EXCLUSIVE: Justice minister took half a million rand 'loan' from ...

Thembi Simelane used the “commercial loan” of R575,600 from Gundo Wealth Solutions owned by Ralliom Razwinane to purchase a coffee shop in Sandton. Razwinane and Gundo also brokered investments on behalf of VBS Mutual Bank, and the Polokwane Municipality invested R349-million in the bank. 

When VBS imploded in March 2018, forensic investigations found it had rewarded Razwinane with kickbacks totalling R24.2-million for being a commissioning agent for various municipalities and state entities. 

Investigators found these to be corrupt transactions and contraventions of the Municipal Finance Management Act. Razwinane is currently on trial for fraud, corruption and money laundering for his role as a commission agent connecting municipalities, including Polokwane Municipality, with VBS.

As minister of justice, Simelane oversees the National Prosecuting Authority (NPA), which is investigating and prosecuting those involved in the collapse of VBS. She is also a member of the justice and crime prevention cluster in the Cabinet, which includes the police and the Hawks, who are also investigating the VBS matter. She was Polokwane mayor between 2014 and 2021 and was appointed as justice minister in June. 

Simelane used the “loan” to buy a coffee shop in two transactions in October 2016. The payments appear linked to kickbacks received in exchange for large deposits by Polokwane Municipality into VBS. 

In October 2016, VBS paid R1.66-million in kickbacks to Razwinane and Gundo Wealth Solutions in exchange for two deposits totalling R130-million from the Polokwane Municipality. They were made shortly after Gundo signed a three-year contract to provide investment brokerage services to the municipality. 

In turn, Razwinane paid R575,600, almost 35% of his kickbacks, to a company called Ricovert, the then owner of Silvanas Coffee Shop on the ground floor of Fredman Towers in Sandton. 

Simelane has confirmed the Ricovert transaction was to aid her purchase of the business. She characterised the deal as a legitimate “commercial loan” which was “fully repaid”. 

“The transaction was completely above board,” she said. 

Simelane’s deal is cast against at least five unlawful deposits Polokwane Municipality made into VBS between September 2016 and May 2017, totalling R349-million. For each deposit, Razwinane is alleged to have received kickbacks from VBS. 

Simelane, who previously went by the surname Nkadimeng, offered assurances of her commitment to “the practice of ethical leadership” and welcomed “any legitimate scrutiny into [her] affairs, including [her] private business affairs”. 

She did not, however, provide the “commercial loan” agreement or proof of settling the loan — information she claims exists.

Simelane pointed out that Gundo was registered as a financial services provider. However, she did not reply to follow-up questions highlighting that Gundo was not a registered credit provider and could, therefore, not offer loan services. Nor did she comment on the apparent conflict of interest created when she used Gundo as her service provider while the company offered “advice” to the municipality of which she was executive mayor.

A joint investigation by Daily Maverick and News24, based on bank statements, indictments, former VBS bank chairperson Tshifhiwa Matodzi’s plea deal, a report by Advocate Terry Motau and unpublished reports from investigators Crowe Forensics and law firm BDO, suggests that the transactions are questionable.

Between September 2016 and May 2017, Polokwane Municipality made at least five unlawful deposits into VBS bank, totalling R349-million. 

Unlike other municipalities which lost large amounts when VBS imploded, Polokwane retrieved all its money, with one report outlining that it expected around R12-million in interest, without any clear indication if that is how much the municipality made in total. 

The deposits were made after Gundo signed a deal with the municipality as its “investment broker and manager” in March 2016, investigators at BDO found in a probe sanctioned by National Treasury. 

The first unlawful deposit Polokwane Municipality made into VBS was of R50-million on or about 16 September 2016. Six days later, VBS paid R755,314 to Gundo — about 1.5% of the deposit.

In an indictment submitted to court, prosecutors described these payments to Gundo as cash meant to solicit the first deposit and used for “corrupt payments to various municipal officials, both known and unknown to the State”. 

Simelane is not named in the indictment. 

According to the indictment, the transaction contravened several sections of the Prevention and Combating of Corrupt Activities Act (Precca).

Sources familiar with the investigation said one of these “corrupt payments” for the benefit of a “municipal official” was paid towards a coffee shop. A report by Crowe Forensics flagged the transaction for further investigation by law enforcement.

Bank statements show that Gundo paid R300,000 to Ricovert about a month after the R50-million deposit. The payment descriptions were “Silvana loan” and “Silvanas sale”. Ricovert at that stage owned the Silvanas Coffee Shop at Sandton’s Fredman Towers.

A second unlawful deposit, of R80-million, by Polokwane Municipality was made on or about 7 October 2016. Tied to this investment, Gundo received a kickback of R912,000 — just over 1% of the deposit. According to the indictment, these payments, too, contravened anti-corruption legislation.

Gundo then made another payment, of R275,600, to Ricovert. The payment descriptions were “Silvana loan” and “Silvana”. 

The payments to Ricovert for Silvanas Coffee Shop amount to almost 35% of the R755,314,31 and R912,000 kickbacks Gundo received from VBS. 

Simelane declined to answer specific questions but did admit that Gundo’s payments to Ricovert were made on her behalf. On Simelane’s version, the R575,600 was “a commercial loan” for “the purchase of a coffee shop business”. She said the “loan in question has since been paid in full” but did not respond to requests for supporting documents to prove this version. 

Three years later, in 2019, she registered a company, Silvanas Bistro, to manage the business, apparently around the time she was questioned by investigators.

Responding to our questions, Simelane explained that at that time Gundo was her financial adviser. She had, according to BDO documents, not provided this information to investigators.

Simelane does not believe there is a conflict of interest between her involvement with VBS and her position in the executive.  

“There will be no conflict of interest. The minister is the first to insist on the independence of all law enforcement agencies. The NPA has the minister’s full support to discharge its constitutional mandate without fear, favour or prejudice,” she said in a written response to questions

The commission agent scheme run by VBS management was identified as an illegal method used to bribe municipal officials to make “massive deposits” into the bank, the extensive Motau and Werksmans probe into the implosion of VBS found in 2018. Motau’s report, The Great Bank Heist, set out the findings in detail.

Razwinane was charged in 2021 with 13 counts of contravening anti-corruption legislation, related to the commission agent scheme.

A request for Simelane’s declarations of interest to the Polokwane Municipality covering this period has yet to be responded to. 

Razwinane read but did not respond to detailed questions. DM

This was a joint investigation by Daily Maverick and News24.