Seven municipalities in Limpopo are on the brink of insolvency and could be placed under administration after they lost hundreds of millions of rands in investments into VBS Mutual Bank.

The bank was placed under liquidation following an order by the North Gauteng High Court on Tuesday.

A total of 10 municipalities in the province invested with VBS. Three municipalities, however, withdrew their investments following instructions from National Treasury.

Premier Stan Mathabatha on Wednesday revealed that some of the municipalities had to cut down on service delivery projects and others were struggling to pay salaries.

Mathabatha was speaking at a provincial executive committee lekgotla in Bela-Bela where MECs, heads of department, mayors and CEOs of government entities had gathered for a budget review.

"It is public knowledge now that these municipalities that did not withdraw their investment when they were advised to do so have permanently lost their investments. Hundreds of millions of rands have been lost, simply because people insisted on violating the law and ignoring instructions.

"These people refused to take corrective action even when that was the logical thing to do," Mathabatha said.

'VBS can be saved'

"We have municipalities that are now on the brink of insolvency. It is now clear that we will have to place certain municipalities under administration," he said.

He believes that VBS itself can still be salvaged because "this is the story of ordinary men and women whose confidence has been betrayed in the worst possible manner".

"These are the men and women whose investments have been liquidated by greed and brazen criminality," he said.

Mathabatha said municipal officials were as equally responsible as the politicians who issued instructions to invest in VBS.

He was once again trying to address the public outcry around the fact that municipal officials, especially accounting officers and chief financial officers, were being made to take the fall and no action was being taken against politicians implicated in the saga.

So far, former Capricorn District Municipality mayor Gilbert Kganyago, who was recently suspended as South African Communist Party provincial secretary, is the only known politician who has suffered consequences for his alleged involvement in the scandal.

Budget cuts

"I am on record on many occasions to be saying that you are not expected to execute any instruction which is against the law. I have even said that you should refuse to carry out such an instruction even when it comes from the Premier himself," Mathabatha said.

The loss of hundreds of millions of rands through VBS investments in Limpopo may still be felt in the future as national government has already indicated the budget cuts for provinces in the coming financial year.

The budget cuts may also have a negative impact on the intervention by the provincial government to salvage struggling municipalities as acquisition of expertise from the private sector may be hindered by lack of funds.

However, Mathabatha said authorities had to ensure that resources were utilised only for their intended purpose and "we have to learn to do more with less".