Public Protector calls on government to support mutual banks

Public Protector Adv. Busisiwe Mkhwebane on Tuesday evening called on government to consider amending the regulatory framework applicable to mutual banks so as to make it possible for public money to be deposited and invested in such financial institutions but under safer conditions.

Current regulations – published by the Minister of Finance in April 2005 in terms of the applicable provisions of the Municipal Finance Management Act – outlaw the deposition of municipal funds in banks established under the Mutual Banks Act, 1993. In terms of the regulations, deposits can only be made into banks registered under the Banks Act.

“Government needs to create an enabling environment for mutual banks to thrive by amending the restrictions that prohibit such banks from receiving deposits from government,” she said, adding that such amendments should come with controls that will prevent the loss of such deposits and investments, and prejudice to the public.

She was speaking at the Young Women in Business Network (YWBN) dinner in Johannesburg. YWBN was founded by South Africa’s first woman owner of a mutual bank, Ms. Nthabeleng Likotsi.

Adv. Mkhwebane used the opportunity to advise Ms. Likotsi to beware of the potential pitfalls involved in the mutual banking sector under the current regulatory framework as seen in the case of the VBS (VBS) Mutual Bank.

“Take heed of this advice as you set off on this ground-breaking journey and you will never have to worry about calls from the Reserve Bank or law enforcement agencies,” she said, adding that Ms. Likotsi’s achievement was a significant feat when viewed through the lens the economic emancipation of women.

Adv. Mkhwebane’s remarks come at the time when she is putting final touches to a report in respect of an own-initiative investigation into allegations of improper conduct and maladministration by about 14 municipalities across Gauteng, Limpopo and the North West relating to investments made with the VBS Mutual Bank, where hundreds of millions of rands in public funds were subsequently lost.

VBS Mutual Bank has since been declared insolvent and placed under curatorship.