Global management consultancy Bain & Company says it is “deeply sorry” for its role in the damage inflicted on the SA Revenue Service (Sars) during the tenure of Commissioner Tom Moyane.
However, Bain said it did not accept that its representatives knowingly participated in an effort to damage Sars. It made “many mistakes” (see below) in relation to Sars, “but the firm had no motive, monetary or otherwise, to damage Sars, and did not set out to do so”.
Part 1 of Acting Chief Justice Raymond Zondo’s report into state capture details how then-president Jacob Zuma and Moyane captured Sars, “systemically and deliberately” weakening what was once regarded as one of the best tax authorities in the world.
The report said the capture of Sars followed “familiar patterns and processes of state capture that have been observed in other state institutions and does so in emphatic fashion. Sars offers one of the clearest demonstrations of the patterns of state capture observed in other state-owned enterprises and state institutions.”
In 2013, an internationally accepted tax administration diagnostic assessment tool had ranked Sars as among the top five revenue and customs authorities in the world, according to Sars senior executive Vlok Symington.
Although Sars was “a well-functioning and highly effective organisation”, Bain was contracted, in January 2015, to perform consultancy services at Sars, which included completely restructuring the organisation.
“In reality, there was no need for consultants, let alone a radical overhaul of what was then a world-class institution. The ‘profound strategy refresh’ was just a pretext for the assumption of control over Sars for ulterior purposes,” Judge Zondo said.
In addition, evidence before the commission showed that Bain admitted it did not have the expertise required to provide consultancy services for Sars.
Bain’s restructuring plan
Judge Zondo’s report outlines how before Moyane was appointed as commissioner, and before Sars contracted with Bain, Moyane and Bain developed a plan to restructure Sars, which Moyane presented to Zuma, “most likely with Bain in attendance”.
“Bain did not arrive at Sars as an unwitting participant in the events that followed. In fact, Bain arrived at Sars, as Mr Moyane did, with a restructuring agenda,” the judge said.
Key take-outs from this section of the report include:
- Representatives from Bain met with Zuma at least 12 times between 2012 and 2014. “This frequency and the fact that they were all after hours and behind closed doors or at the president’s official residence was, on the face of it, a cause for concern.”
- Between 2012 and 2015, Bain created a series of documents containing far-reaching plans, not only to restructure certain government agencies and SOEs, but also to restructure entire sectors of the South African economy. All these documents were presented to Zuma.
- Moyane was told by Zuma in 2013 that he would be appointed as commissioner before the post had even been advertised. He was formally appointed by Zuma on 23 September 2014.
- Bain knew about the appointment of Moyane as commissioner months before it was announced publicly.
- Bain furnished Moyane with a “First 100 Days Plan” on 26 May 2014, months before he was appointed as commissioner. According to evidence from former Bain employee Athol Williams, the level of specific guidance in the plan suggested it was based on information leaked from within Sars.
- Evidence suggested that Jonas Makwakwa, Sars’s head Internal Audit, fed sensitive information to persons outside of Sars. “Not only was this illegal; it also meant that Bain had access to confidential information which was not in the public domain,” the report said.
- Among other things, the 100 days document noted that the plan was to “build a healthy sponsorship spine to accelerate change and identify individuals to neutralise” (report’s emphasis). The report said the attempts by Bain and Moyane “to explain away the obvious intention” behind the use of the word “neutralise” were unconvincing. “The clear intention signified in plain language was to identify people within Sars to get rid of.”
- Procurement legislation was flouted so that what was supposed to be a six-week contract with Bain for about R2.6 million was extended to a 27-month contract that cost Sars about R164m.
Key officials forced out
Judge Zondo said that “exactly as the plan had contemplated, specific individuals at Sars were identified and neutralised once Mr Moyane took up his position. This included very senior people who had served the institution well for years.”
He said the only rational explanation for the sudden departure of so many senior people in such a short space of time was that they had been targeted by Moyane.
Furthermore, two weeks after becoming commissioner, Moyane disbanded Sars’s entire executive committee because of an “exposé” in the Sunday Times about a so-called “rogue unit” within Sars.
“The evidence suggests that, as commissioner, Mr Moyane based a number of his decisions and actions on the propositions that there was an unlawful rogue unit. One of those decisions was the decision to disband the executive committee. The departure of a number of senior people discussed above was also connected with allegations of the existence of the so-called rogue unit.
“Mr Moyane’s vehement denial of this assertion is at odds with the findings of the Nugent Commission. The alleged existence of the rogue unit was a pretext under which to target people. The fact that Mr Moyane still asserts the establishment of the unit was unlawful is telling,” the report said.
Enforcement capacity undermined
The report goes on to describe how, during Moyane’s tenure, some of Sars’s most important units, which were set up to ensure tax compliance, were disbanded or restructured such that important projects were put on hold or abandoned, thus “fundamentally weakening” Sars’s revenue collection function.
“Sars’s investigatory and enforcement capacity presented a hurdle to those involved in organised crime, and was, therefore, a target for those engaged in state capture. The involvement of the media in perpetuating false narratives, which discredited targeted people as well as providing grounds for their removal, was a notable feature of the evidence led in regard to the capture of Sars,” the report said.
The report said Sars’s capabilities were also weakened by the “pervasive culture of fear and bullying” that characterised Moyane’s tenure at Sars.
Recommendations
Judge Zondo concluded his chapter on Sars with the following recommendations:
- All Bain’s contracts with state departments and organs of state be re-examined to see whether they complied with the relevant statutory and constitutional provisions.
- Law enforcement agencies conduct such investigations as may be necessary with a view to enabling the National Prosecuting Authority to decide whether or not to initiate prosecutions in connection with the award of the Bain contracts.
- The Sars Act be amended to provide for an open, transparent and competitive process for the appointment of the Commissioner of Sars.
- Moyane be charged with perjury in relation to his false evidence to Parliament.
Bain’s ‘significant mistakes’
In its statement, Bain said it made “three significant mistakes” when executing its “assignment” at Sars.
- It overstated the case for change – Sars did not need a fundamental overhaul.
- When Moyane disregarded Bain’s proposed organisational structure changes, Bain consented to a scope of work “which we knew impaired our ability to deliver appropriate results”.
- Bain should have walked away when it became clear, by late 2016, that Moyane’s agenda was not to improve Sars.
It also said that Vittorio Massone, Bain South Africa’s former managing partner, had “displayed poor judgement” in drawing the firm into the Sars assignment, and he had not adhered “to some core Bain leadership values, especially around transparency, as the problems at Sars unfolded”.
