International consultancy firms operating in SA during the Zuma presidency haven’t exactly covered themselves in glory. Bain & Co is the latest to find itself in trouble, and like McKinsey before it, it risks being caught napping as events unfold, turning what at first looked like a localised SA story into one with international dimensions, with them in a starring role.
It’s not the first time the company has courted controversy in dealings with companies in SA, but the political intrigue and twists that have emerged in the Nugent inquiry into governance and administration at the SA Revenue Service (Sars) will come as a shock even to the most sceptical observers of how the country was run during the time Jacob Zuma was in power.
Vittorio Massone, Bain’s managing partner in SA, wasn’t exactly a household name before the latter parts of last week. But he has emerged as a smooth political operator who ingratiated himself with powerful political players and landed contracts that were more politically significant than they were lucrative.
That immediately raises the question of whether his claim that he may have been "used" by his Sars contacts can be taken at face value, or whether he was part of the capture project from the start. Business Day has established that Massone met Zuma as early as 2013, with another meeting the following year. So far, Bain hasn’t responded to questions about what was discussed and whether Zuma had received gifts on its behalf.
It has now launched its own internal investigation.
The facts emerging from the Sars commission are that Bain reorganised the tax agency based on 33 interviews over six days with employees handpicked by commissioner Tom Moyane, appointed only three months earlier. Some lasted mere minutes.
Many were conducted by junior consultants who didn’t know the inner workings of the 14,000-strong institution.
Objections raised by Sars employees were never recorded, let alone considered in the overhaul that ensued.
Another startling revelation was that Massone’s first meeting with Moyane about Sars took place when the latter was still prisons boss. In other words, before the rest of the country knew that he would be taking over the tax agency at some point. And that didn’t happen until a year later. It’s important that not even the National Treasury, which Moyane had to report to, was consulted on his appointment.
Three months after taking over, Moyane began scouting for a consultant to overhaul the tax agency, and he wrote to Telkom, with whom Bain had an existing R91m deal in place, requesting permission for the tax agency to "participate" in that contract.
Telkom did not bite, but it is valuable to divert to this existing Telkom contract.
Bloomberg reported in 2014 that Bain secured this contract without Telkom following an open bidding process. Massone was also meeting Sipho Maseko during the 10-month period before Maseko was appointed as Telkom CEO, according to the Bloomberg report. Bain received the Telkom contract early into Maseko’s tenure.
Unions at Telkom, which is partly state-owned, have long complained about what they described as Bain’s "destructive" work at the JSE-listed company.
It emerged before the commission that Bain’s contract with Sars was irregular, littered with "red flags" and appeared to be predetermined — revelations made by technocrats in the Treasury who scrutinised the contract.
It has also done work for the Development Bank of SA, which will no doubt now also be more carefully scrutinised.
The inquiry heard that the knock-on effect of Bain’s work at Sars was a reduction in its capacity to collect revenue, which contributed to this year’s VAT increase. A real and tangible cost for the country’s poor.
Bain needs to provide full disclosure on its meetings with Zuma, Moyane and Maseko.
Bain, like McKinsey and KPMG before it, should not be allowed to get away with simply undertaking internal probes, followed by resignations of individuals it can no longer protect.
And if companies are found to have played a role in harming the country’s ability to finance itself and provide services to those who need them most, the least the state can do is to pledge to refrain from doing any business with them again.