If state capture was piloted at Transnet it was more or less perfected at the South African Revenue Service (Sars) during the tenure of Tom Moyane, the first part of the Zondo commission report has concluded.
“Sars offers one of the clearest demonstrations of state capture as observed in other SOEs [state-owned entities] and state institutions,” Deputy Chief Justice Raymond Zondo found.
The motive, he added, was that its capacity to investigate tax evasion and enforce compliance “presented a hurdle to those involved in organised crime, and was, therefore, a target for those engaged in state capture”.
Zondo said the evidence before him indicated that there was “collusion” with Bain & Company South Africa on a co-ordinated agenda “to seize and restructure SARS” and that Moyane and then president Jacob Zuma played key roles in this.
The result was a failure of integrity and governance at SARS, demonstrated by the chasm between what it was and what it became, and a reversal of its ability to crack down on organised crime and recoup losses to the fiscus.
“That state of affairs was brought about by the (at least) reckless mismanagement of SARS on the part of Mr Moyane,” Zondo found.
He said once Moyane was appointed in September 2014, the purging of competent senior revenue service officials was a foregone conclusion and recommended that he face charges of perjury for lying to parliament, for telling the legislature he was not involved in appointing a friend of his to do debt collecting for SARS.
“What occurred at Sars was inevitable the moment Mr Moyane set foot there. He dismantled the elements of governance one by one,” Zondo wrote. “This was more than mere mismanagement. It was seizing control of SARS as if it was his to have.”
The report dismisses attempts by Bain and Moyane to explain away the patent intent behind the word “neutralise” in relation to certain staff members and his denial that he drove them out as simply “not credible”.
“The clear intention signified in plain language was to identify people within Sars to get rid of. … An essential part of Mr Moyane’s 100 Day Plan was to identify individuals that could hamper change and neutralise them.
“It would appear from the facts that this is precisely what Mr Moyane did.”
To achieve this, the rogue unit narrative was devised. Moyane’s silence, and stubborn refusal to discuss the matter with those innocently implicated when this was reprised by the Sunday Times, spoke volumes, Zondo said.
“Instead of interrogating the truth of this assertion and protecting Sars and its employees from what is now acknowledged to be an entirely false and misleading story, Mr Moyane treated it as the truth from the outset and dismantled his entire executive committee on the strength thereof,” the Zondo report said.
“The fact that he kept quiet suggests that he knew well where the allegations were coming from.”
This finding was consistent with the testimony of former Sars executive Johann van Loggerenberg, who oversaw the entity’s various compliance enforcement units. Van Loggerenberg last year told the commission that employees begged Moyane in vain to defend their integrity.
Part of the aim of the needless restructuring, the report concluded, was to halt investigations carried out by the enforcement capacity in Sars.
It cites a number of cases and notes that they have in common three things. First, they stopped in about 2014 when Moyane arrived. Second, they involved people who “had connections to politicians and politics”, and third, all related to sophisticated and complicated criminal schemes.
“Finally, all of them allegedly involved state intelligence operatives,” Zondo added.
The report cites the cessation of Operation Honey Badger, aimed at curbing the illicit tobacco trade, as a prime example of what happened next. By the 2013-14 financial year, excise collection in the cigarette sector had grown to R13.1-billion.
On Van Loggerenberg’s testimony, SARS was winning the war against the illicit trade and people who had previously been cheating the system began voluntarily paying money to SARS.
After 2014, the gains were reversed.
“In contrast to the previous three years where the quantum of excise duties which were being collected was increasing, in the 2015-16 and 2017-18 fiscal years, there was a 15 percent drop in the excise figures for tobacco. In addition, the illicit component of the industry increased to 30 percent.”
Moreover, there were instances where suspects were given the advantage of insight into evidence SARS had collected.
“This ultimately led to SARS having no really effective means to address the illicit economy or organised crime from a tax and customs perspective,” the report says.
Zondo’s findings include that the record reflects 17 meetings between Zuma and Bain’s managing partner for South Africa, Vittorio Massone, between 11 August 2012 and July 2014.
“That means on average Bain was having a meeting with President Zuma every six weeks over a period of about two years (24 months). Those were very frequent meetings.”
The report also notes that Bain was appointed as consultants to SARS despite Massone conceding in an email dated 18 November 2014 that the consultancy lacked experience in this field, his exact words being that though the project was “designed for us” … “we know that we can’t claim to have done much on the specific topic”.
Zondo said this seemed irrelevant to Zuma and Moyane.
“Bain knew that they did not have the necessary expertise. They must have thought South Africa did not know this or did not care whether they had the necessary expertise. I think President Zuma and Mr Moyane neither knew nor cared.”
What transpired was not coincidental, especially in light of the planning documents the commission saw.
“The only feasible conclusion is that the organisation was deliberately captured and President Zuma and Mr Moyane played critical roles in the capture of SARS and dismantling it in the way it was done during Mr Moyane’s term as commissioner.”
He recommended that law enforcement agencies conduct investigations to allow the National Prosecuting Authority to decide whether to initiate prosecutions in connection with the award of the Bain contracts. The recommendation that Moyane face perjury charges stems from his telling parliament he had no role in the appointment of New Integrated Credit Solutions, owned by Patrick Monyeki, to perform debt collecting work.
“In this regard, Mr Moyane provided parliament with false information,” he said.