The KZN High Court (Pietermaritzburg) application by the liquidator of VBS Mutual Bank to recover millions owed to it by former President Jacob Zuma, has revealed how the bank was reckless while conducting its business before it collapsed, notes a Cape Times report.

Other than taking a huge financial gamble in 2016, by lending money to a man beyond his working age (Zuma was 74 at the time), the bank also took a gamble by giving out the home loan with a rural property as a guarantee.

The R7.8m loan was met with outrage and the bank was accused of reckless lending, but it stood its ground saying it conducted thorough due diligence on Zuma’s affordability. More outrageous, suggests the report, was how the bank, according to papers that have since been leaked to the public, used Zuma’s Nkandla rural home, as collateral even though the home was built on communal land that is owned by the controversial Ingonyama Trust.

According to the leaked section of the home loan agreement signed with Zuma in 2016, VBS agreed to attach the ‘Nkandla Zuma Homestead in KZN’.

Accounting analyst Khaya Sithole is quoted as saying nobody knows how the liquidators hope to get the law to back it to attach the Zuma homestead as it is sitting on communal land.

‘Everybody is just speculating that maybe the lawyers will find a loophole.'

Sithole said VBS was engaged in reckless lending and one of the ways Zuma may get out of this loan agreement was to argue that they were reckless to lend him money.

‘The key question here was whether he could afford to service the loan. The second one is what is the security… I think he can get out of this by accusing them of (being) reckless because it doesn’t make sense,’ he said.

Full Cape Times report (subscription needed)

‘Selling the Ingonyama Trust property in order to satisfy the debt of Jacob Zuma’s might be stretching the law a little bit,’ suggests Paul Hoffman, of the Institute for Accountability in Southern Africa.

According to a report in The Mercury, Hoffman said VBS would only be able to execute on the former President’s rural property if there was a valid bond in place. This would be the case if the owner of the property, the Ingonyama Trust Board, through its sole trustee King Goodwill Zwelithini, had consented to a bond being taken on the property, or if Zuma claimed that the land belonged to the Zuma clan and not to the trust.

But in their court papers, the curators have attached what appears to be a lease agreement that Zuma signed with the trust in 2011.

Hoffman added that Zuma had many strategies available to defend himself, including raising the defence that VBS was a reckless lender.

‘They lent money to someone who could not pay it back, someone whose children’s school fees were paid for by other people. If he wins that argument, that will be the end of their (VBS) case.'

Full report in The Mercury (subscription needed)