Unpacking the most important issue of 2014
On this Reconciliation Day I write my final newsletter of 2014. I wanted to focus on the theme of reconciliation, sweeping away the accumulated irritations of a complex year. Now I am just going to have to do so quietly and privately, which is probably best for everyone.
Instead I focus this newsletter on a story that has surfaced during the past month. When we look back in a few years’ time, I predict it will be regarded as the most significant issue that emerged during 2014.
It is the development of a raging, politicized conflict at the South African Revenue Service (SARS). Even in its early stages, it is fair to describe this conflict as a “crisis”.
If it is true (as I believe it is) that this conflict is the result of yet another attempt by Jacob Zuma to “capture” a state institution in order to protect himself and the ANC from paying taxes, then it will be a watershed for South Africa’s democracy. This is a line that law-abiding, taxpaying citizens will not allow Jacob Zuma and his cohorts to cross.
President Zuma and the ANC had better wake up right now to one unavoidable reality that other analysts have identified before. South Africa has an Achilles heel. It is the 6-million law abiding, honest personal taxpayers who contribute billions to the state’s coffers in order to ensure that the poor get the services they otherwise would be unable to afford, including 16-million monthly social grants. Most taxpayers pay willingly, and timeously, because they know it is the “right thing to do”. They want the poor to have decent opportunities to improve their lives
But the ANC must know one thing: law-abiding taxpayers will not tolerate a President who is a tax evader. And they will not meekly accept the fact that the ANC, through its political contacts, is able to avoid paying its dues, such as R41-million customs duty on its massive consignment of Chinese T-shirts (imported for the election, unsurprisingly, through a Zuma business contact, Mr Jen Huang).
If, under President Jacob Zuma, our revenue collection system breaks down, it will be unfixable. If there is one message Mr Zuma needs to hear before this year is out, it is this.
During the first two decades of our democracy, SARS built up a formidable reputation for competence and uncorruptability. It has been lauded as one of the most effective tax collection agencies in the world, earning runner-up status in “innovative technology” for their e-filing system at the Adobe Max Awards in 2008. It has operated without fear or favour and extracted taxes from anyone who is obliged to pay. That is as it should be. So what has happened?
It is hard to draw a watertight conclusion from press reports. As usual in any high-level politicized dispute, various factions leak selective bits of information to the media who then publish wildly different accounts of the causes, characters and conflicts involved.
Sadly, most newspapers have lost the capacity to investigate and bring us closer to the truth. Instead we have to wade through irreconcilably different versions and decide for ourselves where the truth lies. Too many journalists have just become “post-boxes” for leaks that are not evaluated or assessed.
But all the reports point to the usual suspect as the source of the problem. President Jacob Zuma.
The current conflict in SARS surfaced shortly after the media announced in September that Jacob Zuma had appointed a new Commissioner, Tom Moyane. Mr Moyane then suspended the deputy Commissioner Ivan Pillay and Peter Richer, SARS’s Chief Strategy officer for reasons that are unclear.
To understand the unfolding drama, it is necessary to rewind a few years. Jacob Zuma’s conflict with SARS began a long time ago, over a dispute as to whether tax evasion charges should be added to the fraud, corruption, money laundering and racketeering charges, that were inexplicably withdrawn by the acting National Director of Public Prosecutions, Mokotedi Mpshe, in 2009.
Having read all the media reports, and joined the dots, I am prepared to wager good money on the following scenario: Having “captured” the National Prosecuting Authority in order to keep himself out of jail, President Zuma was determined to move against SARS next. He did not want them getting too close to his own tax affairs, and those of his numerous business and political associates.
In this context the leaks about a “rogue unit” operating in SARS, become clearer. This unit was allegedly involved in illegal activities such as “bugging” Jacob Zuma and running a brothel as a “front” for its activities of tracking down high-level tax evaders and criminal syndicates.
When allegations concerning this “rogue unit” emerged around mid-year, Ivan Pillay was still the Acting Commissioner for SARS. He appointed senior advocate Muzi Sikhakhane SC to head up a panel to investigate the matter.
By the time Advocate Sikhakhane submitted his final report, President Zuma had replaced Pillay with a new full-time Commissioner, Tom Moyane, who then received the Sikhakhane report.
Mr Moyane said that, on the basis of the Sikhakhane report’s findings, he suspended Pillay and Richer. However, in a radio interview conducted by Stephen Grootes on radio 702, Mr Imraan Mohamed, the attorney of the panel, openly denied that the findings of the Sikhakhane Inquiry had implicated either Pillay or Richer.
We will not know the truth until the Sikhakhane report is released. The DA will continue to press for this.
Mr Pillay acknowledges that SARS has a “National Research Group”, but denies it was a “rogue” group nor that it undertook illegal investigations.
