BLSA suspends Bain over its involvement in ‘yet another state capture project’
The consultancy ‘aided the collapse of Sars’ with revamp
Bain & Company has joined KPMG, Eskom and Transnet as the latest member of Business Leadership SA (BLSA) to be suspended from the organisation.
Bain, one of the top three consulting firms globally, was suspended with immediate effect over its involvement in “yet another state capture project under the pretext of restructuring”, BLSA, which represents CEOs of the largest companies in SA, said on Monday.
The sitting Nugent commission of inquiry into tax administration and governance by the SA Revenue Service (Sars) has heard how Bain was irregularly appointed to design a revamp of the agency. Instead it contributed to questionable, unnecessary changes at Sars which led to institutional degradation and a R50bn shortfall in tax revenue in the 2017/2018 financial year.
Last week Bain replaced its SA head, Vittorio Massone, and offered to pay back the R164m it earned, including interest, for its services to Sars as it did not want to benefit from work that was used to further a different agenda than was intended, the firm said. It said it had also launched an independent investigation led by the global law firm Baker McKenzie.
It has since clarified that Massone remains a partner at the firm. Massone admitted to the inquiry that suspended Sars commissioner Tom Moyane asked him for a presentation on the tax agency, which he delivered a year before Moyane was appointed to the top job.
BLSA said in its statement that Bain had aided the collapse of a “well-oiled, perfectly functioning state-owned company”. The restructuring included worrisome changes such as the “deliberate shutdown of highly specialised, effective and efficient units that were specifically created to improve revenue collection and the exodus of talent from SARS”. This created space for illegal activities and directly contributed to a rapidly declining tax morality, BLSA said.
The organisation has been vocal in its criticism of companies involved in state capture.
Bain’s suspension comes a year after BLSA suspended global accounting firm KPMG as well as SA’s two largest state-owned companies, Eskom and Transnet, after strong evidence of their involvement in state capture surfaced through the hundreds of leaked e-mails dubbed the Guptaleaks.
“The state capture project will continue to have long-term devastating effects not only on Sars but the country as a whole,” said BLSA CEO Bonang Mohale.
BLSA urged Bain to ensure it is subjected to a truly independent investigation. “While we accept that wrongdoing can be caused by a few rotten apples, this assertion cannot be accepted at face value and must be rigorously tested,” Mohale said.
“If remedial action is found to be necessary, we require that it be fully proportional to the wrongdoing.”
Bain declined to comment.