/ 9 July 2010

Malema’s new tax dodge

Malema's New Tax Dodge

ANC Youth League president Julius Malema may have shot himself in the foot by telling the taxman he does not benefit financially from business dealings but receives “donations” from private companies.

The Mail & Guardian has established that Malema is refusing to disclose to the South African Revenue Service (Sars) who he receives these “donations” from — and this has prompted an even more intense scrutiny of his wealth.

The M&G can further reveal that another Malema company — Blue Nightingale Trading 61 — has benefited from a lucrative Limpopo government contract worth more than R200-million for the disposal of medical waste.

Sars is investigating Malema’s finances and assets after it was revealed earlier this year that companies he is linked to have benefited from multimillion-rand government tenders. Malema has steadfastly denied benefiting from government tenders, claiming his signature on documents submitted to the Companies and Intellectual Property Registration Office (Cipro) was forged.

He has to date failed to declare publicly who was behind the alleged forgery or what steps he was taking to find out.

High-level team
In March City Press reported that Malema had not submitted tax returns since his election as ANC Youth League president in 2008 and that none of his companies was tax compliant. It was reported at the time that a high-level investigation team was assigned by Sars to probe Malema’s case.

The M&G understands that, when confronted by the taxman about his income recently, Malema flatly denied receiving money from his shareholding in private companies. But he confirmed receiving “donations” from private businesses and individuals whose identities he refuses to disclose.

When contacted for comment, Malema’s spokesperson, Floyd Shivambu, accused the M&G of a “witch-hunt” against Malema and maintained that the youth leader had no businesses. He said Sars would have approached Malema if it were conducting a lifestyle audit into his affairs.

“They’ve never approached him,” Shivambu said.

Malema put the phone down when the M&G tried to contact him and then switched it off. Malema’s lawyer, Tumi Mokwena, said he had no knowledge of Malema’s dealings with Sars.

Malema’s public show of wealth — including fancy cars and expensive watches — has raised suspicions that his lifestyle is more opulent than his ANC salary alone could sustain. In March Malema claimed in an interview with the M&G that he “lives on handouts“.

Malema has also been reported to public protector Thuli Madonsela by the Congress of the People and AfriForum Youth. Madonsela recently said she was still investigating Malema’s businesses and looking into all the tenders awarded by municipalities in Limpopo and North West to his companies.

Malema is now facing attack on two fronts as Sars combs Limpopo government and business circles to find all the deals he may have been linked to. Because of the sensitivity of the matter and Malema’s substantial influence in Limpopo, sources were willing to speak to the M&G only on condition of anonymity.

Targeted by Sars
Business people in Limpopo complained this week that they were being targeted by Sars because of their possible involvement with Malema. Several who have conducted business with Malema are finding the taxman’s investigation nerve-racking. The investigation includes interviews with them and explorations of their business relations with the youth leader.

One told the M&G: “They looked at my car, took down the registration number and found my information and called me up.

“Then they asked questions, wanted to see my tax returns and check if everything was up to date.”

Sources with knowledge of Malema’s money matters confirmed to the M&G the substance of previous reports — that Malema’s records showed he has several outstanding tax returns and owed Sars “millions of rands”.

Malema appointed an accountant and a lawyer to handle his affairs after he engaged with Sars on the matter.

Sars has instructed every municipality in Limpopo to hand over all the documentation it has relating to business with Malema’s companies. Sars spokesperson Adrian Lackay declined to comment, saying that the affairs of all taxpayers “regardless of their public profile or standing” are treated confidentially.

“Sars will apply tax laws equally to all taxpayers and will follow due process in terms of the law without bias, fear or favour. We do not issue public statements on the affairs of any taxpayer,” Lackay said.

Home is where the money is
The Limpopo province has been kind to Julius Malema.

Companies linked to the ANC Youth League president have received tenders worth millions of rands from municipalities and departments in the province.

The latest Malema-linked contract to come to light is a R200-million-plus contract for the “removal, treatment and disposal” of medical waste from the province’s 46 hospitals and 360 clinics.

At the time the tender was awarded to Tshumisano Waste Management by the Limpopo department of health and social development in 2005, Malema was provincial secretary of the youth league in Limpopo.

The M&G is in possession of a shareholders’ agreement between Tshumisano and four other companies, including Malema’s Blue Nightingale Trading 61. According to Cipro’s records Malema is the sole director of Blue Nightingale and was appointed on January 19 2006.

One of the other companies in the “consortium” is Medicare Process Technologies, which specialises in the burning of medical waste.

Medicare director Christos Eleftheriades told the M&G Malema was part of a “youth group” that was recommended by his local partners in Limpopo to form part of Tshumisano’s contract.

“Part of the deal was to involve youth and women. Obviously the youth leader [Malema] was part of the youth group. Blue Nightingale came as the youth group’s company.”

Phetole Sekete, a director of Buhle Waste, also part of the consortium, said his understanding was that Blue Nightingale “belongs to the ANC Youth League”. He said Malema did not represent the company at the time and he was not aware Malema was the sole director. Both Eleftheriades and Sekete claimed Malema’s Blue Nightingale owned a 3% stake in the consortium. Sekete said these shares were bought by other partners in 2006 for “under R150 000”.

Tshumisano’s tender ran out in June this year, but was extended by six months to November after the tender process for a new contract was cancelled twice. Competing companies have claimed political interference is delaying the appointment of a new service provider.