The Bank of Namibia (BoN) hired troubled South African accounting firm, KPMG, to help trace funds allegedly invested in South Africa by the now defunct SME Bank, the Mail and Guardian reported this week.
The paper also reported that Sipho Malaba, who resigned from KPMG last week, was brought on board as part of the embattled audit firm’s ‘new broom’ team, but appears not to have disclosed his interest in VBS Mutual Bank.
Malaba who was entrusted with restoring public trust amid the embattled company’s scandals is at the centre of an investigation into an almost N$177 million investment made through VBS Mutual Bank by SME Bank.
As KPMG struggles to shrug off controversy about its auditing practices, it has now emerged that its internal investigation, conducted by Bowman Gilfillan, is probing former partner Malaba’s role in the fight between VBS Mutual Bank and the Bank of Namibia. The central bank is seeking to recoup almost N$177 million that was invested by the SME Bank via the embattled mutual bank.
The investment was made by the SME using Mamepe Capital as fund manager, and was paid into three accounts held with VBS Mutual Bank, but the funds were mysteriously withdrawn within a few months.
The central bank instituted an investigation after it took over the SME Bank’s operations, which went insolvent in March 2017 because of its financial woes and unaccounted-for funds.
In its attempts to recoup the missing funds from the SME Bank, the central bank enlisted the services of KPMG to investigate and trace the deposits into VBS Bank to establish where the almost N$177 million investment had gone.
Malaba, who was KPMG’s lead audit partner on VBS, which has been under curatorship since last month, also led the Bank of Namibia’s request to trace the funds.
According to VBS curator Anoosh Rooplal, N$900 million of VBS’s reported deposits of R2.9‑billion could not be confirmed. Malaba signed off on the external auditor’s report on VBS’s accounts until July 2017. The South African Reserve Bank said that VBS had experienced liquidity problems for at least the past 18 months. KPMG revealed that Malaba and another KPMG partner, Dumi Tshuma, had not fully disclosed that they held loans with VBS.
Malaba had been introduced by the new KPMG Chief Executive, Nhlamu Dlomu, as part of the team that was to support her in restoring public trust in the auditing firm after two major scandals.
Last week, the two resigned before disciplinary proceedings could take place. Rooplal then withdrew VBS’s financial statements for the year ending March 31 2017 “as they contain material misstatements and are no longer considered to be reliable.”
Documents seen by the Mail & Guardian, including Bank of Namibia board minutes, reveal reports by Malaba to the bank confirming the deposits made by the SME Bank and Mamepe Capital, and stating that VBS Mutual Bank had entered into legitimate contracts. In his report to the Bank of Namibia, Malaba said that between August and October 2016, SME Bank had deposited N$70 million and Mamepe Capital had deposited N$175 million.
Between October and November 2016, about N$69‑million had been moved from VBS to elsewhere.
This week, Malaba said his role was to trace the funds, as per the Bank of Namibia request, because no audit had been requested.
Minutes of a Bank of Namibia board meeting on February 24 2017 reveal that VBS had been reluctant to provide information about the deposits and only complied after legal action took place.
VBS’s chief executive, Andile Ramavhunga, said the bank had co-operated with Namibia and denied that they had tried to withhold information. He said VBS was used by the SME Bank as an intermediary. Rooplal said he was still investigating all the deposits and couldn’t confirm the Namibian deposits.