The South African Revenue Service (Sars) is “going full speed” towards ensuring lifestyle audits are hardwired into the tax authority’s normal operations. (Oupa Nkosi)
The recommendation in the Zondo report that all Bain & Co’s contracts with the government be scrutinised for probity poses an existential threat to the global consultancy, whistleblower Athol Wiliams said this week, but he fears it may be a dead letter.
Williams told the commission of inquiry that Bain’s involvement in the state went well beyond its destructive overhaul of the South African Revenue Service (Sars). It was devising, with then-president Jacob Zuma, a “grand project” to restructure sectors of the economy, with a view to multiplying its contracts with the state.
Zondo referred to this in the first part of his report released last week.
It is recommended, he said, “in the light of the facts pertaining to Bain’s unlawful role in Sars, all Bain’s contracts with state departments and organs of state be re-examined for compliance with the relevant statutory and constitutional provisions.”
He went further and asked that law enforcement agencies conduct investigations to help “the National Prosecuting Authority (NPA) to decide whether or not to initiate prosecutions in connection with the award of the Bain & Co contracts”.
But Williams said he doubted that the already overstretched NPA had the capacity to do so.
“I worry about the NPA not having the capacity to add more investigations to the load they have and already cannot handle, and secondly, I still worry that investigators aren’t sophisticated enough to peel away the bullshit Bain will give them.”
As a start, Willliams said the national treasury should draw up a list of state entities that have contracted with Bain, and then seek to analyse firstly the procurement process followed and secondly the nature of work done.
His estimation is that this includes Eskom, the Development Bank of Southern Africa and the Public Investment Corporation.
“I’m very pleased that the Zondo commission said look into these other projects because I am absolutely certain we are going to be doubly shocked because I know when I was still inside Bain they were very happy that the focus was on Sars,” he told the Mail & Guardian.
Williams was asked by Bain in 2018 to oversee an independent investigation by US law firm Baker McKenzie into its role at Sars.
“The investigators had discovered far bigger issues in Bain’s work at the other state entities,” he said, adding that there was particular concern at the time that more information would emerge about the company’s role at Telkom.
Its work at Telkom predated the Sars contract and here the fees of around R1-billion dwarfed the R164-million Bain would earn for its restructuring of the revenue service.
But, as Zondo established was the case in Sars, Williams said the company also had input in how the request for proposals at Telkom was drafted to ensure Bain would get the contract. Williams had told the commission that the man who would become Telkom chief executive, Sipho Maseko, was among those who had meetings with Bain’s manager partner for South Africa, Vittorio Massone, and then-president Jacob Zuma.
“I have an email where Massone writes to his boss in London and says the Telkom RFP [request for proposals] was designed for Bain,” he said.
“What happened at Sars was actually Bain’s second run; Telkom was the test case and Massone says so to his boss. He says that Zuma was testing Bain at Telkom and that they had succeeded and they are now moving on to the next one. The exact same pattern, but Bain repeated it everywhere.
“The pattern is: spend a year or so with the person Zuma is putting into the organisation, so Bain spent a year with Sipho Maseko. Sipho Maseko had an office in Bain’s offices in Melrose Arch.”
He said this was extraordinary conduct on the company’s part, but a part of the modus operandi to develop plans that Zuma would then approve before appointing someone to implement them. In the case of Sars, the report noted, Tom Moyane knew in 2013 that he would be appointed, well before it happened in September 2014.
Williams insists that if other global consultancies, such as Deloitte, McKinsey and KPMG, helped to implement state capture projects, Bain was unique in the manner in which it strategised directly with Zuma to create projects that would yield long-term contracts with a bigger price tag than those it could negotiate in the private sector.
“The public sector was always the target because in a very cynical way they were exploiting our public sector weakness. You can double your profit margin because the client is less sophisticated and demanding. It was devising projects that could run for a decade or more,” Williams said.
“They saw the institutional weakness and they saw a corrupt president and they said this is going to be a land of milk and honey for us.”
The Zondo report notes that Massone met with Zuma 17 times in the space of 24 months.
“We must ask what happened to those plans that they developed,” Williams added.
He said the narrative that with Massone gone from the company, probity has been restored to the firm’s South African operations was misleading.
“We are naive if we believe this story that Massone worked alone. Within Bain we laughed at this narrative that Massone was a lone rogue. It is not how Bain works, which office you work in is irrelevant,” he said.
“No one else from Massone’s team has left Bain, and are all still working in South Africa, even though their business card does not give a South African address.”
Wiliams has this week publicly clashed with Business Leadership South Africa after challenging its decision to re-admit the firm as a member after suspending it in 2018.
“Our view, based on the process we undertook with the company, is that the current leadership runs the company ethically within an appropriate governance framework, and there is nothing in the Zondo commission report that suggests otherwise,” the organisaton stated.
Williams disagrees, and reads it as a sign that the business community’s stated support for the Zondo commission was lip service. He points to Bain’s refusal to make full disclosure to the state capture inquiry.
Williams said that that reluctance drove him to resign from the self-appointed Baker McKenzie investigation and was motivated by the consequences the firm would suffer elsewhere if it came clean.
“I was saying we have got to make full disclosure of everything we know because that is what South Africa demands and my bosses were saying if we make full disclosure it will destroy the business in the US,” he said.
The strategy was explicit — protect Bain Global, and what that meant was to make an early disclosure to the US department of justice. That is what Bain did with Baker McKenzie.”
The problem for the Boston-based firm is that it informed the authorities of the matters in which it was involved and could not deviate from that version.
It “had to control the story the department sees”, and this is why it abandoned Bain application to cross-examine Williams at the Zondo commission, Williams said. As the report recalls, Zondo had pointed out that Bain might, in return, have to submit to cross-examination.
“What happened in South Africa was completely irrelevant to Bain, what they do care about is in being in the media and being public with what they have done because the department of justice would read that,” Williams said.
Williams said he has written to the Zondo commission to offer his help to whoever takes forward the recommendation for further inquiry into Bain’s local contracts. The commission responded by saying it would inform whoever did so of his offer.
“There will be obfuscation. I am worried that everything will just go quiet.”
Williams left South Africa in November last year, after receiving information from a senior ANC member that his life was in danger.
Bain in December 2018 paid back the fees it earned for its twice-extended contract with Sars with interest. Contacted for comment on 11 January, the company referred to a press release issued a day after the Zondo report was published.
It expressed disappointment that the report “mis-characterised Bain’s work at Sars”.
“While we made mistakes in our work with Sars, we remain confident that we did not in any way wilfully or knowingly support state capture at Sars or elsewhere,” it added.
“There are no new facts considered in this report; the report relies heavily on the affidavit and testimony of one witness who admitted to having ‘no first-hand knowledge’ of Bain’s work at Sars. Bain submitted two detailed affidavits to the commission, neither of which appear to have been factored into the report.”
The national treasury was contacted for comment but did not reply by the time of publication.