system.
When asked repeatedly if she would step aside while the matter was investigated, Simelane avoided giving a direct response but expressed openness to the inquiry.
Meanwhile, in China, President Cyril Ramaphosa assured the media that the issue would be addressed. “As president, I need the space and time to manage this matter, and rest assured, it is being dealt with. This is not an issue that will be brushed under the carpet,” he stated.
Despite the gravity of the situation, Simelane remained calm during the committee session, at one point joking, “The sun still shines even on tough days.” VBS Loan Scandal
FAQs: Justice Minister Simelane & the VBS Loan Scandal
What has President Cyril Ramaphosa said about the situation?
Ramaphosa has stated that the issue will be addressed and is “not an issue that will be brushed under the carpet.” However, he has not yet taken any specific action against Simelane.
What has the response been to Simelane’s actions?
Parliament has launched an inquiry into the matter, with MPs expressing strong scepticism towards Simelane’s explanations. Opposition parties are calling for her resignation or suspension.
What are the main concerns surrounding Simelane’s VBS loan?
Key concerns include:
- High Interest Rate: The 47% interest rate is significantly higher than standard bank loans, raising suspicions about the legitimacy of the transaction.
- Conflict of Interest: Simelane’s role as mayor while simultaneously benefiting from a company managing the municipality’s VBS investment raises ethical questions.
- Lack of Transparency: Simelane did not initially disclose the loan, only revealing it after public scrutiny.
How is Justice Minister Simelane connected to the VBS scandal?
While serving as mayor of Polokwane, Simelane took a R575,600 loan from VBS with a 47% interest rate. This loan was arranged through Gundo Wealth Solutions, an entity that managed the Polokwane municipality’s investment in VBS. This raises concerns about potential conflicts of interest and preferential treatment.
What is the VBS loan scandal about?
The VBS loan scandal refers to the widespread looting and collapse of VBS Mutual Bank in South Africa. The bank was found to have been involved in large-scale fraud and corruption, with millions of rands syphoned off illegally.
