The Zondo commission’s report on the capture of the SA Revenue Service (Sars) doesn’t add much to what we already knew from the Nugent commission’s more thorough report on the tax authority. But it offers a couple of crucial takeaways and prompts some big questions, not just about Sars but about state capture more generally.
The Zondo report has served to spotlight the role played by management consultancy Bain, in a way the Nugent report did not, despite the dramatic revelations it contained. Rival McKinsey and other firms such as KPMG that enabled state capture have taken huge flak in SA and abroad for the role they played and have sustained significant damage.
Yet Bain somehow managed not to face as much public outrage — even though the damage it did was arguably worse. Others ripped off the state in grand and corrupt style and provided a gloss of respectability for dodgy dealing by public entities. But Bain colluded to trash an institution — and not just any institution, but the one responsible for raising the revenue government needs to govern, and to improve peoples’ lives.
Evidence to the two commissions suggests Bain worked closely with former president Jacob Zuma for more than two years before former Sars commissioner Tom Moyane was appointed in September 2014, devising a restructuring plan that included “neutralising” Sars executives as well as stripping out investigative and enforcement capacity.
Nugent had already established that Bain’s Vittoria Massone had met Zuma and Moyane several times before the new commissioner was appointed and proceeded to bypass procurement rules to give Bain the contract to advise on Sars’ restructuring. But the knockout revelation at Zondo was that Massone met Zuma no fewer than 17 times — about once every six weeks — from 2012 to 2014.
In an affidavit to the Nugent commission, Massone admitted to some of the meetings, without conceding that he and Zuma discussed Sars. What he did describe, however, was that Sars was one of the first targets in a campaign by Bain (dubbed Project Phoenix) to get access to business in SA’s public sector. And what Zondo touches on, but doesn’t pursue, is evidence that Bain pitched to Zuma to restructure government agencies, state owned entities and entire sectors over the almost three years in which they met.
This is one question the report prompts. Consultancies typically put a lot of time and effort into networking and “business development”. But Bain put a huge amount of time into its privileged access to the president, in return for which all it appears to have won was a R167m two-year contract to restructure Sars. It’s a lot of money, but a small return on investment compared to the more than R1.5bn rival McKinsey paid back to Eskom and Transnet on those corrupt contracts, or the hundreds of millions more that other firms made off the public sector in the state capture years.
Perhaps Massone was just rubbish at turning his business development efforts to account. Certainly he was a man who loved to hobnob with the powerful and wine and dine the elite.
But the story should surely raise questions about what else might have been going on in those Zuma meetings, and who else might have been involved. Unfortunately, the Zondo commission didn’t ask, relying heavily on a single source — former Bain partner Athol Williams — without even asking Sars itself for further evidence that could have corroborated, checked or expanded on his account.
Another, much broader question the report prompts is about the cost and consequences of capture. Sars would seem to be an easy case study, in terms of revenue lost to the fiscus, revenue that could have helped prevent government finances getting into the mess they are in now.
The Nugent commission did hear evidence on the increasing revenue shortfalls during Moyane’s four-year tenure, along with the decline in revenue buoyancy and in tax compliance levels. But it’s hard to know how much of the revenue decline was attributable directly to the decline at Sars. That clearly did matter a great deal, and though the current commissioner, Edward Kieswetter, moved swiftly to repair the damage, there’s still a way to go.
However, the performance of the economy generally looms much larger as a driver of revenue than does the performance of the tax authority itself. And over this period the economy tanked. That was in part a consequence of state capture and the way in which it eroded institutions, Sars included, as well as undermining investor confidence and the capacity of the state in general. The indirect effect on tax collections of the Zuma era economic growth collapse was likely greater than the direct effect of capture.
But that growth collapse wasn’t simply a result of capture by the Guptas and other evil people, but of a political and policy environment that hasn’t changed enough to get the economy growing. And there’s a danger that when politicians blame state capture for SA’s economic and institutional woes it conveniently diverts attention from the underlying environment of which state capture was as much symptom as cause. It risks disappointment, too, when the public sector fails to deliver improvements, even under more honest leaders.
Meanwhile, at Sars at least, Kieswetter is making good progress rebuilding a broken institution — though this time (ironically) it’s the other way round, with revenue rolling in because of a global commodities boom, making it hard to disentangle any direct impact of his turnaround efforts.
• Joffe is editor-at-large
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.