The money was meant for Municipal Infrastructure Grant.
The municipality is one of more than 20 municipalities in the country with millions of rand being withheld by VBS.
The bank is unable to release more funds to clients after it was placed under curatorship. Concerned residents say they fear that the situation will affect service delivery.
“Why they should invest money whereas this is a newly established entity. It is still new and is crawling. They should not have done it at this stage. They should have firstly look after service delivered as the money was allocated for service. We are surprised at how the municipality takes the money to the VBS. What will happen because the bank has no money at present. It means we will be having no service at our Collins Chabane municipality.”
The municipal manager of Collins Chabane municipality, Sharlote Ngobeni says they cannot comment on the deposits withheld by VBS Mutual Bank because it is sub judice. Meawhile, the national Treasury says the Division of Revenue Act provides for unspent conditional grants to be returned to Treasury after assessments and motivations.
In a statement, the department says municipalities will be expected to return unspent money, including deposits withheld by VBS Mutual Bank.