Bain & Co. ‘used’ for ulterior motives, Nugent commission hears
Bain & Company may have been used for an ulterior motive outside of improving the efficiency of the South African Revenue Service (SARS) when it was brought in to create and implement a new operational model by suspended commissioner Tom Moyane, the Nugent commission heard on Friday.
Vittorio Massone, managing partner at Bain & Co., has distanced the consulting firm from the way the final operating model and changes were implemented at Sars. These have been attributed as the reason for the breakdown in efficiency at the tax agency.
“With the benefit of hindsight think we can understand that there was an intent there. Having read transcripts, you can see how we might have been used,” said Massone.
Sars underwent massive changes in 2015 when Moyane implemented a new operating model, fragmenting some of Sars’ key tax collection and enforcement units, which partly led to a drop in revenue collection.
Massone told the commission the case for change at Sars was to improve the operations there and not to implement “radical change”, as has been heard from current and former officials.
He said from reading the testimonies of current and former senior Sars officials who appeared before the commission, he believes the root cause of all the “bad things” that happened at Sars wasn’t because of the organisational structure that they designed.
Massone said there were three underlying factors as to why the structure failed: firstly, the “change in leadership team” where he said too many executives were changed and removed from their position and there was a “juniorisation” of staff. The second reason is the “change of management plan” which he said was not implemented properly with adequate communication and support to employees. Lastly, Massone said other things needed to complement the structure such as processes, communication lines and culture needed to be redesigned. Masonne called these “software” issues.
Masonne added that had these issues been attended to and the leadership not changed, “you would have been talking about a stronger Sars”.
Many senior executives who headed critical units — such as the Large Business Centre which collected a third of Sars’s revenue and the enforcement division dealing with the illicit economy — were sidelined or left Sars after the new operating model was introduced.
When asked if he had raised these issues when he became aware of them, Masonne said he had spoken to Moyane and former chief operating officer Jonas Makwakwa, who did not give him a satisfactory answer beyond: “We are going to work on it”.
The irregularities in the tender process for Bain & Co.’s contract also came under the spotlight at the hearing, with evidence leader Advocate Carol Steinberg questioning how the final invoice was for R164-million.
Steinberg said the company had won the contract to do a diagnostic at Sars at a cost of R2.38-million, which was a 50% discount rate of the consultancy firm’s normal pricing and much cheaper than competing firms.
However, after Bain and Co. completed the diagnostic report on the new operating model they were given a new contract to implement the project for which they charged their regular fees.
Steinberg said going forward there was no competitive tender with the initial price for the work increasing as well.
Massone said it was normal practice in the industry and for Bain & Co. to enter new clients at a reduced rate and it would have been “unsustainable” to continue with the 50% discount but they had given Sars slight discounts of between 12% to 20% in the years 2015 to 2017.