What brought Sars to its knees?
Tom Moyane’s request that Bain present him with an ‘outside-in’ look at Sars a year before he was appointed tax commissioner stunned officials and the gallery
Stringing a sentence together is rarely a difficult thing for an executive. But it was for Vittorio Massone, managing partner at Bain & Co, when he gave evidence before the commission of inquiry into the SA Revenue Service (Sars), chaired by retired judge Robert Nugent.
Massone, his colleagues felt, was not answering questions directly due to translation issues: he is of Italian descent. But it soon became clear that his difficulty might be due to the very odd circumstances in which Bain landed the Sars contract, and the calamitous effect of its work on the tax agency, which had a R50bn hole in revenue collection for 2017-2018.
This, the National Treasury told the commission last week, resulted in the need to raise VAT by one percentage point for the first time in 20 years.
Massone’s role is emerging as rather sinister as details slowly ooze into the open. He first visited former president Jacob Zuma’s Nkandla home in late 2013 and again early in 2014, and is said to have presented him with a gift of cattle.
Bain, in response to questions from the FM, announced it had begun an internal investigation.
The dots, it seems, are becoming easier to connect in establishing what brought Sars to its knees.
Massone told the commission that Tom Moyane, a year before he became Sars commissioner, had asked Bain to present him with an "outside-in" look at the tax agency. This sent shockwaves through the public gallery and the officials present at the inquiry.
Massone duly made a presentation on Sars to Moyane — who was still head of prisons — and a year later Bain was named as the successful bidder out of six companies that took part in the closed tender process to conduct an overhaul at the tax agency.
Evidence on Friday suggested this had been Moyane’s plan all along.
The tender process was irregular and littered with "red flags", Treasury official Solly Tshitangano said. told the commission. He found it unusual that companies were invited to a Sars briefing on the tender on December 11 2014 and asked to submit their proposals the next day.
Bain had already included its price in its documents.
"My suspicion is that for you to be able to provide documents with a price a day after attending the briefing, you would have started some time back and this is a problem we know in government," Tshitangano said. "We know government officials give information to suppliers so that they [can] start preparing."
Once the first phase of work had concluded, Sars "changed its story" and instead of tapping the market for phase 2 of the project, it deviated from procurement processes and retained Bain.
Phase 2 cost R151m and phase 3, which the Treasury approved, cost R50m. Tshitangano said the Treasury approved phase 3 because Sars had said failure to do so would mean the agency would incur irregular expenditure.
A Bain contract with Telkom was similarly irregular. Bloomberg reported in 2014 that Massone had meetings with Telkom CEO Sipho Maseko 10 months before he took up the post.
The Communication Workers Union has long complained about the damage that Bain’s restructuring did at Telkom in terms of staff morale and job losses.
The impact on Sars was similar. But due to the critical role of Sars, Massone and Bain could not simply walk away from the wreckage with their consultancy fees safely banked.
The company released a mealy-mouthed apology on Sunday for the harm it had caused Sars employees.
The statement appeared to try to place all blame on Sars and Moyane, saying it was the way they had implemented the model that caused the harm. Bain admitted it could have handled the restructuring better, but said it stood by its work.
The company clearly does not accept, publicly at least, that it was complicit in the crippling of Sars.
This might have to change once Nugent concludes his work and presents his findings to President Cyril Ramaphosa.