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Former North West premier Supra Mahumapelo "vigorously encouraged" municipalities in that province to invest R314m with VBS Mutual Bank, the Mail & Guardian reported on Friday.
This is according to a forensic investigation report by auditors SekelaXabiso and two highly placed sources, the media report said.
It is alleged that Mahumapelo, who resigned in May following widespread protests against him, invited VBS to make a presentation at his Bokone Bophirima premier's co-ordinating council in March 2017.
The council was reportedly attended by MECs, municipal managers, mayors and key government functionaries.
The forensic report apparently states: "We were informed during our interviews that VBS were given an opportunity to present their services and that the former North West premier vigorously encouraged the municipalities to invest with VBS, as VBS was a black-owned bank, which offered better interest rates."
Vuyisile Ngesi, a spokesperson for the North West's new premier, Job Mokgoro, reportedly told the M&G that VBS was invited to make a presentation at the council.
But, Ngesi said, no resolution was taken, and no approval was given for municipalities to invest with the bank.
Mahumapelo told the newspaper that VBS was invited to make a presentation, along with other banks. He said he had no power to instruct any municipality to invest with any of the banks, and that municipalities are responsible for their own investments.
The SekelaXabiso report also states that there may have been "some form of political encouragement" for municipalities to invest with VBS, since they all invested after the presentation and no risk assessment was done by any of them.
VBS a 'ponzi scheme', MPs hear
According to the M&G, money meant for service delivery was invested into VBS.
The paper was not able to get comment from the mayors of the various municipalities implicated.
Looting at the bank to the tune of R2bn was recently exposed in a report by the South African Reserve Bank.
SARB deputy governor Kuben Naidoo described to Parliament's Standing Committee on Public Accounts this week how the bank had effectively operated as a "ponzi scheme", News24 reported.
Hawks head Lieutenant General Godfrey Lebeya told the committee that 65 witness statements had already been received during their investigation. Fraud, money laundering and corruption are among the alleged crimes under the investigation.
Five prosecutors from the National Prosecuting Authority are working on the case.
Eyewitness News (EWN) reported on Thursday that ANC MPs on the committtee want the bank to be saved. An application for the liquidation of the bank will reportedly be heard next Tuesday.
But the Reserve Bank is pushing back against political pressure to rescue the bank, Business Day reported. Naidoo reportedly said there was no option but to apply for the bank to be liquidated.
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