Like an exam with a marking rubric, governance principles are known upfront to those entrusted with oversight. This predictability creates a vulnerability: compliance can become performative.
When individuals know the keywords the “examiner” is looking for, the temptation is to mirror those signals convincingly — regardless of whether there is genuine understanding of what is being tested.
In such cases the deception is not of the examiner but of oneself — meeting the requirements without understanding what is being tested. The appearance of competence masks a deeper deficiency.
This is precisely what happens when institutions prioritise compliance with governance frameworks without an internalised moral compass to guide behavior. In such contexts governance becomes an exercise in optics rather than substance.
The collapse of VBS Mutual Bank remains one of the most instructive examples of this dynamic. More than a story of theft, it is a case study in how governance systems can be convincingly performed while being systematically undermined.
The 2018 forensic report “The Great Bank Heist” revealed how senior executives, directors and connected individuals systematically siphoned billions from the bank for personal enrichment. Funds were diverted into luxury properties and vehicles, ultimately leading to the bank’s collapse.
The role of audit firms is fundamental to good governance, providing independent assessments of controls that manage risk. Yet the audit failures in this case are particularly instructive.
What makes the VBS case particularly devastating is that the bank represented the aspirations of a rural, largely poor community ― a symbol of self-reliance and collective progress. The thieving that eventually led to its collapse was a profound betrayal of trust.
The report also exposed failures within the audit process. KPMG, which audited the bank over several years, issued clean audit opinions despite clear warning signs. While auditors are not expected to detect every instance of fraud, they are required to exercise professional scepticism and to identify material irregularities. In this case, that obligation was not met.
The role of audit firms is fundamental to good governance, providing independent assessments of controls that manage risk. Yet the audit failures in this case are particularly instructive. Clean audit opinions were issued in the presence of clear warning signs ― not because governance frameworks were absent, but because they were performed. The language of compliance was present; its intent was not.
KPMG acknowledged its lapses, issuing an apology and entered an out-of-court settlement. They attributed the failure in part to a senior partner who betrayed the firm’s trust. That partner, Sipho Malaba, has been found guilty by the Independent Regulatory Board for Auditors after a seven-year investigation.
The charges related to issuing audit opinions without sufficient evidence, failing to report irregularities despite being alerted to them, and breaching auditing standards. In a ruling dated March 19 he was permanently disqualified from practicing as an auditor and ordered to pay a R1.6m fine and R9.2m in legal costs.
The disciplinary panel described his conduct as dishonest and found him directly responsible for enabling the conditions that led to the bank’s collapse. This was not a technical failure. It was a moral one. Malaba received kickbacks from VBS senior executives to facilitate the scheme.
He understood the rules. He knew the expectations. Yet he chose to simulate compliance while actively subverting the system he was entrusted to uphold. This is performative governance in its purest form: adherence in appearance, absence in substance.
It would be comforting to treat this as an isolated case. It is not. It is what happens when governance is misunderstood by those entrusted to uphold it. The more unsettling reality is that many individuals in positions of authority operate within systems that reward compliance signals over ethical judgement. Where governance is reduced to checklists and disclosures, those who understand the system are often best positioned to manipulate it.
The issue, therefore, is not only individual misconduct but systemic design. Governance frameworks that prioritise form over substance create conditions in which performative compliance can thrive. In this sense performative governance is not an aberration within functional systems; it is an outcome of systems that over-index on demonstrable compliance.
This raises an uncomfortable but necessary question: how do organisations ensure that those entrusted with power are guided not only by rules, but by a moral compass? The lesson from VBS is not that governance failed in the absence of rules. It is that it failed in their presence.
When systems reward the demonstration of compliance over the exercise of judgment they invite manipulation by those who understand them best. The task then is not to design more governance, but to design for integrity within it. A moral compass cannot be assumed; it must be designed. If governance is to mean anything it must begin to test character as rigorously as it verifies compliance.
• Dr Vilakazi is an academic and organisational development practitioner whose work focuses on how governance and power are exercised in institutions, particularly where they are misunderstood and misapplied.
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