It also appears to be “common cause” that, several years ago, SARS expert investigators were set to work together with the National Intelligence Agency (now called the State Security Agency), to track down tax evaders and organized crime syndicates.
This co-operative arrangement fell through, for reasons that are unclear. Was it because Jacob Zuma and his cronies had already “captured” the State Security Agency, that then refused to co-operate with tax investigations that got too close to Zuma and the ANC? Again I am prepared to wager good money that this is at least part of the reason.
In any event, when this arrangement fell through, it appears that Johan van Loggerenberg, then SARS executive for tax and customs investigations, may have continued with this unit, that allegedly undertook investigations that crossed the lines of legality.
At this point, the story takes a twist more dramatic than a spy thriller. A State Security Agent, Belinda Walters, begins an affair with Van Loggerenberg, and extracts the critical information she needed through pillow talk, sms’s and other lover/spy devices.
When the “honey-trap” romance went “sour” (was this part of Walters’ plan from the start?) she alleged that Van Loggerenberg had told her that the unit was bugging Zuma and conducting its activities behind various “fronts” one of which was allegedly a brothel.
If this is so, it would most certainly have been illegal. But many questions require answering. Was Belinda Walters a deliberate plant by the State Security Agency (after it had declined to cooperate with SARS investigations) in order to destroy SARS internal investigative capacity? Is her version of SARS’s activities true? What exactly was Mr Van Loggerenberg up to?
We won’t be any closer to answering these questions until the Sikhakhane report is made public. Or until someone is charged and put before a court of law so that the witnesses can be called and cross-examined. Neither of these developments have yet transpired.
My question is: if none of the formal channels (such as the State Security Agency) are prepared to investigate the ANC’s top brass when necessary, and if the National Prosecuting Authority refuses to pursue charges of tax evasion against the President, what is SARS supposed to do? Must they meekly accept that the President can manipulate state agencies to engage in all sorts of unlawful behaviour together with his business associates simply because they are politically powerful?
I suspect that SARS refused to accept this situation. They fought back. And that is when President Zuma moved Tom Moyane in, through his “deployment” policy. The Revenue Services Act provides for the Finance Minister to make this appointment but the President seems to have taken the lead in appointing Mr Moyane.
And in the purge, Ivan Pillay and Peter Richer became the primary targets because they had insisted that Zuma pay “Nkandla” tax, and the ANC pay its T-shirt customs duty. And that legitimate investigations should continue into the affairs of Zuma and the other ANC top brass.
Stripped of all the frills, I believe that is the core story.
Mr Moyane can prove me wrong by releasing the full Sikhakhane report.
The NPA can prove me wrong by providing a plausible, verifiable explanation as to why tax evasion charges were withdrawn against Jacob Zuma.
The State Security Agency can prove me wrong by providing a convincing analysis of why they were not prepared to work with SARS experts to track down tax evaders.
And above all, Jacob Zuma can sue me for defamation if I am wrong. I am sure that many people would welcome a day in court to testify about this matter.
It would be important to hear Ivan Pillay in the witness stand explaining the pressures that SARS faced to ignore the customs duties on the ANC’s imported T-shirts, and Jacob Zuma’s Nkandla tax.
It would be fascinating to hear SSA agent Belinda Walters cross-examined about her liaison with Van Loggerenberg, and the purpose behind it.
It would be interesting to hear Tom Moyane explain why he misrepresented the Sikhakhane report in order to justify suspending Pillay and Richer.
In fact all the major players have important (if not good) stories to tell.
South Africa needs to know. The sooner we get this matter into an open court of law, the better.
I am prepared to bet that I won’t be sued.
And I shall take this as confirmation that my conclusions are correct, or at least substantially so.
But we won’t leave it at deductions. This story has a long way to run. There is a lot of work to do.
Looking back I am reminded of the NPA’s withdrawal of charges against Jacob Zuma in 2009, paving the way for him to become President. Then I also joined the dots, and came to the inescapable conclusion that the charges had been withdrawn for political, not legal reasons. This was strongly denied at the time, by some heavy-weight and credible individuals.
The DA has spent five years, and millions of Rand seeking to establish the facts. This case will reach its conclusion early in the new year. And when it does, I hope the DA will have played a key role in securing the independence of the National Prosecuting Authority.
We must show exactly the same resolve in getting to the truth of the SARS debacle, so that this critical institution can perform its functions without fear or favour, and that South African taxpayers, including Jacob Zuma, can pay their taxes willingly and reliably, providing a firm foundation for our annual budget.
If that is no longer possible, we will be over the cliff.
I’m sorry to end the year on this note. But I think it’s best to know. Because then, we can still do something about it. And believe me, the DA will.